“22 (7) The retirement condition is met in relation to the member and the pension scheme if— (a) the member becomes entitled to all the [benefits] payable to the member under arrangements under the pension scheme (to which the member did not have an actual entitlement on or before5th April 2006 ) on the same date, and (b) in a case where on5th April 2006 the member had an actual or prospective right under the pension scheme to any benefit from an age of less than 50, Condition 1 is met or, in any other case, Condition 2 or 3 is met. (7A) Condition 1 is met if– (a) the member is not, after becoming entitled to the benefits mentioned in sub-paragraph (7)(a), employed by a person who is a sponsoring employer in relation to the pension scheme and with whom the member is connected, and (b) the member's becoming entitled to those benefits is not part of an arrangement the main purpose (or one of the main purposes) of which is the avoidance of tax or national insurance contributions. (7B) Condition 2 is met if– (a) the member is not, after becoming entitled to the benefits mentioned in sub-paragraph (7)(a), employed by a person specified in sub-paragraph (7C), and (b) the member's becoming entitled to those benefits is not part of an arrangement the main purpose (or one of the main purposes) of which is the avoidance of tax or national insurance contributions. (7C) The persons referred to in sub-paragraph (7B)(a) are– (a) any person who was a sponsoring employer in relation to the pension scheme at any time during the period of six months ending with the day on which the member became entitled to the benefits mentioned in sub-paragraph (7)(a) and by whom the member was employed at any time during that period, (b) any person who is connected with any such person, or (c) any person who is a sponsoring employer in relation to the pension scheme and with whom the member is connected. (7D) If the member has become entitled to the benefits payable under arrangements under the pension scheme by reason of service in the armed forces of the Crown, any employment on compulsory recall is to be disregarded for the purposes of subparagraph (7B)(a). (7E) Condition 3 is met if– (a) paragraph (a) of sub-paragraph (7B) is not satisfied but one of the re-employment conditions is met, and (b) paragraph (b) of that sub-paragraph is satisfied. (7F) The re-employment conditions are– (a) that the member is not employed as mentioned in subparagraph (7B)(a) during the period of six months beginning with the day on which the member becomes entitled to the benefits mentioned in sub-paragraph (7)(a), and (b) that the member is not employed as mentioned in subparagraph (7B)(a) during the period of one month beginning with that day, but is so employed during the period of five months beginning at the end of that period, and either the pension abatement condition or the materially different employment condition is met. (7G) The pension abatement condition is met if– (a) the pension scheme is a public service pension scheme, and (b) the member's benefits under the scheme consist of or include a scheme pension which is liable to reduction by abatement while the member is employed as mentioned in subparagraph (7B)(a) and is under the age of 55. (7H) The materially different employment condition is met– (a) in a case where the member is employed as mentioned in sub-paragraph (7B)(a) in more than one employment during the period of five months mentioned in subparagraph (7F)(b), if each of those employments, and (b) otherwise, if the employment in which the member is so employed during that period, is materially different in nature from the employment in which the member was employed immediately before becoming entitled to the benefits mentioned in sub-paragraph (7)(a). (7I) For the purposes of sub-paragraph (7D) “employment on compulsory recall” means permanent service– (a) under Part 4of theReserve Forces Act 1996 , (b) under Part 5of that Act, (c) under a call-out or recall order made under that Act, (d) having been called out or recalled under theReserve Forces Act 1980 , or (e) because of any other call-out or recall obligation of an officer. (7J)[Section 1122of the Corporation Tax Act 2010] (connected persons) applies for the purposes of this paragraph.”
“While the application of the relevant legal principles means that I am unable to uphold the complaints, I do have a great deal of sympathy for the unenviable position that [the complainants] have found themselves in and I can certainly understand why they feel aggrieved. They have chosen to continue working, following their retirement as police officers. Utilising a person with their rich experience and extensive knowledge of policing in a civilian police staff role is clearly to the benefit of both the Avon & Somerset Police and also the Essex Police. Indeed, our investigations in this case suggest that the practice of employing former officers in civilian police staff roles post-retirement is widespread across forces in England and Wales, presumably for that very reason. Given the clear benefit both services derive from employing former officers in civilian police staff roles, [the respondents] could be said to have a moral duty to ensure that [the complainants] were made aware of any potential adverse financial consequences of their employment with them post retirement.”
“Such a payment is classed as “unauthorised” and will result in an unauthorised payment tax charge of 40% of the excess amount above the HMRC limit. Should the value of this excess exceed 25% of the value of your “vested benefits” at retirement, an additional 15% surcharge would be payable, taking the total tax charge to 55%.”
