Agenda item

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 mean for the Fund and its administration.