In this article...
In this month’s article, Christine Johnston reports on the Local Government Employer’s Organisation (the ‘LGE’) call for a return to a 2 year vesting period in the Local Government Pension Scheme and gives a summary of the Court of Appeal’s decision in the case of Booth v Oldham MBC.
Terry Edwards, Head of Pensions at the LGE has called for a move back to a 2-year automatic vesting period for pension benefits in the Local Government Pension Scheme (LGPS).
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Mr Edwards first raised his suggestion in a letter to Terry Crossley, the Deputy Director of Workforce, Pay and Pensions at the Department of Communities and Local Government (CLG) on 30 July 2009 in which he expressed his concern at the large number of small deferred benefits that have arisen in the LGPS since the move to a 3-month vesting period on 1 June 2004.
The annual cost of providing a deferred benefit rather than a refund of contributions is estimated at 0.16% of pensionable payroll (excluding administrative costs). This highlights the increased administrative complexity and costs that administering employers have suffered since the 3-month vesting period was introduced. An issue that had already been raised with CLG by Kent County Council, by letter, on 2 October 2008 and to which the CLG responded that if a business case could be constructed, it would be prepared to consider the merits of a move back to a 2-year vesting period following discussion with interested parties.
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In his letter, Mr Edwards explained to the CLG that the Local Government Pensions Committee (the ‘LGPC’) had now decided that a business case should be prepared in support of a move back to a 2-year automatic vesting period but on condition that any change to the LGPS Regulations should not disadvantage existing members. The LGPC has therefore suggested that the following options should be provided to LGPS members:
- Under three months’ LGPS membership (with no transfer in ) – the option of a refund or a transfer value;
- Three months’ LGPS membership (or transfer in) but less than 2 years’ membership – the option of a refund, deferred benefit, or transfer value;
- 2 years’ or more LGPS membership – the option of a deferred benefit or transfer value
In conclusion, the LGE called for consideration to be given to a move back to a 2 year automatic vesting period and consultation with interested parties.
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In the case of Booth v Oldham MBC the Court of Appeal found that a member of the LGPS could not continue proceedings through the Courts when he had failed to use the dispute resolution mechanism under the LGPS Regulations in relation to his claim.
This highlights the need for members to exhaust the remedies available for them under the Scheme’s internal dispute resolution procedure, and the Pensions Ombudsman (with the help of the Pensions Advisory Service), before resorting to litigation.
In this case, the Court of Appeal also found that an employee who was not treated as disabled under the DDA was not permanently incapable under the 1997 LGPS Regulations.
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Mr Booth was dismissed on capability grounds on 31 August 2001. He had previously been signed off work for stress and depression. He initially brought a complaint to the Employment Tribunal (ET) for unfair dismissal and disability discrimination. The ET dismissed the disability discrimination claim on the grounds that he was not disabled for the purposes of the Disability Discrimination Act 1995 (DDA), and this decision was confirmed by the Employment Appeal Tribunal.
He then brought a claim before the High Court that his employer, Oldham Metropolitan Borough Council, had acted in breach of contract by refusing to refer him for a medical assessment to find out if he was eligible for an incapacity pension under the 1997 LGPS Regulations. The High Court dismissed his claim and Mr Booth appealed to the Court of Appeal.
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The Court of Appeal also dismissed his claim. The evidence before the ET established that Mr Booth did not fulfil the criteria for an incapacity pension under Regulation 27 of the 1997 LGPS Regulations. He was not permanently incapable of discharging the duties of his employment because of ill-health or infirmity of mind or body.
The level of disability under the DDA was lower than that under Regulation 27 so if his disabilities did not qualify him as disabled under the DDA, then he was not permanently incapable for the purposes of the LGPS. Therefore the Council were not under a duty to investigate whether he was permanently disabled under the 1997 LGPS Regulations.
This decision was based on the facts of the particular case, and the particular disabilities relied on by Mr Booth. There may however be circumstances where a person who is found not to be under a disability for the purposes of the DDA is able to establish permanent incapacity under the LGPS Regulations.
For all schemes it is important to review the definition of incapacity within the Schemes Rules to establish eligibility for an incapacity pension.
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