“Please note that your decision to commute pension to lump sum is a personal choice, and we are unable to provide you with any financial advice. You may wish to seek independent financial advice before making your final decision.”
“You should be aware that pensions (other than duty awards) under the Police Pension scheme are treated as earned income for Income Tax purposes and that normal PAYE arrangements apply. Consequently, no Form P45 will be issued. However, a copy P160 will be sent to you shortly after you retire. To ensure that your tax position is properly assessed you should complete the enclosed form P161 and return it to Inland Revenue (address provided).”
“Prior to being re-employed Mr R attended a presentation regarding his retirement options. The presentation was not given by A&SPCC, but a copy of it has been provided to my adjudicator. While the presentation did touch on retirement prior to age 55/60, in a slide entitled ‘When to go?’, Mr R has confirmed that during the presentation of that slide there was no suggestion raised that individuals should take independent financial advice if retiring prior to age 55; and, specifically, there was no advice relating to a potential loss of protected pension age if retiring before that age and being re-employed.”
“The Chief Constabulary offers pre-retirement courses for retiring officers and employees. The financial sessions are provided by Affinity Connect who describe themselves as ‘a leading provider of financial education in the workplace for the public sector’. Affinity Connect provide within the workshop manual an appointment request form which allows delegates to request an appointment with an Independent Financial Adviser and during 2009/2010/2011, when these officers would have attended, all delegates also received a copy of the presentation itself which had links to organisations such as the Financial Conduct Authority and Unbiased.Com. Affinity say they take it very seriously that they should point delegates in the right direction and signpost quite a few times during the course that Independent Financial Advice should be sought, and how to do so. ”
“59. The HMRC on-line guide to which a link was provided was the same guidance that is made available on the internet to all employees, employers and scheme administrators. The link took users through to the Registered Pension Scheme Manual, from which they could select the pages relevant to their status (1). The employer pages (2) gave as an option a ‘pension age’ page (3) which included a page entitled: ‘What if the scheme rules currently allow benefits to be paid before age 55?’ (4) At the bottom of that page, employers were directed towards another page ‘For further information about the protection of early retirement ages and what is meant by “unqualified right” (5). This further page gave a list of options of which one was: “Loss of protection due to employment after taking benefits: protected pension age 50 to 54” (6). This, finally, gave details of the circumstances in which re-employment would cause the loss of the protected pension age of below 55 and which would render payment of pension below that age ‘unauthorised’. To reach it, six links had to be followed. 60. The Scheme Administrators’ pages (2) had as an option: ‘Protecting Pension Rights from tax charges’ (3) and one of the contents within that heading was ‘Loss of protected pension age due to employment after taking benefits: protected pension ages in the range 50 to 54.’ This page (4) again gave details of the circumstances in which re-employment would cause the loss of the protected pension age of below 55 and which would render payment of pension below that age ‘unauthorised’. To reach it, four links had to be followed. 61. Alternatively, the page could have been arrived at via the technical pages, which would also have required four different links to be followed.”
“A-day” and changes to Police Pensions Regulation 1987”
“a) to explain the changes which are being made to thePolice Pensions Regulations 1987 and thePolice Pensions (AVC) Regulations 1991 , including those consequential upon the Aday changes and upon the new financing arrangements for police pensions. b) to instruct police pensions administrators on the action they need to take before 6 April (‘A-day’) to comply with the changes to tax legislation which come into force on that day; … ”
“The Scheme Administrator should tell the member if their right to take benefits has been protected, although there is not requirement for the member to register the protection themselves with HMRC.”
“Change in normal minimum pension age from 6 April 2010Outline of change The normal minimum pension age (NMPA) marks the earliest age at which pensions and lump sums may normally be taken as authorised payments under a registered pension scheme. The current NMPA of 50 rises to 55 from6 April 2010 . From6 April 2010 , benefits in payment to a member under the NMPA of 55 are likely to be unauthorised payments, unless the member has a protected pension age, (see RPSM03106000).”
“Loss of protection due to employment after taking benefits:protected pension ages 50 to 54. Protection will be lost if after becoming entitled to benefits the individual is employed by one of the following employers and one of the four re-employment conditions listed below is not met. The four re-employment conditions are set out in more detail in RPSM03106065 but broadly are 2. a break in employment of at least six months. … 4. a break in employment of at least one month and the reemployment is materially different.”
