August 2024 Update

The end of August will see Forces send out ABS-RSS to all active and deferred members (Deferred Choice Members) who are subject to remedy

The Public Service Pensions and Judicial Offices Act 2022 (PSPJOA 22) came into effect on 1 October 2023 and provides the framework for the implementation of the remedy which will give members the same pension choices for the Remedy Period (1 April 2015 to 31 March 2022).

The remedy applies to pension scheme members who were in pensionable public service both on or before 31 March 2012 and on or after 1 April 2015, including those with a gap in service of no longer than five years. Members who joined from 1 April 2012 are not in scope for the remedy unless the circumstances described below apply.

The key to the above is pensionable public service not police service.  If a member joined the police on or after 1 April 2012 and had previous applicable pensionable service in a public service pension, then members will be subject to remedy and should receive an ABS-RSS in August. If they do not and feel that they are in scope, they should contact their pension administrator in the first instance and seek Federation assistance if there is an issue. For ease the link for police pension administrators is below.

Police pension administrator contacts - England and Wales - GOV.UK (www.gov.uk)

 

Annual Benefit Statements - Remediable Service Statements (ABS - RSS)

Rollback

All active and deferred members of the police pension schemes have been rolled back into their legacy schemes for the remedy period. The legacy schemes are the 1987 and 2006 schemes, and the remedy period is 1 April 2015 to 31 March 2022. The ABS-RSS is a document that will reflect that position and the reformed scheme position (2015 Pension) so that members can compare the benefits for both options. This will then become an annual event each August so that members can continue the comparison as they move towards retirement.

PFEW have been informed that the ABS-RSS will show the two pension positions at 60. If members want the position for other exit points, 30 years, 55 etc. then those forecasts would need to be dealt with by specific forecast requests to their pension administrator.

Most Forces will use a template devised by the NPCC and if there are any issues with the ABS-RSS then contact your pension administrator in the first instance, their details will be included in the statement.

The ABS-RSS will also deal with the contribution and interest position that rolling back into the legacy scheme triggered. Tax relief will also be owed or need to be paid back dependent on the legacy scheme (1987 owed, 2006 owing).

 

1987 Rollback Members

The contribution rate for the 1987 pension in the remedy period was 14.25% and for the 2015 scheme was 13.44%, hence contributions will be owed by members. The rates for those earning over £60,000 were 15.05% and 13.78% respectively.

The calculation for what is owed by 1987 tapered and no protection members is the difference in contributions between the 1987 and 2015 schemes minus tax relief owed to the member plus interest.

Interest is payable on contributions owed and is compound interest from the date of entry into the 2015 scheme to the date of settlement. The NS&I direct saver rate is the applicable rate.

The NS&I direct saver rate is currently 4%. The historical changes in rates can be found here: 

Historical interest rates | NS&I (nsandi.com)

The pension picture is changing quickly and currently it looks very likely that the ABS-RSS will provide gross figures and the tax-relief owed to members will not be calculated and thus the contributions and interest owed will not be correct as it will not show the tax relief position. The Treasury will change the directions in October so that future ABS-RSS’ will not have this issue.

In the meantime, if gross figures are provided and a member wants to pay off what is owed, they will need to contact their pension administrator so that an accurate figure can be provided. Scheme Managers have been informed that they can calculate the tax relief as if the aforesaid directions are in place. If there are any issues please speak with your local Federation office.

Monies owed can be paid in full within 12 weeks of the ABS-RSS being issued. There will be an opportunity to pay the full amount after every ABS-RSS which will be provided annually. If members do not pay the amounts owed before retirement, then it will be settled at the point of retirement.

 

2006 Rollback Members

The contribution rate for the 2006 pension in the remedy period was 12.05% and for the 2015 scheme was 13.44% hence a refund of contributions is owed to members. The rates for those earning over £60,000 were 12.75% and 13.78% respectively.

The calculation for monies owed to 2006 tapered and no protection members is the difference between the 2015 scheme and 2006 contributions minus the tax relief provided on the higher contributions plus interest. There is no issue with the calculation for the 2006 scheme and the amount quoted should be the amount owed to members.

Interest owing to members on contributions is paid at 8% and is simple interest. If a member does not take the monies owing the interest rate reverts to the NS&I direct saver rate on a compound basis 29 days after the issue of the ABS-RSS.

Monies owing to 2006 members can be taken once the ABS-RSS has been issued. If at retirement the member decides to take the reformed scheme benefits and has taken the monies owing, they will owe a shortfall in contributions. Members can keep the monies in their contribution account earning compound interest to cover this eventuality.

 

Other Members

Members who are not in scope of remedy will not receive an ABS-RSS but will receive an Annual Benefit Statement in August.

Members who were fully protected and remained on their legacy scheme for the remedy period will receive an ABS-RSS but will not be rolled back. The ABS-RSS will show the alternative benefits available if they were to choose the reformed scheme for the remedy period. There are no contributions owed or owing as they paid legacy contributions during the remedy period.

Deferred Members will have the same options as active members regarding taking the money they are owed or paying the money they owe due to contribution adjustments. They will make a choice of benefits when they access their deferred benefits.

 

What needs to be done upon receipt?

If members are in receipt of an ABS-RSS they do not need to make a final choice of benefits they want to receive, that decision is deferred to their eventual retirement.

All that needs to be dealt with at this point is the contribution adjustment.

2006 members do they want to take what is owed?

If they decide to keep the monies owed in their contribution account they can claim it at any annual ABS-RSS event or wait until retirement.

1987 members do they want to pay in full what is owed?

The added complication of only having the gross amounts will have to be dealt with by making a request for accurate figures from the administrator.

