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					                   Police Pension Scheme
                   Standard Note:    SN 0700
                   Last updated:     2 October 2012
                   Author:           Djuna Thurley
                   Section           Business and Transport Section



The Police Pension Scheme is a public service pension scheme, providing pensions based
on final salary. Like most of the other main public service schemes, it operates on a pay-as-
you-go basis. Most serving officers are members of the Police Pension Scheme (PPS) 1987
(closed to new entrants from April 2006). Under the PPS, a maximum pension of two-thirds
of final salary is accrued after 30 years service, or at 50 with 25 years’ service. Concerns
about costs led to a lengthy period of consultation on the future of the scheme. In 2003, the
Labour Government published proposals for a New Police Pension Scheme (NPPS). Under
the NPPS, introduced in April 2006, a maximum pension of half of final salary (plus a fixed
lump sum of four times the annual pension) would be accrued after 35 years.

The Conservative-Liberal Democrat Coalition Government has announced a number of
changes affecting public service pensions generally. In the June 2010 Budget, it announced
that public service pensions would in future be increased in line with the Consumer Prices
Index rather than the Retail Prices Index. In addition, it set up an Independent Public Service
Pensions Commission, to “undertake a fundamental, structural review of public service
pension provision.” The Commission concluded in its interim report that compared to the
other options, an increase in member contribution rates was the most effective way of
making short-term savings. In response, the Government announced its intention to increase
member contributions by an average of 3.2% by 2014/15 across public service schemes
(though not for the armed forces), phased-in and designed to protect the lower paid. In
January 2012, it announced increases in member contribution rates for the police schemes
for 2012/13. The Police Federation has expressed concern at the increases.

The Commission’s final report was published on 10 March 2011. Recommendations included
a move to pensions based on career average earnings and an increase to 60 in the normal
pension age for the uniformed services. On 27 March, the Government set out proposals for
reform and on 4 September set out its final position. The Staff Side of the Police Negotiating
Board accepted the announcement, although disappointed with aspects of it. The Public
Service Pensions Bill 2012/13, which will provide for new public service schemes from April
2015, is due to have its Second Reading on 22 October 2012.



This information is provided to Members of Parliament in support of their parliamentary duties
and is not intended to address the specific circumstances of any particular individual. It
should not be relied upon as being up to date; the law or policies may have changed since it
was last updated; and it should not be relied upon as legal or professional advice or as a
substitute for it. A suitably qualified professional should be consulted if specific advice or
information is required.

This information is provided subject to our general terms and conditions which are available
online or may be provided on request in hard copy. Authors are available to discuss the
content of this briefing with Members and their staff, but not with the general public.
The second report of the Winsor Review of Police Remuneration and Conditions, published
in March 2012, recommended changes to ill-health retirement and the introduction of a
power akin to compulsory severance for police officers. Negotiations on these proposals are
ongoing.

This note concentrates on changes to police pensions. For information on public service
pension reform more generally, see SN 5768 Public service pension reform – 2010 onwards.
Other aspects of the Winsor review are discussed in SN 6148 Police pay and conditions –
Winsor Review.




Contents

1    Background                                                                          3 

1    Key features of the current schemes                                                 4 

2    Development                                                                         6 
     2.1  Review process                                                                 7 
     2.2  Reform of financing arrangements                                               8 

3    Recent reforms                                                                     10 
     3.1  Proposals for a New Police Pension Scheme (NPPS)                              10 
           Ill-health benefits and injury awards                                        12 
           Introduction of the New Police Pension Scheme                                13 
           Impact                                                                       13 

     3.2  Switch to CPI                                                                 15 

4    Winsor and Hutton reviews                                                          15 
     4.1  Independent Public Service Pensions Commission                                16 
           Interim report – contribution increases                                      16 
           Final report                                                                 18 

     4.2  Independent Review of Police Officer and Staff Remuneration and Conditions 21 
           Pension age                                                                  22 
           Voluntary and compulsory exits                                               22 

5    Taking the reforms forward                                                         26 
     5.1  Negotiations                                                                  26 
     5.2  Outcome of the negotiations                                                   29 
     5.3  What are the reforms likely to mean for individuals?                          33 
     5.4  Public Service Pensions Bill 2012/13                                          33 



                                              2
      5.5  Negotiations in Scotland                                                                    34 

6     Other issues                                                                                     36 
      6.1  Commutation factors                                                                         36 
      6.2  Survivors’ benefits where an officer dies in the course of duty                             38 
      6.3  Review of injury awards at retirement age                                                   39 
             Home Office Circular 46/2004                                                              41 
             Comment                                                                                   42 
             Home Office Review of Police Injury Benefits                                              44 



                1       Background
The Police Pension Scheme is an unfunded, contributory, final salary pension scheme.
There are two police pension schemes – the Police Pension Scheme 1987 (now closed to
new entrants) and the Police Pension Scheme 2006 (for new entrants from April 2006). The
main legislation affecting officers England and Wales is in the Police Pensions Act 1976 and
the regulations made under it, in particular: the Police Pensions Regulations 1987 (SI
1987/257) and the Police Pensions Regulations 2006 (SI 2006/3415).

Administration of the police pension schemes is the responsibility of individual police
authorities. 1 Information about police pensions is included in annual reports published by the
Chartered Institute of Public Finance and Accountancy (CIPFA). 2 The Government Actuary’s
Department is undertaking the first formal triennial actuarial valuation of the Police Pension
Schemes, as at March 2008. 3 As at 31 March 2011, the police pension schemes had
135,000 active (contributing members) and 134,000 pensioner members. There are some
20,000 deferred members (early leavers with preserved pension rights). 4

Policy on occupational pensions is reserved to the UK Parliament. However, Scottish
Ministers have the power to make regulations for police pensions in Scotland:

       Occupational pensions are reserved to the UK Parliament under paragraph F3 of
       Schedule 5 to the Scotland Act 1998. However, the Scottish Ministers have executive
       powers devolved to them under The Scotland Act 1998 (Transfer of Functions to the
       Scottish Ministers etc.) Order 1999 (S.I. 1999/1750). This Order transfers to the
       Scottish Ministers executive pension powers of the Secretary of State, including the
       power to make regulations establishing and maintaining pension schemes under the
       Superannuation Act 1972, The Police Pensions Act 1976, the Fire and Rescue
       services Act 2004 and the preserved section 26 of the Fire Services Act 1947. The five
       main schemes covered are the NHS, Teachers, Local Government, Police and
       Firefighters. Scottish Ministers therefore have responsibility for the content of the




1
  See, for example, HC Deb, 1 April 2008, c768W and HC Deb, 5 November 2008, c617 W
2
  HC Deb, 30 Oct 2008,c1253W
3
  GAD, Pay-As-You-Go Public Service Pension Schemes. December 2009 Cashflow Projections. Methodology,
    assumptions and data, 9 December 2009, (6 April 2010), para 4.1
4
   Police estimates 2011/12 - CIPFA Stats; HC Deb, 15 February 2011, c669W, Figures for deferred members
    are for 2008



                                                    3
        regulations governing these schemes although in the case of the Teachers and NHS
        schemes the consent of the Treasury to the making of the regulations is still required. 5

The Scottish Public Pensions Agency is responsible for the regulation of the two Police
Pension Schemes in Scotland. its role includes introducing new legislation that meets the
policy intentions of the Executive.

Audit Scotland explains how the funding works:

        Police and firefighters’ pensions are paid for out of DEL, which forms about 85 per cent
        of the Scottish Government’s budget and include revenue and capital expenditure.
        DEL is included in the Barnett Formula and UK government spending decisions
        therefore determine the total DEL allocation. The Scottish Government decides how to
        spend DEL. However, it has to fund any increased spending on police and firefighters’
        pensions, which directly affects its spending power. 6

In Northern Ireland, pensions are the responsibility of the Police Service of Northern Ireland.


                 1        Key features of the current schemes
There are two police pension schemes – the Police Pension Scheme 1987 (closed to new
entrants on 5 April 2006) and the New Police Pension Scheme 2006 (for new entrants from 6
April 2006). The main features of both schemes were summarised below: 7




5
  Source: HM Treasury
6
   Audit Scotland, The cost of public sector pensions in Scotland, February 2011, para 58
7
   Information in table based on Home Office leaflet, “Police Pensions – comparison of the key features of the
   current and new schemes”, February 2006;



                                                        4
             Question                            Police Pension Scheme 1987                          New Police Pension Scheme 2006

                                                                                                Police officers joining the force on 6 April 2006
Who can be a member of the                                                                      or later. Members of the Police Pension
                                      Police officers joining the force up to 5 April 2006
scheme?                                                                                         Scheme had the opportunity to transfer to the
                                                                                                new scheme shortly after its introduction.


                                      Tiered contribution rates - 12.25% to 12.5% of pay        Tiered contribution rates - 10.1% to 10.75% of
How much do I pay?
                                      (2012/13)                                                 pay (2012/13)

                                                                                                1/2 final salary plus fixed lump sum of 4 times
What is the maximum pension           2/3 final salary, with option to exchange part of the
                                                                                                the pension, with option to exhange part or all
that I can get?                       pension for a lump sum
                                                                                                of the lump sum for extra pension.

                                      Highest pensionable pay in each of the last 3             Earnings over the last 10 years may be taken
What is my final salary based on?
                                      years                                                     into account.

How long to I have to serve to get
                                      30 years                                                  35 years
maximum pension?

What is the earliest age that I can   After 30 years' service, or at age 50 with 25 years'
                                                                                                55. Deferred pension payable at age 65.
get my pension                        service. Deferred pension payable at age 60


Does my pension increase each         Yes - from age 55, or earlier if retiring on ill-health   Yes - from age 55, or earlier if retiring on ill-
year for inflation?                   grounds                                                   health grounds


                                      Dual accrual: 1/60 of final salary for each of the
                                                                                                Uniform accrual: 1/70 of final salary for each
How is my pension accumulated?        first 20 years' service, and 2/60 for each of the final
                                                                                                year of service
                                      10 years' service

                                                                                                Pension and lump sum payable immediately.
                                                                                                Enhanced pensions are only payable to
What are the arrangements for ill- Pension payable immediately. Officers with five or
                                                                                                officers who are incapable of any regular
health retirement?                 more years' service enhanced pensions
                                                                                                employment; others receive unenhanced
                                                                                                pension

                                                                                                Pensions can also be paid to unmarried
                                      Only if he/she is married to you or is you
Can my partner get a pension                                                                    partners (as well as spouses and civil
                                      registered civil partner. Pension stops if the partner
when I die?                                                                                     partners) if appropriate conditions are
                                      remarries or cohabits
                                                                                                satisfied. Pension is payable for life.


                                      Only to your legitimate or adopted children, and          To a natural child, stepchild or adoped child,
Are pensions payable to
                                      not to children of a marriage which took place after      or any other child who was dependent on you
children?
                                      retirement, or to children adopted in retirement          whn you died (even if not related to you)


Are partner and children's
pensions increased for the first 13   Yes                                                       No
weeks?

What is the lump sum death grant
if I die in service (providing you 2 times pay                                                  3 times pay
have not opted out)?


                                                                                                Yes - you can buy "added years" subject to
Can I pay in more money to            Yes - you can buy "added sixtieths" or contribute
                                                                                                limits, although there is no AVC scheme
increase my pension                   to the AVC scheme, subject to limits
                                                                                                linked to the new scheme



Further information can be found on the (archived) Police pensions policy and retirement
policy section of the Home Office website, including:

A Member’s Guide to the Police Pension Scheme 1987; and

A Member’s Guide to the New Police Pension Scheme 2006 (2009)




                                                                      5
                  2       Development
The Police Pension Scheme has its origins in a scheme introduced by the Metropolitan
Police in 1829. Benefits were provided on disablement for London officers “worn out by
length of service”. Payment of a pension was discretionary, with limits to payment set in
legislation. The pensions reflected the “arduous and hazardous conditions” of police work. A
police officer could gain a maximum pension after 25 years, compared to 45 years under the
1834 civil service scale.

Although there was no entitlement to a pension, officers had to contribute up to 2.5 per cent
of pay. These contributions were placed in funds, which could be supplemented with
payments from the police rates if funding was insufficient. The state of the funds and the
unsatisfactory nature of the discretionary system of pensions led to a Select Committee to be
appointed in 1877 to look at the issue. The Committee heard that the funds were either
exhausted or soon would be. It recommended that the discretionary system of payments
should be replaced by a “more uniform and regular system” with entitlement to a pension
after 25 years. This raised the question as to who should pay. The nature of the work made it
reasonable that police officers should be able to draw a pension at an earlier age than those
in “less physically exacting occupations.” However, it was already clear that the funds were
insufficient. 8

In 1890, the Government promoted a Bill which retained the existing superannuation funds.
To ease the burden on local rates, the funds would be supplemented with annual payments
from the Government. 9 In 1921, the attempt to keep separate police superannuation funds
was abandoned:

         The cost of police pensions was henceforth met in part by the contributions paid by the
         men themselves and in part by the general police fund in each area, which itself is now
         composed partly of money derived from the rates and partly of an Exchequer grants for
         police purposes.

The rate of pension was, within certain limits, left to the discretion of individual police
authorities. There were also variations in the extent to which minimum retirement ages were
fixed.

A uniform pension scheme for police officers was first established under the Police Pensions
Act 1921. Gerald Rhodes explains that:

         The main features of this scheme were that the sixtieths pattern of other schemes was
         adapted to give a half-pension after twenty-five years and two-thirds after thirty years,
         that widow’s pensions and not just gratuities were introduced and that prominence was
         given to injury and disablement awards.

         These have been characteristic features of the police scheme ever since, although
         many changes have been made in detail, notably in improving widow’s pensions and in
         raising the contribution rate. 10

Detailed police pensions regulations, along the current lines, were subsequently made under
the Police Pensions Act 1948.

