Home Office circular 025 / 2007
Police Pension Scheme - miscellaneous
Tel: 020 7035 1880
Chief Officers of Police (England and Wales)
Dear Chief Officer,
The main purpose of this circular is to consolidate recent advice on a number of issues relating to police pensions. It also includes some new information or advice.
Items B and C are new. Items A and D-M contain information which has previously been given to forces - and to pensions administrators in particular - either via e-mail from the Police Pensions Section of the Home Office or through the Police Pensions Administrators’ Forum.
This circular should be brought to the immediate attention of force personnel officers, Human Resource Managers and the managers and administrators of the police pension schemes.
Please note that in this circular the Police Pension Scheme 1987 is referred to as ‘the 1987 scheme’ and the New Police Pension Scheme 2006 is referred to as ‘the 2006 scheme’ (the 1987 scheme is in other contexts referred to as PPS and the 2006 scheme as NPPS.)
A. Civil partnerships: amendments to the Police Pensions Regulations 1987 [Previously notified in April 2006]
HOC 52/2005 provided information on the necessary changes to the Police Pensions Regulations 1987 required by the Civil Partnership Act 2004. This circular confirms that the Regulations have been amended by the Police Pensions (Amendment) Regulations 2006 (SI 2006 No.740). A hard copy of the regulations has been issued to each force.
SI 2006 No. 740 also made amendments relating to elections to opt out of the pension scheme. The amendments had two purposes:
- To make a technical change to ensure that police officers who chose to cancel such an election before 6 April 2006 were able to rejoin the 1987 scheme with effect from 5 April at the latest - without the amendment a last-minute cancellation of an election would almost certainly have been too late to take effect before the 1987 scheme closed at the end of 5 April.
- To confirm that a cancellation made on or after 6 April 2006 shall have no effect - from that date onwards cancellation will be made under the power of regulation 9(5) of the Police Pensions Regulations 2006.
B. Other amendments to the Police Pensions Regulations 1987 [not previously notified]
3. Work is in hand on a number of other amendments to the 1987 Regulations, These are to reflect tax law changes from 6 April 2006, to correct anomalies and to bring some minor aspects into line with the new scheme where a difference cannot be justified (e.g. the use of qualifying service for certain benefits in the 2006 scheme and reckonable service for the corresponding benefits in the 1987 scheme). Some of the changes classified as urgent - in particular those relating to the new compulsory retirement ages introduced in October 2006 - have been included in draft regulations relating to pension arrangements for SOCA (in respect of England and Wales), which will be covered in a separate circular. The next set of changes, those which are less urgent, is expected in September or October. Remaining changes will be covered in the planned consolidated UK-wide regulations for the 1987 scheme, planned for 2008.
C. 1987 Scheme: death-in-service benefits [not previously notified]
We have been asked to clarify whether the lump sum death grant (payable under regulation E3A of the 1987 Regulations) is paid in conjunction with the return of aggregate pension contributions (payable under regulation E3) or not. The following explanation presumes that contributions have been made as usual.
Essentially, regulation E3 requires that where the aggregate of any pension payments (including lump sums via commutation) already paid to the former officer, the capitalised value of any pension payable as a result of his or her death and/or any gratuities paid in respect of his or her death is less than the aggregate pensions contributions, a gratuity equal to the difference is paid.
In the situation where an unmarried (or divorced) officer with no dependants dies in service, this in effect returns the aggregate pensions contributions. The gratuity is payable to the estate.
- The lump-sum death grant is common to many pension schemes and exists to recognise that when a person dies it can be very costly and that most people do not make provision to cover the costs of their death while still working. The grant is not part of a pension of any sort and is not a gratuity, so it does not fall under the criteria for aggregation in E3.
7. As was stated in the explanatory note to the Police (Pensions and Injury Benefit) Regulations 1992 (SI 1992 No. 2349):
‘Regulation 6 introduces a new lump sum death grant, equivalent to 2 years’ pensionable pay. The grant is payable, in addition to any other death benefits, on the death after 31st August 1992 of a contributing regular policeman. If the policeman leaves a widow (which by virtue of regulation 12 includes a widower) and they were not separated, the grant is payable to the widow; otherwise, it is payable to the personal representatives.’
