Issue - meetings

8.1       The Committee considered a report seeking approval for changes to the Administering Authority’s policy on abatement.

8.2       The Committee asked what would happen to employees who will have returned to work under the old abatement policy between 2014 and  1 April 2021 and who may be entitled to move onto the new policy (back dated to 1 April 2021) but who may not be aware they are entitled to do so. The administration system does not flag whether someone has returned to work under an abated policy, so it is not known how many may be affected. Furthermore, not all members returning to work in the period 2014-2021 will have necessarily been subject to an abated pension, as it depends on the salary of the role they are returning to as to whether abatement was applied fully or in part, or not at all. This means only those with a suspended pension could be easily spotted. The only way to identify all those who are affected, and the costs involved in moving them all on to the new scheme, is to ask all members receiving a pension whether it has been abated, which the PAT intends to do but which may take some time.  Once identified, these employees will have their pension put to the full monetary value as of 1 April 2021.

8.3       The Committee RESOLVED to:

1) approve the removal of the abatement with effect from 1 April 2021; and

2) delegate authority to the Chief Finance Officer, in consultation with the Chair, to take all necessary actions to give effect to the implementation of the above recommendation

7.1       SK introduced the report and outlined the background to the Abatement Policy. Such a policy can make it difficult to re-recruit previous employees. The recommendation of the report is to remove the Abatement Policy so that it no longer applies from April 2021.

7.2       The Chair commented that he agreed with the removal of this policy and asked what approach will be taken to compensate or re-imburse those who have previously had their pension abated. SK responded that pension will be corrected from April 2021 onwards, but it is very difficult to identify how many members have been affected by this policy. If there is a recommendation from the Pension Board which is agreed by the Pension Committee, the Fund can consider backdating the cessation of the policy which would then require re-imbursements or adjustments.

7.3       LW asked how many members are affected and what the rationale was behind the original policy. SK said it was difficult to establish the number of previously affected members as the administration system does not hold details and any abatements were made manually. The Chair commented that the original rationale was driven by tax legislation as it was seen to be tax beneficial  if people could retire early and get a tax free lump sum and receive pension benefits and then return to work in a similar job. Most private pension schemes removed abatement in the 1980’s and in the public sector from 1998.

7.4       Cllr Tom Druitt (TD) suggested implementing the change over time to deal with the back-dating issue.

7.5       Stephen Osborn (SO) commented that the number of members affected is likely to be small compared with the workload impact that backdating would entail. Therefore, he is in favour of not making the change retrospective.

7.6       SK responded that the numbers affected is likely to be relatively small and they will be difficult to identify. Taking a phased approach would allow the Team to report back on the numbers affected and the likely impact of making the change retrospective. Paul Punter (PP), Head of Pensions Administration, added that the way abatement is applied does not generally affect people coming back into employment on a lower salary (which is the majority), but only really affects those on a higher salary. Abatement, where it has been applied, is in place until the member stops working and then the onus is on affected member to notify the Fund once their employment ceases.

7.7       The Chair summarised the Board’s view which is to support stopping abatement from April 2021 onwards and ask officers to report back to the Pension Board and Committee once the number of members affected is known and what the likely impact of back-dating will be.

7.8       The Board RESOLVED to:

1)    Note the proposed amendments to the Abatement Policy; and

2)    Request officers report back to the Pension Board and Committee once the number of affected members is known and what the impact of backdating the change in policy will  ...  view the full minutes text for item 23