Agenda item

Christina Hefferon, Assistant Director, OD & HR, introduced a report seeking approval for an additional Pension Discretion in accordance with regulation 31 of the LGPS 2013, to enable greater flexibility thereby enabling the Council to maximise the benefit of its financial contributions for employer and employee.

The Committee was advised that when the Pension Discretions were reviewed in 2014, it was believed that the discretions adopted were sufficient to allow the Council to make in-whole or part contributions to pensions strain and so mitigate the impact of the actuarial reduction of early retirement on the pension received by the employee. When tested for the first time, in relation to a particular case, it had been found that the options available were almost entirely restricted, and only offered the option of offering no mitigation, or mitigation in full at a potentially prohibitive cost to the employer.

It was proposed that the additional Discretion act as an alternative to waiving the actuarial reduction, to deliver greater flexibility on concluding settlements and severance arrangements, and enhance the benefit of the Council’s contribution to both employer and employee for cases in which a sound business case applied. In line with the Government consultation on reducing the cap on public sector exit payments, any payments through the new Discretion would be limited to a maximum of £95k. Any severance arrangements in excess of £100k would be brought to Full Council for review.

Members asked a number of questions, including:

Would the Discretion be included as part of a compromise agreement for exiting staff members?

This was one way the Discretion could be applied, but would only be used when it was of benefit to the Council. The Discretion would allow for quick change, and was designed to avoid lengthy debates, restructures and costly redundancies. The Council retained the option of disciplinary and dismissal where appropriate.

(Cllr Zarait left the meeting at 19.03)

Could examples of the impact of the new Discretion on costs be provided?

It was difficult to provide examples of the cost to the Council, as this would vary on a case-by-case basis taking into account variances such as what an employee was entitled to based on their age, length of membership of the LGPS, salary etc. Alongside the benefits to flexibility and time, the Discretion was designed to help the Council provide a way out for employees wishing to leave, where this also supported the business requirements of the Council, without incurring significant costs. The maximum cost of £95k would include any contractual costs to be incurred in any case, for example an employee’s pay during their notice period.

Was there an age limit before the Discretion could be applied?

Employees would need to be aged 55 or over to benefit from the Discretion, as only employees over 55 could take early retirement with a part of their pension. The Discretion allowed the Council to provide an incentive to take early retirement and avoid more significant costs at a later date.

Would the new Discretion be open to abuse due to bias or favouritism?

In each instance, a business case would be produced to assess costs, and this would be authorised by the relevant senior officers, thereby avoiding any issues of bias or favouritism.

Did the new Discretion allow for enhanced voluntary redundancies or retirements?

The Discretion would not apply to voluntary or compulsory redundancy payments as these were separate matters. The Discretion related to the enhancement of pension in accordance with LGPS rules, in appropriate cases.

The Chair proposed the approval of the Pension discretion and the Committee approved the item, noting Councillor Dhaliwal’s abstention.

Resolved -  That the Pension Discretion, as set out in the paragraphs 10 to 12 of the report, be approved.