8. The lump sum death grant should therefore always be paid on death in service regardless of what other benefits are payable. This means that both the gratuity provided for by E3 and the lump-sum death grant provided for by E3A should be paid to the estate of an unmarried (or divorced) officer with no dependants who dies in service.
D. Police (Injury Benefit) Regulations 2006 [previously notified in April 2006]
- The Police (Injury Benefit) Regulations 2006 came into force on 20 April 2006 with retrospective effect from 6 April 2006. A copy of the Regulations (SI 2006 No. 932) can be accessed online. A hard copy of the regulations has been issued to each force.
10. Entitlement to an injury award is not dependant on the officer being a member of the 1987 scheme or the 2006 scheme. Injury benefits are compensatory payments for those officers who suffer an injury without their default in the execution of their duties. The benefits payable are made up of both pensions and gratuities. In addition pensions and gratuities are paid to spouses, civil partners, children and adult dependant relatives where the officer dies from such an injury.
11. The regulations under which these benefits are payable were previously included in the Police Pensions Regulations 1987 and the additional Police (Injury Benefit) Regulations 1987. The 2006 Injury Benefit Regulations separate out and consolidate all regulations relating to injury awards from the main police pension scheme regulations. The benefits themselves remain unchanged. Further details concerning the reasons why injury benefits have been placed on a separate statutory basis were outlined in Annex G of HOC 7/2006.
E. Updated Police Medical Appeal Board Guidance [previously notified by e-mail on 4 May 2007]
- Due to an overhaul of the Home Office website, our Guidance for members of Police Medical Appeal Boards is no longer at the web address given in paragraph 14 of HOC 46/2004. The guidance is available on the police pensions pages of the Home Office website.
13. This is not the most user friendly web address, so we have devised the following instructions:
Home Office Police Medical Appeal Board Guidance
- Go to the Human Resources section on the Home Office Police website and select ‘Police Pensions’.
- On the left hand side of this page select ‘Ill-Health Retirement and Injury Awards’.
- On the right hand side of this page, under ‘see also’ select “Police Medical Appeal Board Guidance’.
- The guidance is on this page in sections for easy download.
14. As discussed in part D, there have recently been amendments to the Police Pensions Regulations 1987 involving the consolidation of the regulations relating to injury benefits into the Police (Injury Benefit) Regulations 2006 (SI 2006 No. 932). The guidance has been up-dated to incorporate appropriate references to the Injury Benefit Regulations.
- One addition to the guidance is the annex to section 6. This is the text of a letter that we recommend police authorities send to all those who apply for an appeal. The aim is to ensure that the police authority has done all it can to inform an appellant of the information and advice that is available on the appeal process.
F. Corrections to Police Pensions Regulations 2006 [previously notified by e-mail in February 2007]
16. It has been brought to our attention that there are three typographical errors in the Police Pensions Regulations 2006 (SI 2006 No. 3415). We intend to correct them when we next issue a pensions SI, but for the mean time please be aware of the following:
The first error is in Schedule 3.
Paragraph 2(d) needs correction. Subject to final legal advice about the drafting the text should read:
‘(d) in a case falling within paragraph 1(a) or 1(b), regulation 6(2)(a)(ii) applies…’
The second and third are in Schedule 5
Paragraph 8(b) and (c) should be amended to make regulation 26(2) of SI 2006/932 read as follows (our emphasis added to show where the insertions to SI 2006/932 are):
‘26. –(2) The police authority shall not under regulation 24 or 25 substitute for the whole or any part of an adult survivor’s special pension or child’s special allowance payable in respect of such a police officer a gratuity the actuarial equivalent of which (within the meaning of paragraph (3) when added to that of:
(a) any other gratuity so substituted under regulation 24 or 25, and
(b) any lump sum paid or payable under regulation B7 of the 1987 Regulations or regulation 38 of the 2006 Regulations, where a portion of the principal pension has been commuted, exceeds a quarter of the capitalised value of the principal pension, any reduction therein under the said regulation B7 or regulation 38 being ignored.’