8
     Gerald Rhodes, Public sector pensions, 1965, p60
9
     Ibid, p58-9
10
     Ibid p61



                                                        6
2.1      Review process
By the early 1990s, the scheme was considered to be in need of review. The 1993 report of
Sir Patrick Sheehy’s “Inquiry into Police Responsibilities and Rewards” referred to concerns
about the cost of the scheme. 11 It recommended significant changes to police pension
arrangements, closely related to its proposals for the introduction of fixed-term appointments.
The then Conservative Home Secretary, Michael Howard, explained that as the Government
had only accepted the proposal for fixed term appointments for chief officer ranks, the
proposals for pension reform would need to be reconsidered:

         The report recommended significant changes to police pension arrangements. Those
         were closely related to the proposals for fixed-term appointments and must therefore
         be reconsidered, so we shall undertake a full review of police pensions. One of its
         principal objectives will be to produce greater flexibility. One aspect of the
         recommendations excited controversy : that officers of all ranks should be expected to
         serve for 40 years to receive a full pension at the age of 60. That would not help to
         encourage mature people with experience in other walks of life to join the police, as we
         wish. Patrol duties are not appropriate for people in their late 50s, and we do not think
         that it is reasonable for constables and sergeants, in particular, to be expected
         invariably to continue to serve until then. We have therefore decided not to accept that
         proposal. 12

A review of police pensions was then set up to “identify ways in which the overall benefits
and costs of employing authorities could be made more comparable to other public service
schemes.” The review team did not publish its report before the May 1997 election. The
incoming Labour Government published a “Police Pensions Review Consultation Document”
in March 1998. In the light of the ensuing consultation, further work was then undertaken and
proposals for a New Police Pension Scheme published in 2003:

         4. A review of the Police Pension Scheme was set up in 1993 but a report of the review
         was not published before the election in May 1997. The incoming Government
         decided a fresh start was required and that a consultation document should be issued
         to stimulate debate about a modernised pension scheme for future police officers. The
         consultation document, published in 1998, suggested a pension of half final salary after
         35 years (built up with credits of one 80th for each of the last 30 years and two 80ths for
         each of the last five) and a pension age of 55. This proposed scheme was estimated at
         that time to be worth overall around 24% of pay.

         5. In the light of the consultation exercise the Government concluded that further work
         on the key details of a new scheme was needed before making firm proposals.
         Particular issues considered were whether it would be advisable for a new scheme to
         continue to make ages at which pension could be taken dependent on length of service
         and to offer a two-speed system of pension accrual.

         6. During this period of further consideration, police officers, management and police
         authorities have continued to call for change. Individual (and groups of) officers have
         sought improvements such as benefits for unmarried partners and lifetime pensions for
         spouses. Management has remained concerned at the rising cost of pensions and is
         also keen to tackle the perverse incentives in the present scheme for officers to retire
         while there is still a useful role for them to play in the police service, either with an


11
     Inquiry into Police Responsibilities and Rewards, June 1993, Cm 2280
12
     HC Deb 28 October 1993, c976



                                                       7
         ordinary pension after completing 30 years’ service or with an enhanced ill-health
         pension. 13

2.2      Reform of financing arrangements
The Police Pension Scheme – like most of the other main public service schemes – operates
on a pay-as-you-go (PAYG) basis. 14 This means that pensions are met out of ongoing
Government expenditure as they fall due. In contrast, private sector DB schemes are funded,
which means that scheme members’ pension rights should be covered by assets held under
trust.

Sir Patrick Sheehy’s 1993 report considered whether it was right to continue with a “PAYG
approach.” However, it concluded that a funded scheme was not appropriate:

         13.3 Given concerns expressed as to the costs of the present scheme, and the fact
         that private sector schemes are normally funded, the first matter we considered was
         whether it was right to continue with a “pay-as-you-go” approach to police pensionsor
         whether a funded scheme was indicated.

         13.4 We concluded that a funded scheme was not appropriate. This was on the
         following grounds:

         a) funding is appropriate in private sector schemes so as to secure benefits against the
         risk that the employer’s business may be discontinued. Pension rights which have
         accrued under the present police pension scheme are guaranteed by statute;

         b) it is questionable whether it would be appropriate to build up funds of invested
         assets to secure the benefits being accrued under pension arrangements backed by
         the government;

         c) it is doubtful whether it would be acceptable for the government to raise revenue to
         provide for prospective liabilities rather than to meet its current needs;

         d) to move to a funded arrangement for future service accruals under a new scheme
         whilst leaving the existing scheme on a pay-as-you-go basis would incur significantly
         higher pension costs in the medium term (i.e. for the next 20 to 30 years).

         13.5 For these reasons the Inquiry does not recommend a move to a funded scheme. 15

In December 2003 the Government proposed reforms to the system of financing police
pensions. Under the existing system, each police authority was responsible for paying the
pensions of its former employees on a “pay-as-you-go” basis. It was proposed that this
should be replaced with a system in which police authorities paid employer and employee
contributions into a local pensions account:

         Under the new financing arrangements it is proposed that police authorities would
         continue to administer police pensions. However, their operational budgets would be
         better safeguarded as employer contributions would be paid from them rather than
         annual payments of ordinary retirement pensions net of employee contributions


13
     Home Office, New Police Pension Scheme for Future Entrants, December 2003, p7
14
     There are seven main public service schemes – the Teachers’ Pension Scheme, the NHS Pension Scheme,
     the Civil Service Pension Scheme, the Local Government Pension Scheme, the Police Pension Scheme, the
     Armed Forces Pension Scheme and the Firefighters’ Pension Scheme. Only one of these schemes – the local
     government scheme – is funded. The others are unfunded.
15
     “Inquiry into Police Responsibilities and Rewards”, Cm 2280.I, June 1993, Chapter 13



                                                      8
         (income from which might fall due to the reforms discussed here). This will happen in
         two ways:

         •   Budgets will be protected from changes in pensions expenditure caused by year to
             year fluctuations in normal retirement;

         •   Instead of operational budgets bearing the cost of paying retired officers’ pensions
             (which are set to increase over the next 20 years or so) net of employee
             contributions, they will bear the employer’s share of accruing pensions costs for
             currently serving officers. 16

A Home Office-led working group set up to look at the details for introducing the new scheme
reported in March 2005. 17 The outcome of the ensuing consultation was that respondents
wanted the new financing arrangements to be introduced essentially as proposed. 18 On 5
December 2005, the Government announced that the new system would be introduced. 19

As the following Parliamentary Written Answer explains, each police authority now pays
employer and employee contributions to police pensions into a separate account. Where the
income to this account is insufficient to meet the cost of pensions in payment, it is topped up
by a Home Office grant:

         Police: Pensions

         Paul Rowen: To ask the Secretary of State for the Home Department how much was
         paid (a) by (i) employees and (ii) employers into and (b) to those receiving pensions
         payments from the Police Pension Scheme in each of the last five years. [229433]

         Mr. Coaker: The present system of police pensions financing, under which each police
         authority pays employer and officer contributions into a separate account out of which
         pensions are paid, was introduced in April 2006. Where the income into the police
         authority pensions account from contributions and other payments such as inward
         transfer values is insufficient to meet the cost of pensions in payment, it is topped up
         by Home Office grant. The information for the first two completed years under this
         system is given in the following table.

                                            2006-07 (audited)        2007-08 (unaudited)
                                                                £m                    £m

          Officer contributions                                499                    508

          Police authority contribution                      1,118                  1,145

          Pensions expenditure                               1,970                  2,085


         Figures for the years before 2006-07 relate to the previous pay-as-you-go system of
         financing under which police pensions were paid out of forces’ operating accounts.
         Information about the level of officer contributions, and pensions expenditure net of
         officer contributions is included in the annual reports published by the Chartered


16
     Home Office, New Police Pension Scheme for Future Entrants, December 2003, p5
17
     “Report of the Working Group on Police Pensions Finance Reform”, March 2005; House of Commons
     Deposited Paper, 05/624
18
     HL Deb 29 November 2005, c14-15WS
19
     HC Deb 5 December 2005, c74WS



                                                     9
        Institute of Public Finance and Accountancy (CIPFA). This information is gathered
        independently of the Home Office. 20

A Parliamentary Written Answer of 21 June 2011 provided information on the level of the
police pensions top-up grant in provided by the Home Office in each year from 2006-07 to
2010-11. 21

                3        Recent reforms
3.1     Proposals for a New Police Pension Scheme (NPPS)
The 2003 document explained that the reasons for proposing a new scheme included rising
cost and a desire to “meet the needs of a modern police service”:

        1 The fact that the Police Pension Scheme may no longer meet the needs of a modern
        police service and the rising cost of police pensions have been key drivers in recent
        years for conducting a review of police pensions. Against this background the
        Government has confirmed its commitment, in both the Police Reform White Paper of
        December 2001 and the National Policing Plan of November 2002, to considering
        options for modernising police pensions to make them more flexible and affordable for
        future entrants.

        2 The priority for the Government is that any modernisation of police pension
        arrangements should bring early and direct benefits for the police reform programme.
        The changes should help to recruit and retain officers of the right calibre, for example
        by increasing take-home pay, and by allowing for greater diversity in backgrounds and
        careers because pensions would be less dependent on age at entry. The changes
        should also facilitate greater flexibility over exit points, allowing officers to leave early
        with a fair share of pension benefits.

        3 Another consideration is that the police pension represents a very high proportion of
        police officers’ total remuneration at present. The cost of pensions also has longer-
        term implications for the level of police grant. The Government and employers are
        looking for more cost-effective arrangements, which are more affordable for employers,
        taxpayers and police officers and which would free resources for tackling crime. The
        Government is also looking to ensure that police pensions design accords with its
        general policies on public service pensions and on taxation. 22

The Government’s objectives were that the new scheme should offer significant
improvements for police officers in terms of:

        •   improved retention – keeping a final salary scheme will help recruitment and
            retention, but the current scheme gives officers little incentive to stay beyond the
            30-year point, and its ill-health retirement benefits also provide an expensive early
            exit route which has proved attractive to many officers;

        •   flexibility and modernity – the current system of dual accrual is inflexible in that it
            can penalise late jointers and those taking career breaks and reduces the
            willingness of officers to consider a change of career; all this sets the police
            pension arrangements unnecessarily far apart from other schemes and may
            hamper ongoing workforce modernisation; in particular, the system of dual accrual


20
    HC Deb, 30 October 2008, c124-5W
21
   HC Deb, 21 June 2011, c213W. See also HC Deb, 9 July 2009, c964W on the costs of the scheme in the years
    2006/07 to 2008/09
22
    Ibid, p7



                                                     10
                 limits the scope for developing initiatives to enhance mobility and dynamism at the
                 top of the service

          •      increased affordability – the present scheme has an employee contribution rate,
                 which is intended to cover a third of total cost, currently set at 11% of pay, and a
                 notional employer contribution rate which is already more than twice this and
                 expected to rise further with continuing increases in life expectancy. If the
                 opportunity exists to sensibly reduce the cost of the scheme to employers,
                 taxpayers and officers, it should be taken;

          •      diversity – the current scheme provides well for the married officer but not for those
                 in other relationships and, as noted above, dual accrual was not designed with the
                 needs of late entrants and those taking career breaks in mind. 23

It was proposed that the new Police Pension Scheme should be a final salary scheme. The
maximum pension under the scheme would accrue over a longer period (35 years), making it
cheaper than the existing scheme:

          8. It is proposed that maximum pension under the new scheme should be built up over
          35 years. It is considered that a 35-year accrual period will be compatible with future
          fitness levels and 35 years will also accord with the wider Government policy of raising
          the minimum possible pension age from 50 to 55. All else being equal, the longer the
          time taken to build up a maximum pension, the less expensive the scheme is likely to
          be. The proposed scheme would cost around 28-29% of pay. The officer would pay 9-
          9.5% and the employer around 18.5%-19.5%, with contribution rates regularly
          reviewed in the light of, for example, changes in life expectancy. The proposed
          employee contribution rate compares very well with the 11% paid at present under the
          current Police Pension Scheme. 24

The new scheme would not have an accelerated accrual rate after 20 years as this was felt
to disadvantage late entrants and those who take career breaks since the benefits are “end
loaded.” 25 Instead, benefits would accrue at the same rate each year. Survivors’ benefits
would be introduced for unmarried partners and would no longer be withdrawn on remarriage
or cohabitation:

          9. Within the framework proposed above, the new scheme would have the following
          main features:

          •      A full pension, excluding lump sum, of half final salary;

          •      A fixed lump sum in addition to the pension;

          •      Even build-up benefits over a career – no accelerated accrual after 20 years;

          •      A minimum pension age of 55 and a deferred pension age of 65 (consistent with
                 government policy on extending working lifetimes and higher public sector pension
                 ages);

          •      Life-long survivor benefits (i.e. no cessation on remarriage or cohabitation with a
                 new partner);

          •      Survivor benefits for unmarried partners; and

23
     Ibid, p11
24
     Ibid, p4
25
     Ibid, p5



                                                         11
         •   Two-tiers off ill-health benefits – depending on the severity of disablement for
             work. 26

Other proposed features were:

         •   A pension lump sum of four times pension, giving a maximum of twice the final
             salary – although less than the present maximum police pension lump sum of
             about 2.5 times final salary for those who retire by age 51, this is more than some
             officers currently receive and compares favourably with the maximum of 1.5 times
             final salary lump sums in other public service schemes.

         •   A survivor’s pension in respect of an officer accruing the full pension of half final
             salary would be at the rate of 25% of final salary rather than the present 33%. This
             reflects changing lifestyles with financial interdependence, a feature of modern
             relationships, and enables the scheme’s costs to be kept down.