“All this information was originally published on the HMRC website and freely available to all whether a pensions professional or an ordinary individual member. HMRC expects those running and advising registered pension schemes to keep their knowledge of the tax rules up to date. As you can see we publish extensive guidance on how the tax rules work and publicise forthcoming changes to those rules. It is up to scheme administrators, pension scheme trustees/sponsors and their advisers to work out whether or not, and how, changes to the tax rules will impact their particular scheme and design their processes accordingly. … Where there is an uncertainty over the operation of a tax rule in relation to a particular scheme, those representing the scheme can approach HMRC for clarification of the rule where they believe the published guidance is not sufficient.”
“A&SPCC was not made aware of the changes in advance of the Police Federation’s circular of8 December 2011 [to which I refer below]. The Circular that it received on11 April 2006 does not refer to tax liabilities. So A&SPCC cannot be held responsible for failing to advise on a matter of which it was unaware. The Home Office did not alert pension administrators about the HMRC changes until23 January 2012 . The Constabulary HR cannot find any reference to Annex D on the Circular and the HMRC guides in the paperwork they hold. They have checked the website and in Annex D there is no link. The link appears to be in the Circular itself and when they tried to access this information via the link it provided unsuccessful.”
“1.5 The purpose of this guidance is to ensure that forces are able to administer 30 + PLUS effectively with minimal need to refer to the National Policing Improvement Agency which took over responsibility for administration of these retention arrangements on1st April 2007 . 1.6…forces should use this guidance as a statement of good practice which should be applied at all times… 1.7 This guidance is valid from1 April 2010 … 2.2 Each officer who wishes to participate has to apply for selection, which is at the discretion of management. Participants must stay in retirement for at least one month before being reengaged as a shorter period of retirement will result in tax charges for both the officer and the retaining Force. 3.1 Joining 30+Plus is by application only. It is not an automatic right for officers approaching 30 years’ pensionable service. Tax Codes There must be a gap of a month between the officer’s retirement/pension coming into payment and his or her reemployment by the force on 30+PLUS. Under tax rules in force from April 2010, onwards, this is particularly important where the officer retires before age 55. If this does not happen in such cases, both the officer and the force will be liable for large tax charges payable on any pension benefit paid before age 55…”
“We have recently become aware of a potential tax issue for members of the 1987…Scheme…who retire and take a pension under the age of 55 and then take up employment as police staff or are re-engaged as police officers. Our understanding of the issue is, in summary, as follows: 1. From6 April 2010 , the Minimum Pension Age rose to age 55. The rights of members of the PPS to retire in certain circumstances before that age were protected and those members have a Protected Pension Age. 2. However, that protection can be lost in certain circumstances, meaning that payments become unauthorised and taxable. 3. The particular concern is on re-employment by certain employers, including…a police force … one of the four conditions must be satisfied in order for a member aged between 50 and 54 to remain protected. 4. These conditions are broadly: … • A break in employment of at least six months. … • A break in employment of at least one month and the reemployment is materially different. … 6. In relation to re-employment being “materially different”, HMRC guidance states: ‘A simple change in hours will not be a materially different employment. To be a materially different employment the duties and/or the level of responsibility in the new employment must be different from the old employment.’ … We are writing to the Home Office and making, amongst others, the following points: • expressing our concern that this issue does not appear to have been flagged to police forces and police authorities; … • asking the Home Office to issue guidance, preferably with HMRC approval, in relation to abatement and that employment as a member of police staff will, in itself, be regarded as “materially different” from service as a police officer. Branch Boards should avoid giving advice on tax on financial matters or from giving the impression that they are doing so. Members should be encouraged to seek assurances in the circumstances of their case from the Force or Police authority or HMRC and to consider taking their own independent tax advice. Branch Boards should also contact their pension administrator and HR department and seek assurances that: • the tax implications are understood and appropriate steps taken to minimise the risk of any adverse impact on retired members; and • those implications will be explained to any retired member before re-employment starts.”
“In circumstances where: (a) a scheme employer in relation to a pension scheme has a settled practice which, if followed, would or might result in an unauthorised payment from the scheme in respect of which the scheme administrator in relation to that pension scheme would become liable to a scheme sanction charge pursuant tos239 Finance Act 2004 and/or would have reporting obligations pursuant to the Registered Pension Schemes (Provision of Information) Regulations; (b) the practice, if followed by one of a recognisable class of employees, would or might deprive that employee of a significant proportion of his accrued pension rights as a result of that unauthorised payment being made from the scheme; (d) the scheme administrator in relation to that pension scheme could be reasonably be expected to be aware of the existence of that class of employees; (e) the scheme administrator in relation to that pension scheme would, with reasonable diligence, be able to apprise himself of the employer’s practice; (f) in relation to an employee of that class of employees, a course of action is open to him that would enable him to avoid the consequences or some of the consequences set out in (b) above; the scheme administrator owes a duty of care to an employee of that class of employees who is about to retire or to become entitled to benefits from the pension scheme to make reasonable enquiries as to whether he would or might follow the settled practice and, if so, to take reasonable steps to [advise][inform][warn him of the risk of an unauthorised payment being made from the scheme, the tax consequences of the payment being made [and the need to take independent financial advice in respect of it].”
