Corporate report

Police pension scheme: overpayments due to incorrect indexation of guaranteed minimum pension

This publication was published under the 2005 to 2010 Labour government

Home Office circular 031 / 2008 Police pension scheme: overpayments due to incorrect indexation of guaranteed minimum pension Broad subject…

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Home Office circular 031 / 2008

Police pension scheme: overpayments due to incorrect indexation of guaranteed minimum pension

  • Broad subject: Police service
  • Issue date: Fri Dec 19 00:00:00 GMT 2008
  • From:
    Crime Reduction and Community Safety Group (CRCSG), Police Reform and Resources
  • Linked circulars:
    No linked circulars
  • Copies sent to:
    Chief Executives to the Police Authorities

  • Sub category: Police pensions
  • Implementation date: Tue Dec 16 00:00:00 GMT 2008
  • For more info contact:
    John Gilbert, Tel: 020 7035 1880, Email: johnalexander.gilbert@homeoffice.gsi.gov.uk
  • Addressed to:
    Chief Officers of Police (England and Wales)

Introduction

  1. This circular alerts police authorities to the possible overpayment of some police pensions as a result of incorrect indexation of Guaranteed Minimum Pension (GMP).  It instructs police authorities on the action which they must take to identify and correct any pensions which have been overpaid for this reason.

Summary of the problem

  1. Public service pensions are increased each year in line with the Retail Prices Index (RPI). To enable the correct pension increases to be applied, pension scheme administrators need accurate GMP information, derived from the individual’s National Insurance contribution record. A small proportion of pensioners did not or do not have a GMP shown on their pension record, which has meant that they received part of the increase twice: once with the occupational scheme and again with the state pension. The result is that some pensions have been overpaid.

  2. More information on the problem is given at Annex A. The main schemes affected are the armed forces, civil service, judicial, NHS and teachers schemes, where around 5% of pensions may be affected. These schemes are administered by central government departments. Indications are that schemes administered by local authorities (such as the firefighters, local government and police schemes) are not affected to the same degree.  However, we know that at least some police pensioners are affected and all police authorities must take action as set out in paragraph 5, if they have not already done so, to assess whether they have any cases of overpayment.

Announcement by written statement

  1. The overpayment of some public service pensions is being announced by means of a written statement in the House of Commons on Tuesday, 16 December. The text of the statement, made on behalf of the Ministers for the departments responsible for the five centrally-administered pension schemes referred to in paragraph 3, is at Annex B. The statement does not refer to the police pension scheme, but we know that the police pension scheme is affected if not to the same extent as the five mentioned schemes.

Action which police authorities must take

  1. Police authorities should already be aware of this issue.  E-mails sent by the Home Office in December 2007 and April 2008 alerted police pensions administrators to the possibility that some pensioners might have been overpaid, because of the lack of accurate GMP records, and asked them to carry out preliminary action to assess the extent of the problem in their force. Now that the problem has been formally announced police authorities must, if they have not already done so, take the following action:
  • Assess whether any police pensioners (including survivors) lack a GMP record in circumstances in which they should have one (paragraph 8)
  • Assess whether any police pensioner has been overpaid as a result (paragraph 9).
  • Liaise with the National Insurance Contributions Office (NICO) to assess the amount by which any pension has been overpaid (paragraph 9).
  • Correct any overpaid pensions from 6 April 2009, but not recover any past overpayments (paragraphs 10-11).
  • Write to any overpaid pensioners to alert them to the fact that they have been overpaid and that this will be put right from April next year (paragraph 13).
  • Be ready to deal with enquiries from police pensioners who may have heard of the announcement and are worried that they might be affected (paragraphs 15-16).
  • Reassure pensioners that only a small minority of pensions are affected and that no-one will be required to pay back past overpayments (paragraph 17).
  • Keep records of the number of cases of overpayment and the annual and total amounts by which any pensions have been overpaid (paragraph 18).
  1. These actions, which have been or will be carried out all public service pension schemes in England and Wales, are considered in more detail in the paragraphs which follow.

The extent of the problem across the police service

  1. The data already provided by some police authorities suggest that between 1% and 1.5% of police pensioners in England and Wales might have been overpaid. This is, however, a very rough estimate based on an extrapolation of available figures and the real figure could be much lower.

Assessing the extent of the problem in your force

  1. Police authorities should already have some idea of whether and to what extent they are affected by this problem.  We are aware that some have carried out a full checking exercise and are confident that they have no overpaid pensions. Others already know how many overpaid cases they have.  All police authorities must, if they have not already done so, identify any pensions overpaid as a result of non-notification of GMP and be in a position to correct any overpaid pensions from April 2009.