         •   A lump sum death-in-service grant of three times final salary – instead of twice final
             salary at present. 27

Any changes would only apply to new entrants:

         2. The Government has make it clear that police officers serving at present will be able
         to remain in the current scheme if they wish and that their ability to retire with an
         immediate pension after 30 years’ service or with a pension payable from age 50 after
         25 years’ service will not be affected by the introduction of a new scheme.

         3. Arrangements will also need to be put in place to enable members of the current
         scheme to elect to transfer to the new scheme. 28

Ill-health benefits and injury awards
The 2003 consultation document also proposed a two-tier ill-health benefit system:

         …the recent review of public sector ill-health pensions recommended a two-tier system
         for services, like the police, with high fitness standards. Currently any officer who is
         permanently unable to perform the ordinary duties of a member of the force, if
         medically retired, is entitled to an immediate pension with generous enhancements.

         10. Although an enhanced pension is appropriate for those who cannot earn an
         alternative living, those who can take alternative regular full-time employment require
         only limited continuing support from the Police Pension Scheme. An ability to continue
         in full-time employment brings with it the means of earning a reasonably living but also
         of accruing further pension benefits.

         11. It is proposed that officers who are still able to take regular full-time employment
         should leave with an immediate unenhanced pension. This would serve as a cushion
         between the salary on leaving the police and a potentially lower paid job outside. For
         officers who are permanently disabled from taking regular full-time employment there
         should still be a system of enhancements to compensate for this loss. 29




26
     Ibid, p4
27
     Ibid, p4
28
     Home Office, New Police Pension Scheme for Future Entrants, December 2003, p3
29
     Home Office, New Police Pension Scheme for Future Entrants, December 2003, p20



                                                    12
It was proposed that enhancements should be “based on half the prospective service to
normal pension age.” 30

While PPS still has one tier, 31 the NPPS has two tiers of ill-health pension: a standard ill-
health pension for someone permanently disabled for the ordinary duties of a member of the
police force and an “enhanced top-up ill-health pension” for a person who is also
permanently disabled for any “regular employment” (at least 30 hours a week). 32

Introduction of the New Police Pension Scheme
On 9 March 2006, the then Home Office Minister, Hazel Blears announced details of “the first
major overhaul of police pensions in over 80 years”. Key features of the New Police Pension
Scheme to be introduced on 6 April 2006 included:

         •   All new recruits to the police service from 6 April 2006 onwards will become
             members of the NPPS;

         •   Police officers contribute 9.5 per cent of their pay to the scheme (compared with 11
             per cent under the current scheme);

         •   A maximum final pension of half final pay plus a lump sum of four times pension
             (compared with two-thirds final salary and option to exchange part of pension for a
             lump sum);

         •   New option to nominate an unmarried partner – including same sex partner – as
             pension beneficiary;

         •   New lifelong benefits for surviving spouses, civil partners and nominated unmarried
             partners;

         •   Even build-up of pension scheme benefits over a career, which gives late joiners a
             fair deal (compared with the current scheme which has two rates of pension
             accrual depending on length of service); and

         •   Option to exchange all or part of the lump sum for more annual pension. 33

Regulations to introduce the new scheme – the Police Pensions Regulations 2006 (SI
2006/3415) were laid before Parliament on 16 December 2006, to take effect from 6 April
2006. 34 Existing members of the PPS on 6 April 2006 had the option to transfer to the new
scheme any time between 1 November 2006 and 31 January 2007. 35

Impact
The 2003 consultation document estimated the cost of accruing benefits under the PPS as
36% of pensionable pay (an increase compared to the previous estimate - 32% - which was
mainly attributable to increased life expectancy). The estimated cost of benefits under the
proposed new scheme 29%. 36 The introduction of new financing arrangements from April
2006 (see section 2.2 above) means that police authorities now pay the pension

30
     Ibid
31
     For details, see “PPS 1987, Members’ Guide” , p 17-19
32
      A Member’s Guide to the New Police Pension Scheme 2006, p15
33
     Home Office Press Release 029/2006 “New Pension Scheme for a Modern Police Service” (9 March 2006)
34
     Police Pensions Regulations 2006, (SI 2006/3415)
35
     Home Office leaflet, “Understanding your choice” ,October 2006, p5
36
     Home Office, New Police Pension Scheme for Future Entrants, December 2003, p24-5



                                                    13
contributions of serving officers, rather than meeting the ongoing cost of pensions in
payment. The costs to police authorities should therefore start to reduce as the new scheme
is introduced. 37 However, savings on pensions in payment would only begin to be made
when the new scheme had been in place for some time:

       Over time, as more officers join the new scheme and the numbers in the old scheme
       fall, there will be a saving in public expenditure, as the new scheme costs less as a
       percentage of pay than the current scheme. Ultimately, the saving has been assessed
       as 8.3% of pay and savings will begin to be made after the new scheme has been in
       place for about 25 years. 38

The employer contribution rate in respect of active members was reduced to 24.2% as of
April 2008:

       Whereas previously police authorities had to meet the cost of pensions in payment on
       a pay-as-you go basis, they are now only responsible for the payment of an employer
       contribution for each officer, whilst a central Home Office top up grant will cover any
       deficits, or recoup any surplus, that the authority incurs each year. The employer
       contribution has been reduced from 24.6% of pensionable pay to 24.2%, as of 1 April
       2008. This is the result of an actuarial assessment of the police pension schemes, as
       part of the system of regular three yearly actuarial valuations, and is based on the
       rising number of officers in the less expensive NPPS. It demonstrates the advantage of
       the new financing system in allowing forces to feel the benefit of this less expensive
       scheme much quicker than under the pay-as-you-go system. 39

The Pensions Policy Institute (PPI) estimated that the reforms had reduced the value of the
scheme for new entrants:

       The uniformed services schemes were more valuable than the main schemes before
       the reforms, and remain so after the reforms. [...] The reforms to the Armed Forces
       scheme have reduced the effective employee benefit rate by 1% of salary, from 39% to
       38%.Before the reforms, the Police and Fire schemes both had an average effective
       employee benefit rate of around 35% of salary. The reforms to the Police scheme have
       reduced its average effective employee benefit rate from 35% to 29% of salary. The
       reforms to the Fire scheme have reduced its average effective employee benefit rate
       further, from 35% to 24% of salary. 40

The Independent Public Service Pensions Commission expected costs to reduce by about a
fifth over 30 years:

       2.8 The overall cost savings from these reforms, compared with the costs that might
       otherwise have arisen, vary considerably between schemes. Over the next 30 years,
       expected savings under the reforms of the uniformed service schemes range from
       under a tenth of overall cost for the armed forces to about a fifth for police and a third
       for firefighters. However, the savings will build up gradually, in line with the gradual
       increase in the proportion of members accruing benefits under the new pension terms.
       Consequently, because of protections for existing members’ past and future service,
       overall costs for these schemes are predicted to remain at over a third of pensionable
       pay for much of the next decade. 41


37
    See, for example, HC Deb 28 October 2008, c824W
38
    Explanatory Memorandum to the Police Pensions Regulations 2006 (SI 2006 No. 3415)
39
   Explanatory Memorandum to the Police Pensions (Amendment)Regulations 2008 (SI 2008/1887), para 7.8
40
   PPI, An assessment of the Government’s reforms to public sector pensions, October 2008, p15
41
   Independent Public Service Pensions Commission: Interim Report, 7 October 2010



                                                   14
3.2        Switch to CPI
The Government announced in the June 2010 Budget that it would switch to using the
Consumer Prices Index (CPI) rather than the Retail Prices Index (RPI) for the indexation of
social security benefits and pensions from April 2011:

           1.106 The Government will use the CPI for the price indexation of benefits and tax
           credits from April 2011. The CPI provides a more appropriate measure of benefit and
           pension recipients’ inflation experiences than RPI, because it excludes the majority of
           housing costs faced by homeowners (low income households are subsidised
           separately through Housing Benefit, and the majority of pensioners own their home
           outright), and differences in calculation mean it may be considered a better
           representation of the way consumers change their consumption patterns in response
           to price changes. This will also ensure consistency with the measure of inflation
           used by the Bank of England. This change will also apply to public service
           pensions through the statutory link to the indexation of the Second State
           Pension. The Government is also reviewing how the CPI can be used for the
           indexation of taxes and duties while protecting revenues. 42

This has caused some controversy because the CPI tends to give a lower rate of inflation
than the RPI. 43

The Police Federation of England and Wales (in conjunction with a group of public service
unions) applied to the High Court for a Judicial Review of the decision to increase police
pensions in line with the CPI, rather than the RPI. On 2 December 2011, the High Court
dismissed three of the four grounds of challenge and rejected one by a majority of two to
one. Permission was given to take the case to the Court of Appeal. 44 On 20 March 2012, the
Court of Appeal announced its decision to uphold the High Court ruling in favour of the
Government's switch from RPI to CPI for uprating public sector pensions. 45 The issues are
discussed further in Library Standard Note SN 05434 Public service pension increases and
SN 5830 The CPI – uprating benefits and pensions.

                    4       Winsor and Hutton reviews
The Police Pension Scheme is currently under review. One of a series of regular reviews was
scheduled to report in April 2011. 46 In addition, the Independent Public Service Pensions
Commission conducted a fundamental structural review of public service pensions,
producing an interim report in October 2010 and a final report in March 2011. The
Independent Review of Police Officer and Staff Remuneration and Conditions, which
produced two reports, in March 2011 and 2012, made recommendations affecting police
pensions.




42
    HM Treasury, June 2010 Budget, para 1.106
43
   James Browne and Peter Levell, The distributional effect of tax and benefit reforms to be introduced between
    June 2010 and April 2014: a revised assessment, Institute for Fiscal Studies Briefing Note BN 108, 2010
44
   R v Staff Side of Police Negotiating Board and Others ; [2011] EWHC 3175 (Admin); NHS Employers website,
    High Court rules switch to CPI lawful, 2 December 2011
45
     FDA & Ors, R (on the application of) v Secretary of State for Work and Pensions & Anor [2012]
      EWCA Civ 332 (20 March 2012)
46
     Bedfordshire Police Federation website, ‘Review of Police Pensions and Information Surrounding Regulation
      A19 of the Pension Regulations, See also, Thames Valley Police Federation website (viewed 19 January
      2010)



                                                        15
4.1     Independent Public Service Pensions Commission
Interim report – contribution increases
Budget 2010 announced the establishment of the Independent Public Service Pensions
Commission, to be chaired by former Labour Work and Pensions Secretary of State, Lord
Hutton of Furness. This was to “undertake a fundamental, structural review of public service
pension provision by Budget 2011 and consider the case for short-term savings in the
Spending Review period, by September 2010.” 47

In its interim report, the Commission concluded that, compared to the other options, an
increase in member contribution rates was the most effective way of making short-term
savings. The details would be for the Government to decide
:
        Ex 29 It is a matter for the Government to decide the manner and level of any
        increases in contributions necessary. However, the Commission feels that any
        increases should be managed to protect the low paid and, if possible, increases in
        contributions should be staged and need to be considered with a view to preventing a
        significant increase in opt-out rates. The Commission does not recommend introducing
        contribution rates for the armed forces at this time. 48

In response, the Government said it intended to introduce “progressive” changes to
employee contributions from April 2012:

        The Government will implement progressive changes to the level of employee
        contributions equivalent to an average of three percentage points, to be phased in from
        April 2012. The armed forces will be exempt from this increase. Full details, including
        consideration of Lord Hutton’s recommendation to phase in the increase and provide
        protection for the low paid, will be announced at Budget 2011. 49

The Home Office published proposals for increases to police pension contribution rates for
the years 2012/13 to 2014/15 on 29 July 2011. It made the case for increasing contributions,
as follows:

        Expenditure on public service pensions over the last decade has increased by a third
        to £32 bn per year, and is expected to rise to nearly £34 billion per year by 2015-16.
        Pensions are costing more and, as Lord Hutton stated in his report, these costs have
        generally fallen to the taxpayer.

        There needs to be a fairer balance between what employees pay and what other
        taxpayers contribute towards a public service pension. Police authorities currently
        contribute 24.2 per cent towards officers’ pensions, whilst officers contribute either 9.5
        or 11 per cent themselves. 50

On 30 January 2012, Home Secretary, Theresa May announced that member contribution
rates would increase in 2012/13 in line with the proposal put to the PNB in July. The PNB
would be asked to consider the proposed increases for 2013/14 and 2014/15:

        Turning now to police officer pensions, the Government want to ensure that public
        sector workers continue to have access to pension schemes that are among the very
        best available. However, reform is inevitable because people are living longer. Costs

47
   HM Treasury, Budget 2010, HC 61, June 2010
48
   Ibid
49
   HM Treasury, Spending Review – policy costings, October 2010
50
   Letter from Home Secretary to Police Negotiating Board, 29 July 2011



                                                      16
           have risen by one third over the last 10 years to £32 billion. That is more than we
           spend on police, prison and the courts. These costs have generally fallen to the
           taxpayer. This is unfair and unaffordable, so it is also fair that we should ask public
           sector workers, including police officers, to contribute a bit more towards their pension.

           That is why on 29 July 2011, I wrote to members of the Police Negotiating Board
           asking that they consider a proposal to increase police officer pension contribution
           rates. I am grateful to members of the Police Negotiating Board for considering the
           proposal and for the responses they provided.

           Having considered the points raised alongside the recommendation from the recent
           Police Arbitration Tribunal, I have decided to implement the first year of increases in
           line with the proposal put to the Police Negotiating Board. This proposal meets the
           Government’s objectives of protecting lower earners, asking higher earners to pay
           more and, by reducing the burden on those in the first two years of their career,
           minimising the rate of opt out.

           The Government are committed to securing in full the savings announced at spending
           review 2010 from increases in employee pension contributions for the unfunded
           schemes for 2013-14 and 2014-15. I will ask the Police Negotiating Board to consider
           the proposed increases for these years in line with other public service schemes.