If they decide not to pay in full then there will be another opportunity with the ABS-RSS each August, or it can be settled upon retirement.

There could be issues with some officers not receiving their ABS-RSS at the end of August. Those officers will still have 12 weeks to settle what is owed or claim what is owed but from the date of issue of the RSS. This is not particularly helpful, especially to those who wish to settle what they owe and PFEW suggest taking this up with Forces as they will have incurred additional interest due to the late issue of the ABS-RSS.

 

Current retirements

Members retiring now will receive their pension options via an RSS around a month before their retirement and will need to make their choice of benefits at that point. Any contribution and interest issue will be settled as part of the retirement process.

This will be the process going forward for deferred choice members. Once they have put in their intention to retire, they will receive an RSS with their actual benefit choices around a month before retirement. At retirement they can decide to choose the reformed scheme for the remedy period or remain with the legacy scheme they were rolled back into. This could result in another contribution adjustment exercise.

 

Immediate Choice Members

Immediate Choice members are those who retired before the 1 October 2023 and are subject to remedy.

These members will receive their RSS before 31 March 2025.

Forces have until 31 March 2025 to remedy members who retired before 1 October 2023. They will be contacted by the pension administrators and provided with an RSS. This will show the same details as already described plus details of back payments owed for pension and commutation and the interest they are owed. There will also be a contribution adjustment required if they choose legacy benefits for the remedy period. Interest on monies owed is simple interest at 8%.

Immediate Choice RSS’ are now being issued, this is positive and welcome news.

However, in recent months another issue has been identified regarding taxation and interest. It is detailed in the link below and only affects those who took the maximum lump sum at retirement and paid a tax charge. All other members who retired before 1 October 2023 and are awaiting remedy are unaffected and there is nothing stopping them being remedied and it looks like administrators are now starting to deal with these cases.

IC-RSS-unauthorised-payments-update-V1.1.pdf (policepensioninfo.co.uk)

It looks like a solution has been developed for the tax issue and this is likely to be published in September and then members affected as described above will be able to be remedied. Further communications will be published when PFEW have the information on the solution to the tax issue.

The NPCC have several factsheets around the ABS-RSS roll out.

NPCC-Member-Remedy-Factsheet-Remediable-Service-Statements.pdf (policepensioninfo.co.uk)

NPCC-Member-Remedy-Factsheet-Contributions-adjustments.pdf (policepensioninfo.co.uk)

NPCC-Member-Remedy-Factsheet-Illustrative-examples-contributions-adjustments.pdf (policepensioninfo.co.uk)

 

Offsetting

PFEW have noted that members will not receive interest on the tax relief that they are owed as part of the 1987 commutation adjustments.

Members who revert or are rolled back into the 1987 scheme owe contributions. Tax relief is then taken off the amount owed, and interest is calculated on that amount which is payable by the member.

Members can argue that they are owed interest in these circumstances on the tax relief that they are owed. When PFEW have asked administrators, they have stated this will not be calculated due to the complexities involved.

The Government’s rationale for charging interest on contributions owed is that members had extra money in their pockets which they could have invested or used to purchase items that they would have not been able to purchase without that money.

It is not good enough to say we are not going to pay what we owe members due to the complexities involved but we have overcome the complexities around what members owe and are expecting members to pay that.

PFEW have produced templates for members to send to their Chief Constables asking for the interest on the tax relief to be calculated and paid.

The template required will depend on the position the member is in. There are three templates:

Retired member.

Immediate choice member and retiring member – will not be able to send until RSS received.

Active/deferred member – after receipt of ABS-RSS.

 

July 2024

The Remediable Service Statement received by an officer will depend on the purpose they are receiving it for.

The Annual Benefit Statement/RSS for officers subject to remedy must be produced by 31 August 2024 and will provide details of the contributions owed or owing and the interest position.

All officers will be rolled back into their legacy schemes for the remedy period, they will show the legacy scheme benefits and the alternative reformed scheme benefit position so that officers can keep up to date with how both pension positions are accruing. The statements will be based on an assumption that officers will remain in service until age 60. PFEW made the point that age 55 will be of more interest to many officers but they are going to use age 60. The 55-exit point will have to be dealt with by requesting specific quotes from administrators.

The contribution position for monies owed can be settled within 12 weeks of the ABS/RSS being issued and again the following August and so on – ultimately it can be paid off at retirement.

The second type of RSS is the one that an officer will receive when they come to retire, their options document. This is a very important document and the remedy has made it more complex.

The first decision that should be made is which pension option is going to be taken for the remedy period, the legacy scheme or the reformed scheme. In most cases this will be a fairly straightforward decision as there will be an obvious financial difference.

Once the choice has been made there are several choices available and not all of them are reflected in the RSS’.

 The choices are, but may not be reflected:

• Take no commutation from either pension.
• Take the maximum lump sum from both pensions and pay tax on the 1987 commutation if younger than 62 years and 2 months – there is no tax implication on the 2006 and 2015 pension.
• Take the maximum tax-free option for the 1987 pension and the maximum commutation from the 2015 pension.

The above three options are the ones that are reflected on the RSS’ we have seen but there is also the option to:

• Take commutation from the 1987 scheme and not the 2015 scheme.
• Take commutation from the 2006 scheme and not the 2015 scheme.
• There is also the ability to reverse that position and take commutation from the reformed scheme and not the legacy schemes.
• Take a commutation amount from the 1987 or 2006 scheme of your choice up to the maximum lump sum amount and take no commutation from the 2015, the maximum from the 2015 or a chosen amount from the 2015 scheme.

There is greater flexibility in the choices available than is reflected in the RSS’ and we will continue to lobby for this to change.