  2. GMPs were provided by public service pension schemes between 1978 and 1997.  The problem will not affect any pensioner unless he or she is over state pension age with service in this period and for whom you have no record of a GMP. The absence of a GMP record for such a person does not in itself necessarily indicate overpayment, but it does warrant further investigation. Once any potentially overpaid pensioners have been identified, pensions administrators will need to obtain data from NICO in order to ascertain the exact amount of any overpayment.  The level of GMP liability can be confirmed via the Accrued GMP Liability Service (AGLS), details of which can be obtained from the HMRC website or by contacting Richard Crerar, Tel: 0191 225 0164 or Paul Malcolm, Tel: 0191 225 0259.

Correcting overpaid pensions

  1. The government has decided that any pensions overpaid as a result of the GMP problem should be corrected from April 2009.  For practical purposes, the correction will be made from 6 April 2009 to coincide with the date on which pensions increase is applied.  Police authorities must correct any pensions which are identified as being overpaid because of the GMP problem from that date. The first correct payment will be the next one after 6 April 2009. In some cases the effect of the annual uprating will be that there is no reduction in actual payment, but instead a lower increase than would otherwise have been received.

No recovery of past overpayments

  1. The government has also decided that past overpayments as a result of the GMP problem will be written off. Police authorities must not take any steps to recover past overpayments. The decision not to recover in these particular circumstances does not affect the general policy that pension overpayments should in general be recovered, depending on the facts of the individual case.

  2. Incorrect pension payments in excess of £250 which are written off are currently classified as unauthorised payments and attract a tax charge of 40%. Regulations to be laid in the New Year, backdated to take effect from 6 April 2006, will change the definition of authorised payments. One effect will be to classify such overpayments as authorised. 

Writing to affected pensioners

  1. Pensioners who are confirmed as having been overpaid should be informed of the fact as soon as possible.  Police authorities should write to any affected pensioners as soon as they have been identified, using a letter based on the model at Annex C (a variant of which is being used by all the affected public service pension schemes). There is no need to wait until the amount of the overpayment has been calculated. At Annex D is the text of a leaflet giving more detailed information about GMPs, which we recommend is enclosed with the letter. The letter must not be sent to any pensioner who has not positively been identified as having been overpaid.

  2. A further letter will need to be sent to affected pensioners when the amount of any overpayment, and the reduction in the pension taking into account the April 2009 pensions increase, has been confirmed.

Dealing with enquiries and offering reassurance

  1. Once this problem is announced, police pensions administrators are likely to begin to receive enquiries from police pensioners worried that their pensions may be among those affected and hence that they will be reduced.  The extent to which police authorities are able to offer reassurance will depend on the extent to which they have already carried out checks.  Some police authorities have already reported that they have no cases of overpayment and so will be able to reassure all their pensioners that they are not affected by this problem.  Others have already identified which of their pensioners have been overpaid and will be able to reassure those not so identified that they will not be affected.

  2. Where a police authority has not ascertained which if any of their pensioners are affected, they should say that pensioners will be informed as soon as possible, but offer assurance that only a minority of public service pensioners are affected, that the proportion affected in the police pension scheme is expected to lower than that in the five main affected schemes, that any reduction from April 2009 will be offset to an extent by the annual RPI increase in pension and that, whatever happens, any previous overpayments will not be recovered. 

  3. A set of lines for police authorities to take in response to enquiries is at Annex E. These are based on a common set of lines which are being used by all the affected public service pension schemes. They are designed to cover general enquiries which police authorities might receive as well as enquiries from pensioners. 

Keeping records 

  1. The Home Office will need to be in a position to account to the Treasury for any overpayments which are written off. Police authorities should therefore maintain records of:
  • the number of cases of overpayment
  • the annual amount by which any pension has been overpaid in 2008-09
  • the cumulative total amount by which any pension has been overpaid.
  1.  We will contact police authorities for this information in March 2009.

Action being taken by other public service pension schemes

  1. The approach to this problem has been co-ordinated across government departments and the same action will be taken by all affected schemes in England and Wales. There will be some differences in timing, in that the five centrally-administered schemes referred to in paragraph 3 are have already written to their affected pensioners.  Locally-administered schemes will take a little longer to identify any affected pensioners and contact them directly.  All schemes in England and Wales will correct pensions from April 2009.

  2. For the Scottish local government, police and fire pension schemes, Scottish Ministers have decided to exercise delegated powers so that from April 2009 the amount of overpayment currently received will continue to be paid, although it will be frozen at the current level. 

Police Negotiating Board and NARPO

  1. We have written to the official side and the staff side of the police negotiating board and to the National Association of Retired Police Officers (NARPO) to alert them to the action being taken.

  2. Enquiries about this circular should be addressed to the contact point on the first page.

John Gilbert
Head of Police Pensions and Retirement Policy Section

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