(The current insertions apply only to the text in para (2)(b) and make it read ‘regulation B7 of the 1987 Regulations or regulation 38 or regulation 38 of the 2006 Regulations’.)
Paragraph 13 (the ref to 39(7)(b)) should be omitted altogether - there are no allocation provisions in the 2006 scheme.
G. Report on the options exercise [previously notified by e-mail on 4 July 2007]
17. A full report on the options exercise for transfer from the 1987 scheme to the 2006 scheme, on behalf of the Home Office, the Northern Ireland Office and the Scottish Public Pensions Agency, was presented to Police Negotiating Board on 7 June 2007. The report covers the conduct of the exercise, the outcome and conclusions and lessons learned A total of 254 officers transferred to the new scheme under the exercise, which ended on 31 January 2007. The report is available on the police pensions pages of the Home Office website.
H. 2006 scheme: guidance on transfer values and pension sharing [previously issued by e-mail on 13 April 2007]
18. The Government Actuary’s Department (GAD) have issued guidance on transfer values and pension sharing on divorce in the 2006 scheme. This consolidates and replaces the GAD transfer value guidance previously issued in July 2006. The guidance is on the police pensions pages of the Home Office website.
I. Transfer value underpin [previously notified by e-mail on 18 June 2007]
19. Where an officer, who is a member of the Police Pension Scheme 1987 and has transferred in service, transfers his or her service to another pension scheme or is subject to a pension sharing order, there must now be an underpin which equals the value of the transferred-in service plus the transfer value based on the officer’s service in the police since he or she last became a member of the force. The Government Actuary’s Department have produced detailed guidance on this which is available on the police pensions pages of the Home Office website.
J. 2006 scheme: added years factors [Previously notified by e-mail on 8 June 2007]
- The Government Actuary’s Department have issued revised guidance on the purchase of increased benefits in the 2006 scheme. This replaces guidance previously issued in August 2006. The guidance is available on the police pensions pages of the Home Office website.
K. 1987 scheme: pensioner divorce factors from age 86 to 94 Previously notified via the forum on 16 July 2007
- The Government Actuary’s Department have issued an extension to the tables for divorce factors. The guidance is available on the police pensions pages of the Home Office website.
L. New Stakeholder arrangement [previously notified by e-mail on 3 April 2007]
- Stakeholder pensions were introduced by the government to encourage people to save for their retirement and have been available since 6 April 2001. The Police Service of Northern Ireland has had a Stakeholder arrangement since September 2001. This Stakeholder has now been extended to cover officers across the UK.
The new Stakeholder Pension Plan will be open to all officers who are members of either the 1987 scheme or the 2006 scheme or neither pension scheme. This last category will not just comprise optants-out but will also include re-joiners to the service who already have a maximum pension under the 1987 scheme and who are therefore unable to build up further Police Pension Scheme benefits.
23. The AVC Scheme will continue, unchanged, for those officers who are able to take advantage of it i.e. members of the 1987 scheme or former members of the 1987 scheme who had set up an AVC before transferring over to the 2006 scheme. Those with an existing AVC will be able to convert it to a stakeholder if they wish.
24. There are certain differences between an AVC and a stakeholder and it will be for officers to decide which of the two arrangements suits their individual circumstances better and, if they already have an AVC, whether there would be advantages in switching. Unlike the AVC Scheme, the Stakeholder will not be linked by regulations to either scheme and will not require any change to existing legislation.
25. Further information for officers is also available from their police pensions administrator or on the Standard Life Police website.
M. Unauthorised payments: £250 de minimis [previously notified by e-mail on 16 July 2006]
26. The £250 threshold for unauthorised payments has previously applied only to instalments of pension paid in error and not to lump sum payments. We have now been informed that HM Revenue and Customs will interpret the £250 de minimis limit as applying to lump sums as well as to pension payments, subject to the requirement that the excess lump sum was paid in genuine error.
There is therefore no need to include in a scheme’s annual Event Report details of unauthorised lump sum payments which are less than £250. Note, however, that there is only one de minimis limit as opposed to separate limits for both excessive pension payments and excessive lump sum payments in error. We understand that the Registered Pension Scheme Manual will be amended to cover this at the earliest opportunity.