“In the circumstances described by Ms Ling, the scheme administrator owed a duty to an employee who was about to retire to inform him of the consequence of an unauthorised payment being made from the scheme.”
“(i) The Pensions Authority as scheme administrator assumed a responsibility to give accurate information as to whether the lump sum paid to the complainants would be tax free and what option they had to choose to achieve that; alternatively that if they opted to take a sum as a lump sum on which tax had to be paid, the correct amount of that tax. (ii) Alternatively, the Pensions Authority as scheme administrator assumed a responsibility [to give advice][to give information][to warn of any risk and the advisability of taking independent financial advice] in relation to the tax consequences that it was reasonably foreseeable, on making the appropriate enquiries, would or might arise on the payment of their benefits pursuant to provisions of theFinance Act 2004 relating to unauthorised payments, to the standard to be expected of a competent scheme administrator.”
“Where the Authority: (i) was aware of the appellants’ particular circumstances, including their reemployment; and (ii) had actual or constructive knowledge of the tax consequences of that re-employment; it assumed responsibility for providing the appellants with accurate information about the consequence of that reemployment.”
“The duty of care is put in the following alternative ways: (a) A duty of care not to pursue a settled practice which the employer knows, or ought reasonably to know, will deprive an employee (if he follows it) of a significant proportion of his accrued pension rights [by virtue of its being treated as an unauthorised payment pursuant to theFinance Act 2004 ]. (b) alternatively, a duty of care to take reasonable steps to ensure that a settled practice followed by the employer will not deprive an employee (if he follows it) of a significant proportion of his accrued pension rights [by virtue of it being treated as an unauthorised payment pursuant to theFinance Act 2004 ] This version makes the duty to periodically review the legal situation express. . (c) Alternatively, if an employer pursues a settled practice that, if followed by an employee, would or might result in depriving him of a significant proportion of his accrued pension rights, to alert the employee to the risk of such an outcome and to warn him of the need to take independent financial advice in respect of it It is submitted that the specific risk needs to be identified by the employer because otherwise employers would be likely to make a blanket recommendation to take IFA advice irrespective of whether such a risk arose, which would significantly limit its effectiveness. .”
“(In the particular circumstances of these Appellants) to take reasonable steps to bring to the attention of the employee the consequences to their pension of accepting the offer of immediate re-employment by the police authority.”
“Please note that your decision to commute pension to a lump sum is a personal choice and we are unable to provide you with any financial advice. You may wish to seek independent financial advice before making your final decision. These statements are an estimate only and do not constitute a contract or give an undertaking that any actual final benefits payable will not vary from those shown.”
“43. But secondly and more fundamentally, quite apart from authority, I would not accept the implied term contended for by [counsel for the claimant]. Such an implied term would impose an unfair and unreasonable burden on employers. It is one thing to say that, if an employer assumes the responsibility for giving financial advice to his employee, he is under a duty to take reasonable care in the giving of that advice. That is no more than an application of the Hedley Byrne principle[1964] AC 465 . An example of such a case in the context of a contract of employment is Lennon v Comr of Police for the Metropolis[2004] ICR 1114 . It is quite a different matter to impose on an employer the duty to give his employee financial advice in relation to benefits accruing from his employment, or generally to safeguard the employee's economic well-being. 44. As [counsel for the defendant] points out, the financial well-being of the employee may be in conflict with that of the employer. Take the case of an employer who is considering whether or not to make an employee redundant. In deciding whether to make a particular employee redundant or to invite him to take voluntary redundancy, does the employer have a duty to consider the financial consequences of redundancy to that employee? The all-embracing implied term for which [counsel for the claimant] contends would suggest that he does. But that is surely unreasonable. The employer is not required to have regard to the employee's financial circumstances when he takes lawful business decisions which may affect the employee's economic welfare. There is no reason to suppose that he will even be aware of the details of those circumstances. Nor is it the function of the employer to act as his employee's financial adviser: that is simply not part of the bargain that is comprised in the contract of employment. There are no obvious policy reasons to impose on an employer the general duty to protect his employee's economic well-being. The employee can obtain his own advice, whether from his union or otherwise. The policy considerations in relation to questions of health and safety are wholly different. If an employer fails to provide a safe system of work, it will usually not be possible or reasonable to expect the employee to take steps to make good the shortcomings in the system.”