Agenda item

1.            Mrs Mings introduced the report and highlighted key issues, including the impact of the McCloud judgement and the exit cap (see note below), and the impact of the covid-19 restrictions on employers’ ability to pay contributions. A few leisure employers had struggled to made contributions due to closure, loss of income and staff furlough. Those struggling had been contacted by the officer team and the Actuary and had been reported to the Pensions Regulator.Mr Tagg added that the number of employers struggling was very low and the delays were mostly only of a few days. Some employers had been able to make a double payment one month to cover a missed month. 

2.            The split between active and ceased employers (which had not printed out in the pie chart on page 21 of the agenda pack) was 247 active employers and 278 ceased employers. 

3.            Mrs Cheatle responded to comments and questions about the new exit cap and advised that the cap of £95k applied to all public sector employers and restricted the amount an employer could pay an employee upon retirement or redundancy.  It would have a greater impact on employees with long service and on higher pay grades. Government consultation on changes to the scheme regulations to accommodate the new cap had closed on 18 December 2020 but the changes had been made to the scheme and employers had no choice but to start applying the cap.  Some associations had sought judicial reviews with regard to the cap and its interaction with the scheme regulations and, until those had been heard, no changes to the regulations were expected. The result of the change was that, since November 2020, the two pieces of legislation which governed pensions payments contradicted each other, and the Council was relying on advice from the Local Government Association, the Scheme Advisory Board and Squire Patten Boggs.

4.            There had so far been no cases in Kent in which the cap would need to be applied but, until the scheme regulations were changed to accommodate the new cap, what the Council was required to do would breach its own scheme regulations, and any such breach would need to be reported to the pension board.

5.            Employees would receive a lower payment than they had been expecting but would be able to apply to the internal dispute resolution procedure and then, if that procedure was unable to resolve the issue, to the Pensions Ombudsman or the Courts.  However, the Ombudsman would not consider any cases until after a judgment had been made on the current judicial reviews. Once the regulations had been adjusted to take account of the change, many employees leaving the scheme would receive a lower payment that they would previously have received. The length of time it would take to resolve the various issues around regulatory change was not clear but, in the meantime, cases and disputes were likely to arise and would need to be dealt with. 

6.             Asked if scheme members were aware of the situation and the potential reduction in the level of payment they might expect when retiring or accepting redundancy, Mrs Cheatle advised that information was available on the pensions website but employees had not been sent personal notifications.  An employee planning retirement should ask for an estimate or illustration of their pension benefit a minimum of two months before retiring and many would be shocked then by the reduced amount they would receive. The board expressed concern that many people would not realise until this late stage what they would receive and would then have little time to change their retirement plans. Mrs Cheatle advised that it was the duty of each employer to make their staff aware of the new cap and the impact it would have on individuals.

7.         It was RESOLVED that the report and the information given in response to questions be noted, with thanks but much concern about the personal impact of the exit cap.

*Note: On the afternoon of 12 February, notice was received from the Government that the exit cap regulations had been revoked with immediate effect.