           Again, I will begin the necessary action to amend the relevant regulations in order that
           the changes take effect in April of this year. 51

The contribution rates for 2011/12 and 2012/13 are in the table below: 52



                                                                       2011/12    2012/13  
                          Tier 1 ‐ PPS 1987                                n/a        n/a
                          Tier 1 ‐ NPPS 2006                              9.5%      10.1%
                          Tier 2 ‐ PPS 1987                              11.0% 12.25%
                          Tier 2 ‐ NPPS 2006                              9.5%      10.5%
                          Tier 3 ‐ PPS 1987                              11.0%      12.5%
                          Tier 3 ‐ NPPS 2006                              9.5% 10.75%

The Police Federation wrote to the Home Secretary on 10 April to express concern about the
increases for 2012/13 and highlighting the fact that proposed increases for firefighters had
been altered following consultation:

           Staff Side was extremely concerned about the proposed increases for many reasons,
           including:

           •   the fact they bore no relation to the value of providing scheme benefits;

           •   members of the police schemes already pay the highest contribution rates in the
               public sector and would therefore bear the brunt of the increases;

           •   the costs of police pensions are already decreasing, since the introduction of the
               NPPS 2006;


51
     HC Deb, 30 January 2012, c33WS
52
     Home Office circular – 004/12 – Increased police officer pension contributions; The increases for 2012 were
      implemented by the Police Pensions (Amendment) Regulations 2012 (SI 2012 No. 640)



                                                         17
        •   the increases further compound the risk that members (particularly those young in
            service) will opt-out;

        •   within the context of the public sector pay freeze and high inflation an increase to
            contribution rates is effectively a wage cut;

        •   wanting to avoid a vicious circle of increasing contributions to cover opt-outs;

        •   it could affect promotion;

        •   the uncertainty surrounding police pay and conditions because of Tom Winsor’s
            review; and

        •   the unique employment status of police officers and the fact there is no recourse to
            arbitration on pensions’ matters.

        I am aware that members of the fire fighters’ pension schemes had their proposed
        contribution rate increases reduced – in some cases by half. The main reason given by
        the Department for Communities and Local Government (DCLG) was that “the altered
        levels of contributions will help reduce the risk of opt outs from the fire fighters’ pension
        schemes.”

        The fire fighters’ pension schemes are similar to the police pension schemes and, like
        fire fighters (and the armed forces), police officers were recognised by Lord Hutton as
        requiring a lower normal pension age due to the unique nature of their work. Further,
        the DCLG said it would alter (ie, reduce) the pensions increase for fire fighters “in the
        light of the statutory consultation responses”. Many of these responses were identical
        to reasons that Staff Side provided in its consultation response. 53

On 19 April, the Home Secretary responded that contribution increases was only one
element of the proposed reforms:

        [...] I have committed to taking a fair and even-handed approach to police officers on
        pension reform. I maintain that commitment. The increase in pension contributions is
        one element of proposed reforms and it is inevitable that there will be differences
        between schemes on individual elements. This is a consequence of meaningful
        discussions about how the reforms will be tailored to meet the varying requirements of
        different workforces. The Government has a clear intention to achieve the full savings
        from each scheme of a 3.2 percentage point average increase in contributions by
        2014-15 for all relevant workforces.[...] 54

For more detail of contribution rates across public service schemes, see Library Standard
Note SN 6317 Public service pension contributions.

Final report
The Commission was asked to publish its final report in time for Budget 2011. This would
look at the options for longer-term structural reform. It said in its interim report that it did not
think the issues facing the current system (which it thought included rising costs of benefits
due to increasing longevity) could be met through the provision of final salary defined
benefits. Neither did it think it would be desirable to “move towards a funded, individual
account DC model for all public service employees.” 55 For this reason, its final report would


53
   Letter to Home Secretary from PFEW, 10 April 2012
54
   Letter to General Secretary of PFEW from Home Secretary, 19 April 2012
55
   Independent Public Service Pensions Commission: Interim Report, 7 October 2010, p125-6



                                                     18
look at other possible models, including career average defined benefit schemes. It will also
consider elements of scheme design, such as:

               •   ensuring normal pension ages are in line with latest developments in longevity;
               •   reviewing rules around changes to pension payments when they are taken
                    before or after normal pension age to increase labour market flexibility;
               •   the implications of different indexation options for pension costs and incomes
                    over time; and
               •   accrual rates in the different schemes. 56

Lord Hutton’s final report was published on 10 March 2011. It made a total of 27
recommendations. The key recommendations included a shift to new schemes based on
career average salary and an increase in the normal pension age, for members of the
uniformed services, to 60:

          The main recommendation of the report is that existing final salary public service
          pension schemes should be replaced by new schemes, where an employee’s pension
          entitlement is still linked to their salary (a “defined benefit scheme”) but is related to
          their career average earnings, with appropriate adjustments in earlier years so that
          benefits maintain their value.

          It should be possible to introduce these new schemes before the end of this
          Parliament, in 2015, while allowing a longer transition, where needed, for groups such
          as the armed forces and police.

          Other key recommendations in the report include:

               -   Linking Normal Pension Age (NPA) in most public service pension schemes to
                   the State Pension Age;

               -   Introducing a Normal Pension Age of 60 for those members of the uniformed
                   services – armed forces, police and firefighters – who currently have a NPA of
                   less than 60;

               -   Setting a clear cost ceiling for public service pension schemes – the proportion
                   of pensionable pay that taxpayers will contribute to employees’ pensions – with
                   automatic stabilisers to keep future costs under more effective control;

               -   Honouring, in full, the pension promises that have been earned by scheme
                   members (their “accrued rights”) and maintaining the final salary link for past
                   service for current members;

               -   Introducing more independent oversight and much stronger governance of all
                   public service pension schemes;

               -   Encouraging greater member involvement in consultations about the setting up
                   of new schemes, and in the running of schemes; and

               -   Overhauling the current legal framework for public service pensions to make it
                   simpler. 57

The Government said it would give careful consideration to the report’s recommendations:


56
     Ibid, p127, para 9.8
57
     Independent Public Service Pensions Commission press release, 10 March 2011, Lord Hutton publishes his
      final report on public service pensions



                                                       19
          The Government is also committed to continuing to engage with people working in the
          public sector trades unions and others in taking forward the implementation of any
          future reforms. The Government stands by its commitment given at Spending Review
          that there is no race to the bottom of pension provision, that public service pensions
          should remain a gold standard and that public service pensions should continue to
          provide some form of defined benefit. 58

It said any proposed changes to the police pension schemes would be subject to the normal
consultation processes with the Police Negotiating Board in line with statutory obligations. 59

The Police Federation said it would be important to consider the impact of Lord Hutton’s
recommendations in the context of other changes before commenting on individual details:

          Lord Hutton's recommendations are part of a series of changes being proposed for
          public service pensions. The Government, in its 2010 Comprehensive Spending
          Review, proposed a move from RPI to CPI for revaluing pension benefits plus an
          average 3%increase in member contributions to be phased in from April 2012. It is
          therefore important that we consider the impact that all these elements may have on
          police officer pensions before commenting on specific individual detail. Any changes to
          the Police Pension Schemes must be consulted on within the Police Negotiating Board
          the first meeting of which will take place this afternoon (Thursday 10th March). 60

On 17 June 2011, Chief Secretary to the Treasury, Danny Alexander, provided an update on
the Government’s thinking on Lord Hutton’s recommendations. For example, he said the
Government accepted that “60 should be the benchmark Normal Pension Age for the
uniformed services.” Furthermore, the Government was proposing that future pension
benefits would accrue on the basis of career average salary rather than final salary. 61

On 2 November he announced proposals for the reform of schemes for the teachers, NHS
and civil servants. On the police scheme, the Government said that cost ceilings would be
set within the first few months of 2012. 62 A decision on the appropriate Normal Pension Age
for police officers would also be postponed until 2012:

          The Normal Pension Age for police officers would be decided after Tom Winsor had
          published the part two report of his independent review of police officer and staff
          remuneration and conditions early in the New Year. 63

On 20 December, the Chief Secretary to the Treasury confirmed that the second round of the
Winsor report would take the process forward. 64 This reported in March 2012 (see below).

In February 2012, the think-tank Policy Exchange published a report recommending reform
of police pensions to “reduce the burden on the taxpayer”. It argued that, in the short-term:




58
   Written Ministerial Statement, Publication of the final report of the Independent Public Service Pensions
    Commission, 10 March 2011
59
   HC Deb, 28 April 2011, c588W; HC Deb, 16 May 2011, c31W
60
   Police Federation, 10 March 2011, ‘Comment from Ian Rennie, General Secretary, Hutton pensions review’;
    See also Police Federation, Federation News, May 2011
61
   Speech by Danny Alexander to IPPR, 17 June 2011
62
   HC Deb, 2 November 2011, c928; Public Service Pensions: good pensions that last.,CM 8214, 2 November
    2011
63
     HM Treasury, Public Service Pensions: good pensions that last, Cm 6214, para 3.24
64
     HC Deb, 20 December 2011, c1206



                                                      20
                                             In the short-term:

            •   Police pensions should not be excluded from Hutton's recommendation to link
                pensions to career-average pay, and the standard police retirement age
                should be equalised with firefighters and raised to 60 years.

            •   Any increase in employee contributions should take into account the
                affordability for officers, particularly in the light of wider changes to their
                remuneration.

It also recommended the “design of a New Model Police Pension Scheme to create a
sustainable solution for the long-term.” 65

4.2     Independent Review of Police Officer and Staff Remuneration and Conditions
The Government launched the review of police pay and conditions in October 2010. Led by
Tom Winsor, this would “review the remuneration and conditions of service of police officers
and staff, and to make recommendations that enable the police service to manage its
resources to serve the public more cost effectively, taking account of the fiscal challenges.” 66
It is to produce two reports: the first focusing on short-term improvements and the second
(due in June 2011) would consider matters of longer-term reform. 67 The terms of reference
can be found on the Home Office website. Among other things, the review was asked to
have regard to government policy on pay and pensions and any emerging recommendations
from the Independent Public Service Pensions Commission led by Lord Hutton. 68

The first report of this review was published on 8 March 2011. Some of its recommendations
related to the mechanisms available to police forces to manage its staff. At present, they
have no mechanism equivalent to compulsory redundancy for people with fewer than 30
years’ service. The review recommended that the criteria for the use of powers in regulation
A19 should be amended and that “police forces should be provided with the ability to offer
voluntary exit terms for police officers”. 69 Other detailed recommendations related to the
circumstances in which chief police officers could draw their pensions (recommendations 55
and 56). The second report would consider how ill-health pensions could be focused more on
“the degree to which an individual can work in the future.” 70 On 30 January 2012, the Home
Secretary announced that she had decided to accept the recommendations made by the
police arbitration tribunal and the Police Negotiating Board on the proposals in the first
report. 71 A Home Office Circular summarised the recommendations, which included
amending the police pension regulations “to allow chief officers to make a choice in relation
to the time at which their pension benefits crystallise.” 72




65
   Policy Exchange, Police Officer Pensions – Affordability of Current Schemes, February 2012
66
   Home Office press release, 1 October 2010, Police pay and conditions review launches
67
   Ibid
68
   For further detail, see Library standard note SN/BT 5768 Public service pension reform – 2010 onwards.
69
    Independent review of Police Officer and Staff Remuneration and Conditions, Cm 8024, Part 1 Report,
March 2011, pages 189-93. For further details on the civil service scheme, see SN/BT 5201 Civil
Service Compensation Scheme.
70
   Ibid, p199
71
   HC Deb, 30 January 2012, c32-4WS
72
   Home Office circular, 006/12, 1 February 2012



                                                    21
The review published its second report in March 2012. The Home Secretary said she would
consider it “very carefully”. 73

Pension age
The second report concluded that the “normal pension age for police officers should be set at
60 in line with the implemented recommendations made by Lord Hutton of Furness”, with one
important caveat:

          The reforms to public sector pensions which Lord Hutton has recommended have not
          yet been decided upon, and the Treasury is in negotiation with the public sector
          unions. Any alterations in the normal pension age for other uniformed services which is
          made after these negotiations should have effect in relation to police officers as well. 74

The report also recommended changes to ill-health retirement provisions as follows:

          Recommendation 44 – A future police pension scheme should retain the existing test
          which must be fulfilled for an officer to be considered for an ill-health retirement
          pension, that is that the officer should be permanently disabled for the ordinary duties
          of a police officer.

          Recommendation 45 – A future police pension scheme should determine the size of a
          police officer’s pension, when he is retiring on the grounds of ill-health, by considering
          both his length of service and his future capacity for regular employment. 75

Voluntary and compulsory exits
Police officers are not employees and, therefore, cannot be made redundant. 76 However,
regulation A19 of the Police Pensions Regulations 1987 allows an officer with at least 30
years’ service to be required to retire if the police authority determines that this would be “in
the general interests of efficiency.” The BBC reported on 4 November 2010 that a number of
forces were considering using the rule in order to “cut costs”:

          Police federations said they were concerned at the speed of the move.

          Fully sworn officers are Crown servants, not employees, so cannot be made
          redundant. Other than freezing recruitment, the only option to cut staff numbers is to
          implement regulation A19, which is contained in the Police Pensions Regulations 1987.

          This little-used measure states that all police below chief officer rank, with at least 30
          years of service, can be "required to retire" if their retention would "not be in the
          general interests of efficiency".

          Police Federation vice-chairman Simon Reed described it as a "blunt instrument",
          which could lead to officers experienced in such areas as child protection and serious
          criminals, as well as those on the street, being forced to retire. "We're ill-equipped to
          lose people of that magnitude," he said. 77



73
   HC Deb, 15 March 2012, c38WS
74
   Independent Review of Police Officer and Staff Remuneration and Conditions – Final Report – Volume 1, CM
    8325-I, March 2012, p277-8; Consultation response on this point were summarised on page 275
75
   Independent Review of Police Officer and Staff Remuneration and Conditions – Final Report – Volume 1, CM
    8325-I, March 2012, p290
76
   Independent review of Police Officer and Staff Remuneration and Conditions, Cm 8024, Part 1 Report, March
    2011, page 194
77
     BBC News website, ‘Police may force officers to retire to cut costs’, 4 November 2010.



                                                      22
In response to parliamentary questions, Ministers said that the implementation of regulation
A19 was a matter for police authorities:

       Ed Balls: To ask the Secretary of State for the Home Department whether her
       Department has provided guidance to police forces and police authorities on the
       implementation of Regulation A19 of the Police Pensions Regulations 1987. [24006]

       Damian Green [holding answer 15 November 2010]: The Home Office has not issued
       any guidance or procedures specifically on the use of Regulation A19 under this
       Government. 78

       John Mann: To ask the Secretary of State for the Home Department how many police
       authorities have indicated to her Department that they may implement Regulation A19
       of the Police Pensions Regulations 1987 in the last three months. [29474]

       Nick Herbert: The Government have no role to play in any exercise of this power by
       police authorities, and there is no requirement on them to inform the Government
       whether they may use it. The Department is in regular discussion with members of
       police authorities on the range of issues and challenges that are facing the police. 79

On 8 December 2010, Minister for Policing and Criminal Justice, Nick Herbert, drew the
attention of Members to the ongoing review of police pay and conditions:

       I want quickly to comment on what hon. Members have said about the use of the A19
       procedure to enforce retirement for officers who have served for more than 30 years.
       There are only 3,000 officers to whom A19 might apply, out of a total in England and
       Wales of 143,000. It is not the ideal procedure, which is why we have set up a review
       of pay and conditions by Tom Winsor, which will report in February. It is important that
       we address issues such as the number of officers on restricted duties—more than
       5,500—and the institutionalisation of overtime, when overtime costs are still in the
       region of £400 million a year. These are all areas in which considerable savings could
       be delivered to help to protect front-line policing. 80

The first report of the Winsor review recommended that the criteria for the use of the powers
in regulation A19 should be amended, with service-critical skills and performance being
explicit considerations:

       Regulation A19

       6.1.37 Regulation A19 of the Police Pensions Regulations 1987 enables a police force
       to require an officer (below ACPO rank) with more than 30 years’ pensionable service
       to retire from the force on the grounds of efficiency. There are no additional costs
       associated with the use of Regulation A19 for a force. As in a regular retirement, the
       costs are borne by the police pension fund.

       6.1.38 Submissions to the review explained that Regulation A19 has not, until now,
       been used on its present scale. Some Police Authorities including those for West
       Midlands, Surrey and North Wales, have announced that Regulation A19 will be used.
       Others, including the Metropolitan Police Authority have ruled it out, at least for the
       present.

       6.1.39 The review has been told that there is a degree of legal uncertainty concerning
       the use of Regulation A19 on the grounds that it may constitute indirect age

78
   HC Deb, 15 Dec 2010, c765W
79
   HC Deb, 13 December 2010, c547W; See also, HL Deb, 26 April 2011,c91WA
80
   HC Deb, 8 December 2010, c365



                                                  23
        discrimination. This is because it applies only to officers who have completed 30 years’
        service, and, since substantial increases in the recruitment of women police offi cers
        have taken place within the last 20 years, most of the officers who are now made
        subject to Regulation A19 are men. It has also been explained that some police forces
        have obtained legal advice to the effect that if there is an objectively justifiable reason
        for the discrimination, it may be established that such an action is lawful.

        6.1.40 Regulation A19 has significant disadvantages for workforce planning. The
        officers are chosen primarily because they have served for at least 30 years; only
        subsequently is there consideration of the value of their expertise and experience to
        the police force. Regrettably, the officers in question are the same offi cers who, under
        the 30-plus scheme and its successor, were to be encouraged to remain in the police
        service, in order that their skills and experience are not lost. The need predominantly to
        rely on Regulation A19 means that forces must balance their need for financial savings
        against the value of the skills and other qualities of some of their most experienced
        officers.

        6.1.41 In its submissions to the review, ACPO argued that Regulation A19 needs to
        become a more ‘agile’ tool, to control officer numbers in the face of reducing budgets.
        It is accepted that Regulation A19 needs to be considered in the wider context of
        workforce planning mechanisms in Part 2 of the review. In the short term, therefore, I
        believe that Regulation A19 should continue to be available to the police service, as it
        is one of the only tools available to forces which allows them to make compulsory
        reductions in their workforces.

        Recommendation 57 – The criteria for the use of the powers in Regulation A19
        should be amended, with service-critical skills and performance being explicit
        considerations. 81

It also recommended that:

        As quickly as possible, police forces should be provided with the ability to offer
        voluntary exit terms to police officers, substantially on the terms contained in the Civil
        Service Compensation Scheme. 82

A Home Office circular of April 2012 said that the process for making changes to regulations
to reflect these recommendations was being taken forward. 83

The Winsor review also said the question of “whether police forces should have the power to
compel an officer to leave the force was, understandably, controversial.” The Police
Federation, for example, was concerned that a power of redundancy conflicted with the office
of a constable:

        6.1.60 The Police Federation argues that a power of redundancy fundamentally
        conflicts with the office of constable, and would inhibit the use of police officers’ legal
        authority and discretion. The general secretary of the Federation gave an example of a
        police officer being inhibited from exercising his power of arrest in the case of a senior
        police officer, with lawful reason, because he would be concerned that such a step
        would render him more likely to be selected for redundancy. The Superintendents’
        Association questioned whether redundancy would be appropriate given the unique


81
     Independent review of Police Officer and Staff Remuneration and Conditions, Cm 8024, Part 1 Report,
    March 2011, page 191
82
   Ibid, recommendation 58, page 193
83
   Home Office circular 010-2012; Amendments to the determinations under the Police Regulations 2003 to
    implement recommendations from Part 1 of the Winsor Review



                                                     24
           status of the office of constable. It is also understood that at least some ACPO officers
           do not believe that police officers with fewer than 30 years’ police service should be
           susceptible to being required to leave the police service, unless they have had a
           sufficiently adverse determination made against them in the UPP process. It its
           supplementary submission to the review, ACPO did not recommend a compulsory
           scheme. 84

There were different views on the question of whether it was fair to have a power of
redundancy for police staff but not for police officers. The Police Federation, for example,
argued that the training and development of a police officer was a long and expensive
process, and that “accordingly making redundancies could have long-term adverse
consequences on the effectiveness of a police force.” In contrast, it said, police staff
functions “required ‘more general’ skills, which could be quickly filled from outside the police
force if required.” On the other hand, trade unions representing police staff argued that there
was “no good reason” for the difference in treatment and that police forces needed to be able
to make “balanced decisions over the configuration of their workforces.” 85

In its second and final report, published in March 2012, the review recommended introducing
a power analogous to compulsory severance which, should apply to all police officers from
April 2013:

           In Part 1, I explained that police forces need greater flexibility in managing their
           workforces. The future is inherently uncertain, but economic projections indicate that in
           the foreseeable future forces are unlikely to receive the generous budgetary increases
           which have been commonplace over the past decade. Indeed, there may be need for
           further reductions in funding in the medium-term. Approximately 80% of police forces’
           budgets are spent on personnel, and more than half of that part is spent on police
           officers’ pay and allowances. Unlike police staff, officers cannot be made redundant or
           be required to resign in the interests of efficiency (unless, in the latter case, they have
           served for at least 30 years). The exceptions to this are Chief Constables and Deputy
           Chief Constables who are on fixed term appointments. A Chief Constable therefore
           has a limited range of instruments which he can use to change his workforce mix or
           structure; the instruments he does have are generally crude. Freezing recruitment, as
           many forces have done, to reduce the size of police workforces, is far from
           satisfactory, since it will create a bubble of lack of expertise which will move through
           the system for many years to come.

           In order to improve the instruments available to chief officers in the management of
           their police officer workforces, two potential workforce management tools have been
           considered: military-style commissions and a power analogous to compulsory
           severance for police officers. I have concluded that commissions would be a
           disproportionately onerous and therefore illegitimate means of achieving the stated
           objective. In contrast, compulsory severance is a widely accepted practice in the
           United Kingdom labour markets, and it already applies to some police officers, such as
           British Transport Police officers.

           It is therefore not inconsistent with the office of constable. The introduction of such an
           instrument may properly be regarded as analogous to an extension of the existing
           Regulation A19 of the Police Pensions Regulations 1987 and Regulation 20 of the
           Police Pensions Regulations 2006 which permit compulsory severance for those police
           officers with over 30 or 35 years’ service.


84
     Ibid, p195
85
      Ibid, p195



                                                       25
        The principal recommendations in this Chapter include:

            •     introducing a power analogous to compulsory severance which should apply to
                   all police officers from April 2013;

            •     enabling police forces to offer financial compensation to police officers who
                  have had their service ended using this new power;

            •     basing that financial compensation on the financial compensation for
                  redundancy in the Civil Service Redundancy Scheme 2010; and

            •     requiring all police forces to produce and publish an annual force management
                   statement which inter alia sets out the resources, in terms of personnel and
                   tangible assets, which are expected to be required to meet the projected
                   demands for policing services in the area in question in the short-, medium-
                   and long-terms. 86

It argued that:

        [...] some forces have made staff redundant in order to stay within budget. It is not fair
        that staff alone face redundancy. Chief constables should be given new powers akin
        to compulsory severance for police officers to enable them to manage their workforce
        effectively in times of financial pressure, and ensure the right mix of officers and staff in
        the workforce. 87

The recommendation is opposed by the Police Federation:

        Winsor has recommended a power to make police officers redundant. We believe that
        this is in direct conflict with the Office of Constable. Each sworn constable is an
        independent legal official. Police officers cannot be required to carry out unlawful
        orders or be subject to undue political or managerial pressure. If police officers are to
        exercise their duties free from compromise, they must be confident that their actions
        will not be held against them and mark them out for selection for redundancy in the
        future.

        Winsor has described policing as a job for life, and that this should not be the case.
        This totally misrepresents the situation. The power already exists within Police
        Regulations to dismiss officers for unsatisfactory conduct or performance. Given the
        restrictions they face and their unique employment status, it is wholly inappropriate that
        police officers should be subject to a power to make them redundant. 88

                  5       Taking the reforms forward
5.1     Negotiations
On 27 March 2012, the Home Secretary confirmed that she would consult on long-term
reforms of police pensions with the Police Negotiating Board:

        I asked Tom Winsor to consider the findings of the Independent Public Service
        Pensions Commission, led by Lord Hutton, concerning the normal pension age for
        police officers. The final report recommends a pension age of 60, in line with Lord


86
    Independent Review of Police Officer and Staff Remuneration and Conditions – Final Report – Volume 1, CM
    8325-I, March 2012, p291
87
   Winsor Part 2 – report at a glance – factsheet for federated ranks , March 2012
88
   Police Federation, Copy of letter sent to all MPs re Winsor Review from General Secretary & Chairman – 21
    May 2012



                                                     26
          Hutton’s recommended pension age for police officers. This recommendation will be
          reflected in a proposal for long-term reform of police pensions on which I will now
          consult the Police Negotiating Board. In common with the reforms which are being
          developed across public service pension schemes, the Government are committed to
          ensuring that police pensions are affordable and sustainable for the future. Those who
          work in the police and across public services will continue to have access to pension
          schemes that are among the very best available. 89

A letter to the chair of the Police Negotiating Board set out the Government’s preferred
design for a new scheme for police officers:

          2 The preferred scheme design for the police pension scheme is as follows:

                 a) A career average revalued earnings (CARE) pension scheme;

                 b) An accrual rate of 1.57ths;

                 c) A normal pension age of 60;

                 d) Earnings revaluation of past CARE service for active members;

                 e) Pensions in payment and in deferment indexed by CPI

                 f)   Average member contributions should be assumed to be 3.2 percentage
                      points above their current weighted average level;

                 g) No fixed lump sums, optional commutation, with a 12:1 factor for converting
                    pension to a lump sum;

                 h) Ancillary benefits (ill-health, death and survivors benefits) that match
                    provision in schemes that are currently open to new members (e.g. a lower
                    tier ill health pensioner receives an unreduced CARE pension; a partner
                    receives same proportion of member’s pension as now, based on
                    member’s pension after any optional commutation);

                 i)   Members rejoining after a period of deferment of less than five years can
                      link new service with previous service, as if they had always been an active
                      member (so previous accruals are indexed by earnings for that period of
                      deferment); and

                 j)   Members transferring between public service schemes would be treated as
                      having continuous active service (which would include those transferring
                      between schemes who had rejoined public service after a gap of less than
                      five years).

          3. The following elements of the scheme are for discussion during the consultation
          period:

                 -    Accrual rate;

                 -    Revaluation for active members;

                 -    Revaluation for deferred members;




89
     HC Deb, 27 March 2012, c127-8WS



                                                    27
                   -   Employee contribution rates (although the Government is committed to
                       meeting the savings target set out at the Spending Review of £2.8 bn a
                       year by 2014/15);

                   -   Ancillary benefits;

                   -   Rejoiners;

                   -   Transferees from Club schemes;

                   -   Early and later retirement on a cost neutral basis;

                   -   Abatement in existing schemes (current scheme rules apply);

                   -   State date of April 2015; and

                   -   Transitional protection (taking full account of equalities impacts and
                       legislation, while ensuring that costs to the taxpayer in each and every year
                       do not exceed the Office for Budget Responsibility forecasts for public
                       service pensions). 90

In a speech to the Police Federation on 16 May, Home Secretary, she set out the
Government’s reasons for reform:

          On pensions, as well as on pay, I have always been clear with you that we will have to
          take difficult decisions. People are living longer and payouts for public service pensions
          are costing taxpayers more and more. That would be unsustainable even without the
          deficit we have. So, again, we took the difficult, the unpopular, but the necessary
          decision to reform pensions for all public service workers.

          We have now put forward a package for police pensions that is considerably better
          than pensions in the private sector and that compares very favourably with pensions in
          the public service. Like workers across the public service, it does mean that we are
          asking you to pay more for your future pension. But you will still receive a guaranteed
          pension which is index-linked and inflation-proofed. The pension you have built up will
          be protected, as I’ve already promised. In future, you will be able to continue to build
          up your benefits more quickly than most other public servants. 91

She said the Government had proposed to protect the pensions of officers within ten years of
pension age and was consulting on how this should work:

          I’ve already said that we will protect the pensions of officers within ten years of pension
          age. I’m consulting the Federation and others in the Police Negotiating Board on how
          to make these changes work in the best interests of officers. Every officer aged 45 or
          over will see no change to their pension whatsoever. And there will be no change for
          any officer aged 40 or over and less than ten years from full pension who is in the old
          scheme. Protected officers in that scheme will also continue to receive the double
          accrual rate you were expecting after 20 years’ service. That is better protection than
          has been offered for any other public servants’ pension scheme - including fire-
          fighters.

          And, recognising the unique demands you face, I fought hard to have your pension age
          considered separately from other public servants. So your pension age will remain
          significantly lower than for other public servants – 60 for police officers, as opposed to

90
     Letter from Home Secretary to John Randall, Independent Chair, Police Negotiating Board, 27 March 2012
91
     Home Secretary, Speech to the Police Federation, 16 May 2012



                                                       28
          65 rising to 68 for most other public sector workers. Police officers make an incredible
          contribution to our society. It is right that you should receive a competitive and
          attractive pension package and it is right that your pension age should be lower. But
          because police officers work for fewer years and have more generous pension
          arrangements than almost any other public servants, that means the taxpayer
          contributes more to your pension than most others, and it means you have to
          contribute more too. 92

The staff side of the Police Negotiating Board argued that any new scheme should apply to
new recruits only. 93 Nonetheless, it took part in the negotiations with the aim of influencing
the Government in relation to the following priorities:

          To avoid the position (included in the Home Secretary’s preferred scheme) where any
          member who did not serve until 60 would not receive his or her pension until State
          Pension age. It is currently intended that State Pension age will increase to 67 and
          subsequently to 68;
          To reduce member contributions from the proposed average rate of 13.7%; and

          To achieve the best possible transitional arrangements outside the cost of the new
          scheme. 94

5.2       Outcome of the negotiations
On 4 September 2012, the Home Secretary announced the Government’s final position on
the main elements of police pension reform:

          Police Pension Scheme

          The Secretary of State for the Home Department (Mrs Theresa May): On 27 March
          2012, I issued a written statement to the House concerning remuneration and
          conditions of service in the police. Within that statement I explained that I would put
          forward a proposal on long-term reform of police pensions to the Police Negotiating
          Board, which I did on the same day. In common with changes which have been
          developed across public service pension schemes, my proposal reflected the principles
          for reform established last year by the report of the Independent Public Service
          Pensions Commission, led by Lord Hutton.

          My officials have been engaged in detailed and constructive discussions with
          representatives of the Police Negotiating Board since 27 March, and I have received a
          number of written representations from the organisations represented. Having
          considered the outcome of those discussions, and the representations made during
          this period of consultation, I am announcing today my decision for the reform design
          framework for police pensions. This framework sets out the Government’s final position
          on the main elements of police pension reform and will form the basis for discussions
          on points of further detail in moving to implement these changes.

          The main parameters of the new scheme design are set out below:

          a. a pension scheme design based on career average revalued earnings;

          b. a provisional accrual rate of 1/55.3 of pensionable earnings each year, subject to
          agreement on the outstanding issues;


92
     Home Secretary, Speech to the Police Federation, 16 May 2012
93
     Letter from Police Negotiating Board staff side to Home Secretary, 22 June 2012
94
     Police Federation News – 4 September 2012



                                                      29
c. there will be no cap on how much pension can be accrued;

d. a revaluation rate of active members’ benefits in line with the consumer prices index
(CPI) + 1.25%;

e. pensions in payment and deferred benefits to increase in line with CPI;

f. average member contributions of 13.7% from April 2015. As announced by the Chief
Secretary to the Treasury on 20 December 2011, the Government will review the
impact of the 2012-13 contribution changes, including the effect of membership opt-
outs, before taking final decisions on how future increases will be delivered in 2013-14
and 2014-15, and in the new scheme. Interested parties will have a full opportunity to
provide evidence and their views to the Government as part of the review;

g. flexible retirement from the scheme’s minimum pension age of 55, built around the
scheme’s normal pension age of 60—for all active members aged 55 or more at
retirement, 2015 scheme benefits taken before normal pension age will be actuarially
reduced with reference to the 2015 scheme’s normal pension age, rather than the
deferred pension age (i.e. state pension age). Those members’ benefits will continue to
be paid after age 60 at that actuarially reduced level. All other members will have their
2015 scheme benefits actuarially reduced on a cost neutral basis from the scheme’s
deferred pension age;

h. the normal pension age of 60 will be subject to regular review, which will also
consider the linked early retirement facility described at (g). These reviews will
consider the increasing state pension age and any changes to it, alongside evidence
from interested parties, including staff associations and employers. It will consider if the
normal pension age of 60 remains relevant, taking account of the economical, efficient
and effective management of the police service, the changing profile of the work force
and the occupational demands of, and fitness standards for, police officer roles;

i. this regular review will be informed by scheme data and experience;

j. late retirement factors for members retiring from active service to be actuarially
neutral from normal pension age;

k. a deferred pension age equal to the individual’s state pension age;

l. optional lump sum by commutation at a rate of £12 for every £1 per annum of
pension forgone in accordance with HMRC limits and regulations;

m. abatement in existing schemes to continue;

n. ill-health retirement benefits to be based on the arrangements in the 2006 scheme;

o. all other ancillary benefits to be based on those contained in the 2006 scheme;

p. members rejoining after a period of deferment of less than five years can link new
service with previous service, as if they had always been an active member;

q. members transferring between public service schemes would be treated as having
continuous active service;

r. an employer contribution cap and floor, as described in the reform design framework.

Transitional and protection arrangements

There will be full statutory protection for accrued rights for all members as follows:




                                            30
a. all benefits accrued under final salary arrangements will be linked to the member’s
final salary, in accordance with the rules of the member’s current schemes, when they
leave the reformed scheme;

b. full recognition of a member’s expectation to double accrual for service accrued
under the police pension scheme 1987 (“the 1987 scheme”), so that a member’s full
continuous pensionable service upon retirement will be used to calculate an averaged
accrual rate to be applied to service accrued under the 1987 scheme;

c. members of the 1987 scheme to be able to access their 1987 scheme benefits when
they retire at that scheme’s ordinary pension age (i.e. from 30 years’ pensionable
service; age 50 with 25 or more years’ pensionable service; or the member’s voluntary
retirement age), subject to abatement rules for that scheme. Pensionable service for
the purpose of calculating the ordinary pension age will include any continuous
pensionable service accrued under both the 1987 scheme and the 2015 scheme;

d. members of the police pension scheme 2006 (“the 2006 scheme”) to be able to
access their benefits under that scheme when they retire at that scheme’s normal
pension age (i.e. age 55);

e. members will continue to have access to an actuarially assessed commutation factor
for benefits accrued under the 1987 scheme.

There will be statutory transitional protection for certain categories of members, as
follows:

a. all active 2006 scheme members who, as of 1 April 2012, have 10 years or less to
their current normal pension age (i.e. age 55) will see no change in when they can
retire, nor any decrease in the amount of pension they receive at their current normal
pension age. This protection will be achieved by the member remaining in their current
scheme until they retire;

b. all active 1987 scheme members who, as of 1 April 2012, have 10 years or less to
age 55 or have 10 years or less to age 48 and are 10 years or less from a maximum
unreduced pension, will see no change in when they can retire, nor any decrease in
the amount of pension they receive at their current normal pension age. This protection
will be achieved by those members remaining in their current scheme until they retire;

c. there will be a further period of tapered protection for up to four years for scheme
members. Members who are within four years of qualifying for transitional protection,
as of 1 April 2012, will have limited protection so that on average for every month
closer to qualifying for transitional protection they gain about 53 days of protection. The
period of protected service for any member under these tapering arrangements will
have finished by 31 March 2022. At the end of the protected period, they will be
transferred into the new pension scheme arrangements. Further details on how the
tapered protection will apply are set out in the reform design framework.

Areas for further detailed discussion

As set out in the reform design framework, there will be further discussion on specific
areas of detail, responding in part to issues raised during consultation with the Police
Negotiating Board. In particular there will be further consideration of equalities issues
that have been identified, or any which may be identified during further discussion, as
well as arrangements to ensure compatibility between the new scheme design and
recognised existing or future schemes for police officers exiting the service before
normal pension age.




                                            31
       I believe this represents a fair outcome, reflecting the range of issues raised during
       consultation on my original proposal. This will continue to offer valuable pension
       arrangements for police officers which will be affordable and sustainable in the future.

       The Government Actuary’s Department has confirmed that this design does not
       exceed the cost ceiling set by the Government in my proposal of 27 March. Copies of
       the reform design framework and the Government Actuary’s Department verification
       report have been placed in the Libraries of both Houses. 95

Other recommendations of the Winsor review are still subject to negotiation:

       In producing his final report in March 2012, Tom Winsor recommended a future Normal
       Pension Age of 60 for police officers. That was included in the government's proposed
       scheme design which has been considered by the Police Negotiating Board. No final
       decisions have yet been taken on other elements of Tom Winsor's Final Report, but
       they provide a good basis for discussion and consultation, including through the formal
       police negotiating machinery. We remain committed to constructive engagement with
       the service throughout this process, which is ongoing. 96

The Staff Side of the Police Negotiating Board accepted the announcement, despite being
disappointed with aspects of it:

       Staff Side, which includes the Police Federation of England and Wales, has engaged
       in the Home Secretary’s consultation on long-term reform of police officer pensions.
       Despite being disappointed with aspects of this announcement, Staff Side accepts it
       within the context of the Government’s wider public service pension’s reform agenda. It
       is clear from our discussions with the Home Office that, compared to the reference
       scheme offered by the Home Secretary of 27 March, this was the best deal possible to
       protect the unique position of police officers. 97

The Police Federation in England and Wales said it took legal advice on the legality of the
proposed reforms, on the basis that Section 2 of the Police Pensions Act 1976 prevents
specific changes from being made affecting existing members of police forces. However, it
decided it was in the best interests of its members for it to engage in the negotiations:

       We were advised that there were obstacles that the Government would need to
       overcome in order to make changes along the lines they proposed, and in particular
       that primary legislation would be needed, but that if the Government was determined to
       bring in the changes they would be able to do so. [...]

       In the circumstances we had a clear choice in relation to the Home Secretary’s
       proposals for police pension reform. We could:

       •decide not to engage in discussing the detail, whether in the hope that a legal
       challenge would save us or otherwise, in which case the overwhelmingly likely
       outcome would be the imposition of that proposal; or

       •engage in discussions with a view to getting the best design possible for our
       members. 98



95
   HC Deb, 4 September 2012, c19-22WS
96
    Home Office website – Police Pensions – the case for reform - FAQs
97
   Police Federation response to Ministerial Statement – 4 September 2012
98
   General Secretary’s Statement on Long Term Pension Reform, 5 September 2012



                                                   32
The legal framework for proposed changes is discussed in more detail in a Police Federation
FAQ document of 14 September 2012.

The Federation argued that through the negotiations, it had been able to secure
improvements in transitional protection and for members leaving early but serving until at
least 55:

          Disappointingly we were unable to obtain any movement from the Government on the
          contribution rate. However, by engaging in the consultation process and reaching
          agreement, we have been able to secure the following:

               •    any member who serves until at least 55 will be able from that point:

                    o   to retire and take their career average pension immediately, with that
                        pension actuarially reduced from 60 rather than from State Pension Age
                        (for an explanation of “actuarial reduction” please see the Pension Reform
                        Overview section of the Home Office website).

               •    improved transitional arrangements, outside the cost of the new scheme, in
                     particular:

                    o   an extension of full protection to members of the 1987 Police Pension
                        Scheme aged 38 or over and 10 years or less away from being able to
                        retire with a maximum 30 year pension;

              and

                    o   tapering protection for those members within four years of full protection.

              If we had not engaged in the consultation process then, under the Home
              Secretary’s preferred scheme, any member who left service before 60 would have
              had to wait until State Pension Age before accessing his or her career average
              pension (or would have had their actuarial reduction calculated from State Pension
              Age). In addition, fewer officers would have been afforded protection by the
              transitional arrangements. 99

5.3       What are the reforms likely to mean for individuals?
Both the Home Office and the Police Federation have produced information to help
individuals work out what the reforms will mean for them. The pension reform section of the
Home Office website, for example, includes a calculator and some FAQs, for example, FAQ:
access to pensions and FAQ: contributions.

The Police Federation has also produced an FAQ document (dated 14 September 2012),
addressing issues such as what the implications of the switch to career average, the
transitional arrangements and when people who transfer to the new scheme will be able to
draw their pension. 100

5.4       Public Service Pensions Bill 2012/13
The Government has introduced legislation to implement its proposed reforms for public
service pensions, including police pensions. The Public Service Pensions Bill 2012-13 was
99
     Police Federation News – 4 September 2012
100
      The Federation stresses that the document the represents its best understanding of the position at
      the date of drafting and that “precise and final position on many questions will depend on the legal
      provisions.”



                                                       33
laid before Parliament on 13 September and is due to have its Second Reading on 22
October 2012. It enables public service pension schemes to be established within a common
framework. The Government’s intention is that the powers in the Bill will supersede those in
the existing legislation providing for public service pensions, including the Police Pensions
Act 1976. 101 This is in line with the recommendation of the Independent Public Service
Pensions Commission, which said that, “the Government should introduce primary legislation
to adopt a new common UK legal framework for public service pension schemes.” 102

5.5     Negotiations in Scotland
Scottish public service pensions were included in the scope of the review conducted by the
Independent Public Service Pensions Commission. The Commission noted that although
Scottish Ministers had the power to make secondary legislation, in practice the schemes had
“tended to mirror each other closely” and faced “similar structural issues.” 103 Its final report,
published in March 2011, recommended that the key design features of its proposed new
public service schemes should be “part of a UK-wide policy framework that extends to
Scotland, Wales and Northern Ireland, with limited adaptations of other features to meet local
circumstances.” Primary legislation should be introduced to “adopt a new common UK legal
framework for public service schemes”. 104

The Public Service Pensions Bill 2012/13 enables the establishment of the new public
service pension schemes that the Government intends should be introduced in April 2015.
Clauses 1-3 provide for scheme regulations to be made by the “responsible authority” for the
scheme. For those public service schemes in Scotland where regulation-making power is
currently devolved (including the police schemes) this means Scottish Ministers. Treasury
consent is required for those regulations relating to teachers and the NHS schemes. The
Explanatory Notes confirm that this “carries forward current consent arrangements for these
schemes.” 105

However, any regulations must be in accordance with the requirements of the rest of the Bill,
including, for example, its provisions on the normal pension age. The Explanatory Notes say:

        21. By subsection (1), scheme regulations can make such provision as the responsible
        authority considers appropriate, provided they are in accordance with the requirements
        in the rest of the Bill. For clauses that limit the type of provision that may be made, or
        which require provisions of a specific kind to be included, see for example:

        • clause 4, which requires schemes to have a scheme manager who is to be
        responsible for managing or administering the scheme;

        • clause 5, which requires schemes to provide for the establishment of a pension board
        to assist the scheme manager with certain matters;

        • clause 7, which sets constraints on the design of schemes, including requiring
        schemes that are defined benefits schemes to provide those benefits through a “career
        average revalued earnings scheme” (or CARE scheme) or such other description of
        defined benefits scheme as the Treasury may specify in regulations (but not a final
        salary scheme);


101
    Bill 70- EN, para 10
102
    Ibid, p145-6
103
    Independent Public Service Pensions Commission: Interim Report, 7 October 2010, p23-4
104
    Independent Public Service Pensions Commission: Final Report, 10 March 2011, p146
105
    Bill 70 - EN, para 28



                                                    34
           • clause 8, which provides for the revaluation of pensionable earnings of a person in a
           CARE scheme in accordance with changes in prices or earnings as set out in an
           annual order made by the Treasury;

           • clause 9, which contains requirements relating to the normal pension age ofschemes
           made under this Bill; and

           • clauses 10 and 11, which require schemes to contain a mechanism for regular
           valuations of the scheme and to provide for a cap on the costs to employers of public
           service schemes. 106

The Scottish Government has expressed concern that its ability to negotiate reforms in
Scotland will be restricted:

           Jamie Hepburn (Cumbernauld and Kilsyth) (SNP):

           13. To ask the Scottish Government whether it has received clear information from the
           United Kingdom Government regarding its plans for public sector pension reform.
           (S4O-01258)

           The Cabinet Secretary for Finance, Employment and Sustainable Growth (John
           Swinney): In March 2012, we entered in good faith into negotiations with stakeholders
           to develop pension scheme designs that are appropriate for Scottish circumstances.
           Since then, the UK Government has indicated that it intends to use its forthcoming
           public service pensions reform bill to prescribe a number of significant constraints to
           that process. That has changed the context of our negotiations significantly, so I am
           actively pressing the UK Government for further clarity as a matter of urgency.

           Jamie Hepburn: Is the cabinet secretary able to tell us the issues on which the UK
           Government has not provided the clarity that he is seeking, and how they might impact
           on the ability to negotiate?

           John Swinney: As I have indicated, the issues are the subject of active
           correspondence with the Treasury. I wrote to the Chief Secretary to the Treasury most
           recently on 7 September—one of a number of letters that I have written seeking clarity
           on these points. I understand that the constraints that I referred to will be set out in the
           public service pension reform bill that the UK Government will publish later this week.
           Among the key questions on which I am seeking clarity is whether an absolute link will
           be established in statute between the normal pension age and the state pension age. I
           think that if there is to be flexibility, there is significant scope for negotiation in that
           area. However, I fear that such a link will be established, which will reduce flexibility in
           negotiating pension scheme arrangements in Scotland. The bill might have other
           characteristics that will restrict our ability to undertake negotiations in Scotland; in
           particular, I am interested to know whether the powers and responsibilities of Scottish
           Government ministers will be eroded in any way by the implications of the bill, which
           might involve giving the Treasury the ability to exercise control over changes to
           scheme regulations beyond the current areas of activity. Although I am unable to give
           Mr Hepburn a clear answer to his question just now, I suspect that some of the details
           will become clear in the not-too-distant future. 107




106
      Bill 70 - EN
107
      Question time in the Scottish Parliament on 12 September



                                                        35
                   6       Other issues
6.1       Commutation factors
On 21 May 2008, the Government announced new commutation factors, to take effect from 1
October 2007 in the Police Pension Scheme 1987 (PPS) in England and Wales. 108 These
had the effect of increasing the lump sum payable. Home Secretary, Jacqui Smith, said:

          First, I am announcing today new commutation factors for calculating retirement lump
          sums under the Police Pension Scheme 1987. These new factors – which are the
          same for both men and women – should be implemented in forces from 1 July this
          year. And they will be back-dated to 1 October last year.

          This will increase the lump sum payable to all officers who retire under the ‘old’ police
          pension scheme, or who retired with a lump sum under the old pension scheme on or
          after 1 October 2007.

          To give you an idea of what this could mean for different officers in different
          circumstances:

              •    a 50-year old male constable on the top of the pay scale and with CRTP
                   threshold payments who retires after 30 years and commutes the maximum
                   will get a lump sum of just over £109,000 – almost £23,000 more than under
                   the old factors.

              •    a 52-year old male sergeant in similar circumstances will get a lump sum of
                   just under £120,000 – almost £24,000 more.

              •    a 55-year old female inspector in similar circumstances will get a lump sum of
                   just over £142,000 – about £14,000 more. 109

A “New Commutation Factors: Q&A” factsheet explained why the new factors result in
increased lump sum payments for PPS members who retired on or after 1 October 2007:

          The old scheme factors are higher primarily because of increased longevity, so officers
          giving up an annual pension for a lump sum get more. 110

It also explained why the date of 1 October 2007 was chosen:

          Why are you backdating the old scheme factors to 1 October 2007?

          Any new factors which are introduced can only apply going forward. It is, however,
          unavoidable that new factors take time to implement and so some backdating may be
          appropriate. But there has to be a cut-off somewhere. In this case the implementation
          date of 1 October 2007 was fixed in the light of actuarial advice as an fair and
          appropriate date.

          I retired before 1 October 2007 – it seems unfair that I miss out

          There has to be a cut-off point somewhere. We recognise that the introduction of new
          factors from a particular date will seem unfair to those who retired just before then. But
          it is inherent in the process of changing the factors over time that not everyone will
          benefit.

108
      Police Federation Of England and Wales, 12 August 2008, ]BB CIRCULAR NO: 65/2008
109
      Home Secretary’s speech to Police Federation Conference, Speech by the Rt. Hon. Jacqui Smith, Home
      Secretary, to the Police Federation Conference in Bournemouth, 21 May 2008;
110
      Police Pensions website, “New commutation factors: Q&A”, 21 May 2008;



                                                      36
          Why did you not give advance warning of these changes?

          It is in the nature of this sort of change that we have to announce it when it happens.
          The backdating of the new factors for the old scheme allows for the fact that we have
          not been able to give advance warning. Even if we had given advance warning, there
          would still have been a cut-off point. 111

The implications for members of the NPPS is different because of the different relationship
between pension and lump sum in that scheme. In this case, the new factors come into effect
from 1 July 2008 and are not being backdated. 112

The Police Federation applied for judicial review of the decision to choose 1 October 2007 as
the commencement date. A circular of 12 August 2008 said:

          At this year's Conference, the Home Secretary announced that new commutation
          factors would be introduced and backdated to 1 October 2007. Given the importance of
          the change to those who had retired prior to that date, correspondence was opened
          with the Home Office to establish how that date had been determined.

          We have been informed that the new factors were first proposed by the Government
          Actuary Department ("GAD') in December 2006. The explanation given for the delay in
          implementation is that:

          1. some details (such as the need to amend pension increase factors and to check
          whether the changes would breach HMRC limits) had to be finalised prior to
          implementation;

          2. GAD did not intend the new factors should be implemented immediately and
          endorsed use of the old factors until at least 23 October 2007; and

          3. therefore the Government was entitled to take policy issues (and in particular
          affordability) into account.

          We have been advised that the decision is challengeable. The main point being that
          the relevant regulation (B7 Police Pensions Regulations 1987) requires a commuted
          lump sum to be actuarially equivalent to the pension given up, and that this is a purely
          actuarial assessment, which cannot be affected by wider policy issues.

          Accordingly a claim for judicial review has today, 12 August 2008, been lodged at the
          Administrative Court. The Court is being asked to make a declaration that the Home
          Office and/or GAD acted unlawfully in choosing 1 October 2007 as the commencement
          date and to order them to reconsider the date from which the new factors should be
          effective. 113

In March 2009, the High Court decided that the new commutation factors should be
backdated to 1 December 2006. 114




111
      Ibid
112
      Ibid
113
       Police Federation JJB Circular 65/2008, 12 August 2008
114
      Home Office Circular, Police Pension Scheme 1987: New Commutation Factors and Outcome of Judicial
      Review



                                                      37
6.2       Survivors’ benefits where an officer dies in the course of duty
Under the NPPS, survivors’ benefits are payable for life “irrespective of whether the survivor
remarries or forms a new partnership.” 115 Under the PPS, on the other hand, a survivor’s
pension stops if the survivor remarries, forms a new civil partnership or cohabits:

          If your surviving spouse or civil partner later remarries, forms a new civil partnership or
          cohabits, the pension will stop (or be reduced to only the pensions for any children).
          But it may, on application, be restored at the discretion of the police authority if the
          second marriage, civil partnership or cohabitation comes to an end. 116

Existing members of the PPS on 6 April 2006 had the option to transfer to the new scheme
any time between 1 November 2006 and 31 January 2007. The Home Office produced a
leaflet explaining the differences between the two schemes, including the survivors’ benefits
provided. For example: 117




In a speech to the Police Federation Conference on 21 May 2008, the Home Secretary
Jacqui Smith said that she wanted to do more for existing survivors who had already lost a
partner in the line of duty:

          In the future, the pensions of the surviving partners of officers killed in the line of duty
          should be payable for life, regardless of whether they go on to remarry.

          That change is a key part of a package of support for surviving partners that I want the
          Police Negotiating Board to agree by the end of this year.

          And at the same time, I want to do more for existing survivors who have already lost
          their partner in the line of duty.

          At the moment, the pension they receive is withdrawn if they remarry.

          I recognise that this can cause hardship, and so to alleviate the problem I intend to
          give police authorities the discretionary power to make one-off lump sum payments to
          help existing survivors who have remarried or may remarry.

          I will work with the Police Federation and other members of the Police Negotiating
          Board on the details of the scheme, but I envisage this lump sum payment to be
          sizeable in most cases. 118



115
      ‘New Police Pension Scheme: Members’ Guide’, September 2006, p12;
116
      ‘Police Pension Scheme 1987 Members’ Guide’, October 2006, p13
117
      Home Office leaflet, “Understanding your choice” ,October 2006, p5
118
      Speech by the Rt. Hon. Jacqui Smith, Home Secretary, to the Police Federation Conference in Bournemouth,
      21 May 2008



                                                       38
In response, the Home Office established a special discretionary grant scheme – the Police
Survivors’ Support Scheme. Eligibility was limited to the surviving partners of officers who
had died as a result of an injury received in the line of duty but whose pension/gratuity was
stopped on their remarriage, cohabitation or civil partnership:

        Under current legislation, a Special or Augmented pension/gratuity payable to a
        surviving spouse of a Police officer ("Police Survivor") who dies as a result of their
        injuries suffered in the line of duty may be stopped if the Police Survivor remarries,
        forms a new (registered) civil partnership, or cohabits with another person of the same
        or opposite sex.

        The Purpose of this Scheme

        In accordance with a pledge made by the former Home Secretary Jacqui Smith MP in
        May 2008, the Home Office has established a special discretionary grant scheme for
        the purpose of providing financial assistance to eligible Police Survivors in England &
        Wales, who are in financial need as a result of losing their Special or Augmented
        pension/gratuity as a result of the effect of police pensions legislation as outlined
        above. With further support from the governments of Scotland and Northern Ireland,
        this special scheme has been extended to apply to all eligible Police Survivors across
        the United Kingdom, not just those in England & Wales. 119

The scheme closed on 30 March 2011. 120

For the longer term, it published proposals for a revised injury awards scheme, including:

        [...] life-long adult survivor benefits and the extension of survivor benefits to nominated
        unmarried and unregistered partners in cases where an officer dies in the line of duty.
        At present survivor benefits for death in the line of duty are restricted to bereaved
        spouses and civil partners and are stopped on remarriage or cohabitation. 121

A summary of responses to the consultation published in April 2009, proposed that:

        [...]pensions for adult survivors of officers killed in the line of duty should be life-long, in
        line with life-long pensions introduced under the 2006 New Police Pension Scheme
        (NPPS). 122

The Home Office said that:

        Subject to the outcome of ongoing consultation with the PNB and the necessary
        parliamentary approval, we will bring forward the measures necessary to implement
        amendments to the police injury benefits system later in 2009. 123

6.3     Review of injury awards at retirement age
There is a system of injury awards for officers permanently disabled from performing the
ordinary duties of a member of the police force. This does not form part of the pension
scheme. 124 The Home Office explains:



119
     Home Office – Police Survivor Support Scheme website
120
    Ibid
121
     HC Deb 10 Sep 2008, c126-7WS
122
      Home Office, Review of Injury Award Benefits. Summary and analysis of consultation responses
123
      National archives – Injury awards review
124
     See, for example, “New Police Pension Scheme – Members’ Guide”, p18



                                                      39
          An officer receives an injury award where he or she has ceased to be a member of a
          police force and is permanently disabled as a result of an injury received without his or
          her own default in the execution of his or her duty. The award consists of a gratuity
          and a pension, both of which are related to the loss of earning capacity of the officer.
          The pension element is based on a minimum income guarantee, which is set against
          certain other benefits including ¾ of any ill-health pension.

          A Police Authority must review an injury pension from time to time. This is because the
          injury pension is linked to the loss of earning capacity, which may vary with changing
          circumstances. However, although the actual amount paid may change, the injury
          pension cannot be removed entirely and so is payable for life. 125

The amount of an award depends on the former officer’s “degree of disablement”,
pensionable pay and length of pensionable service. Under the regulations, “degree of
disablement” means the extent to which an officer’s earnings capacity has been affected as a
result of a relevant injury. Regulation 7(5) of the Police (Injury Benefit) Regulations 2006
provides that:

          where it is necessary to determine the degree of a person’s disablement it shall be
          determined by reference to the degree to which his earning capacity has been affected
          as a result of an injury received without his own default in the execution of his duty as a
          member of a police force

The Home Office says the term “degree of disablement” is open to misinterpretation and
should be substituted by loss of earnings capacity:

          3.28 The term “degree of disablement” arguably has nothing to do with loss of earning
          capacity to the uninitiated. There seems no reason to retain the term, when all the
          required assessments and calculations of the injury award are carried out so as to
          arrive at the loss of earning capacity that the officer has suffered. It is therefore
          proposed to change “degree of disablement” to “loss of earning capacity”. 126

It explains that the task, in assessing a loss of earnings capacity, is to assess what a person
is capable of doing and thus capable of earning:

          Method of assessing loss of earning capacity

          3.11 The Police (Injury Benefit) Regulations do not set out a specified procedure for
          assessing the degree of a person’s disablement. The Administrative Court has,
          however, commented that the task in assessing earning capacity is to assess what the
          person is capable of doing and thus capable of earning. It is not a labour market
          assessment of whether somebody would actually pay that person to do what he or she
          is capable of doing, whether or not in competition.

          3.12 Under the current guidance issued by the Home Office the loss of earning
          capacity in any case where the claimant is of an age at which he could still have
          expected to be a serving police officer is to be assessed by comparing the likely
          outside pensionable (or basic) salary he or she could now be expected to earn after his
          injury with the pensionable police salary earned when last serving. There is no
          absolute reason for using the claimant’s police salary as a benchmark for pre-injury
          earning capacity but it has been adopted by police authorities as a means of keeping
          the process as fair and transparent as possible – being based on fact (ie what the

125
      Home Office website, Police Pensions – ill-health retirement and injury awards
126
      Home Office, Review of Police Injury Benefits. Government proposals, August 2008; See also, Home Office,
      “Police Pensions Review. A Consultation Document”, March 1998, para 5.44



                                                       40
      claimant was earning) and not on speculation about what the claimant might have
      been able to earn.

      3.13 The reason for using pensionable earnings for assessing both pre- and post-
      retirement earning capacity is to arrive at the fairest and most robust measure of loss
      of earning capacity for the purpose of a pension which may be payable for a
      considerable period of time. It avoids one officer, who was doing a lot of overtime at
      the point of injury, gaining an advantage over an officer who was not.

      Example

      3.14 If a person had earnings as a police officer of £32,000 a year and it is thought that
      he or she could now earn £24,000 a year, then the loss in earning capacity would be
      £8,000, which would be 25% and would place the person in the “slight disablement”
      category.

      3.15 If there has been a gap between retirement and the injury award claim, the police
      salary benchmark will keep step with police pay movements since the claimant left the
      force - by reference to the current equivalent to the claimant’s pensionable pay point at
      retirement.

      3.16 It is proposed to retain the use of the claimant’s pensionable police salary at the
      point at which he or she last served as the benchmark for pre-injury earning capacity. It
      is not considered necessary to amend the regulations to this effect but to keep this as
      a matter of guidance.

Home Office Circular 46/2004
Home Office Circular 46/2004 recommended that police forces consider a review of the
award payable at compulsory retirement age on the grounds that it was no longer
appropriate to use the former officer’s pay scale as the basis for their pre-injury earning
capacity. At State Pension age, they would no longer normally be expected to be earning a
salary in the employment market. They could therefore be placed in the lowest band of
degree of disablement:

      Once a former officer receiving an injury pension reaches what would have been his
      compulsory retirement age under the Police Pensions Regulations (55, 57, 60 or 65
      depending on the person’s force and rank at the point of leaving the police service) the
      force should consider a review of the award payable, since it is no longer appropriate
      to use the former officer’s police pay scale as the basis for his or her pre-injury earning
      capacity.

      In the absence of a cogent reason for a higher or lower outside earnings level, it is
      suggested that the new basis for the person’s earning capacity, had there been no
      injury, should be the National Average Earnings (NAE)* at the time of the review. The
      NAE figure taken should be the average for the population overall. Separate figures
      for males and females, and regional fluctuations should not be considered. The loss of
      earning capacity for the purpose of establishing Degree of Disablement should
      therefore be assessed by reference to the % proportion the person’s actual earning
      capacity bears to NAE.

      This procedure should help to ensure that former officers are treated in a consistent
      way across forces. They will be placed on an equal financial footing with others in the
      employment market at a time when they could not have been assumed to be earning a
      police salary.
      […]




                                                  41
          Review of Injury Pensions once Officers reach Age 65
          Once a former officer receiving an injury pension reaches the age of 65 they will have
          reached their State Pension Age irrespective of whether they are male or female. The
          force then has the discretion, in the absence of a cogent reason otherwise, to advise
          the SMP to place the former officer in the lowest band of Degree of Disablement. At
          such a point the former officer would normally no longer be expected to be earning a
                                            127
          salary in the employment market.

More recently, a note on the Home Office website said the guidance was a clarification and
did not constitute a retrospective change:

          The ability for police authorities to review injury awards has been in the regulations
          since they were made in 1987. Home Office Circular 46/2004 gives guidance
          regarding the process of reviewing injury awards and was issued to ensure a fairer and
          more consistent approach from all police authorities when reviewing injury pensions.
          This clarification of the situation in the Circular does not constitute retrospection. 128

The word “cogent” was used in the guidance to:

          …allow discretion in what are likely to be highly individual and specific cases. Our
          guidance cannot cover every eventuality. It must be for individual Forces to make a
          determination on all the evidence. 129

In June 2006, the then Home Office Minister Tony McNulty explained that the Government
had no plans to withdraw this guidance, although a wider review of injury benefits was
planned:

          We have no plans to change the guidance in Annex C in HOC 46/2004, which was
          issued to provide for a fairer and more consistent framework within which police
          authorities review the injury pensions they are paying. Police authorities have a
          statutory responsibility to consider at suitable intervals whether the pensioner’s loss of
          earning capacity has altered. The relevant provision is now set out in regulation 37 of
          the Police (Injury Benefit) Regulations 2006, but the legal obligation has been in place
          since before 1987, when the previous regulations were made. A wider policy review of
                                               130
          the injury award system is planned.

Comment
The National Association of Retired Police Officers (NARPO) said it “steadfastly opposed the
Home Office Circular 46/2004” and reminds “Police Authorities of the high degree of
discretion they have in both the timing and regularity of reviews”:

          The National Association of Retired Police Officers (NARPO) have steadfastly opposed
          the Home Office Circular 46/2004, which appears to be intended to bully Police
          Authorities into very significant changes to local policies on injury award reviews.
          Imposition of a policy based on the circular would greatly affect the lifestyles and
          financial security of those already limited by the effects of injuries received protecting
          the public.



127
      Home Office Circular 46/2004, Annex C, ‘Home Office guidance for forces on reviews of injury awards’
128
      Home Office website, ‘Reviewing police injury awards. Date: Mon Jan 14 16:48:11 GMT 2008’
129
      ‘Clarification of certain terms used in the Police Pensions Regulations’, Monday 26 September, 2005
130
      HC Deb, 20 June 2006, c1845W;



                                                        42
          Eric Evans, the President of NARPO said ‘Many of those potentially caught by any
          Home Office inspired policy change have been led to believe that the value of their
          award was for life to help to compensate for a lost career and, in many cases, a
          reduced pension. In some forces the reviews have come completely out of the blue, for
          some after years in retirement, with no proper procedure or explanation. We think
          policy changes are driven solely by a desire to save money at any cost.

          Where is the consideration or sympathy for those who lost their jobs protecting local
          communities? We would remind Police Authorities of the high degree of discretion they
          have in both the timing and regularity of reviews and implore them, if considering a
          new policy, not to introduce it retrospectively in fairness to those whose careers were
          shortened by serious injuries.’ 131

It has noticed a more robust and systematic approach being taken to the review of injury
awards:

          Medical Pensions and Injury Awards are two areas that have experienced an
          unprecedented increase in growth of enquiries. Throughout the 43 Police Forces in
          England and Wales a much more robust and systematic approach to Medical Pensions
          and Injury Award review continues to develop. NARPO accepts this new approach, as
          long as it is carried out fairly and with compassion; is based on sound medical
          evidence and is conducted within the guideline of the relevant Police Regulations. 132

The interim report of the Conservative Police Reform Taskforce, chaired by Nick Herbert, the
then Shadow Minister for Police Reform, regretted the way in which the reforms had been
implemented:

          Injury pensions. Police injury pensions were regarded as particularly wasteful and
          expensive and the Government has recently reformed them. An injured officer’s
          pension is determined by their length of service, their final pensionable salary, and
          their loss of earning capacity as a result of their injury. Previously this loss of earning
          capacity would have been measured against police wages, but Government guidance
          now suggests that once an injured officer reaches compulsory retirement age (CRA) it
          is “no longer appropriate to use the former officer’s police pay scale as the basis for his
          or her pre-injury earning capacity.” Instead the guidance recommends “that the new
          basis for the person’s earning capacity, had there been no injury, should be the
          National Average Earnings (NAE) at the time of the review.”

          The implication of this is that injured officers will receive substantially smaller injury
          pensions, with some more than £15,000 worse off a year. Public sector pensions need
          to be affordable and the Government’s argument that, once an officer reaches the age
          at which they would have retired in the absence of any injury police pay has no
          relevance to their loss of earning capacity, is correct. However, the way in which these
          changes have been implemented leaves much to be desired. Injured officers were
          under the impression that their awards would remain unchanged for life unless their
          medical conditions also changed. In the last session of Parliament Edward Garnier MP,
          then Shadow Minister for the Police, sponsored an EDM which expressed sympathy
          for these officers and noted that many of them felt they had been misled.

          Forces have implemented the changes unevenly and many, including the Metropolitan
          Police Service, have refused retrospectively to apply the changes to injured officers
          who reached before 1 April 2006. Subsequently a reform that was intended to “ensure
          that former officers are treated in a consistent way across forces” has actually

131
      NARPO, Injury awards – Statement to the Police Review
132
      NARPO website (downloaded 10 June 2009)



                                                      43
          increased differences between forces. It would be preferable if all forces applied the
          changes in the same way the Met has done. It is important that the any system of
          injury pension is fair, well balanced and proportionate to the injuries an officer has
          suffered. The system needs to be well managed to ensure that all claims receive an
          appropriate response. 133

Home Office Review of Police Injury Benefits
A consultation document on the Review of Police Injury Benefits was published on 25 August
2008. 134 This proposed a number of changes. It proposed retaining the recommended
practice of reviewing an injury award at compulsory retirement age:

          Conditions applying to continuing an Injury Award

          10. It is proposed to retain the current obligation on police authorities to review injury
          awards with decisions as to the frequency and necessity of these reviews left to their
          discretion. Since selected medical practitioners now assess loss of earning capacity in
          terms of percentage points it is no longer appropriate to restrict the revision of an injury
          pension to cases were the loss of earning capacity has “substantially” altered. Injury
          pensions should be revised as and when necessary. If the former officer’s loss of
          earning capacity is assessed as 10% or less on review, it is proposed that payments of
          the income supplement will be stopped. It is also recommended that review of an injury
          pension can revise the extent to which the loss of earning capacity is apportioned to
          reflect changed circumstances.

          11. The current recommended practice should be maintained of reviewing an injury
          pension at the point the former officer would have left the police service on age
          grounds so that the loss of earning capacity can be assessed against the national
          average earnings rather than his or her former police salary.

          12. Since an injury award is to compensate a person for loss of earning capacity it is
          arguable that there is no need to pay an injury pension beyond State Pension age. On
          the other hand, stopping an injury pension completely at that point could
          disproportionately affect officers badly injured early on in their career who had been
          unable to build up pension scheme benefits. The review therefore proposes to halve
          the minimum income guarantee to create a new minimum retirement income
          guarantee, so that those without a reasonable pension scheme pension would still
          receive an injury pension, and to cease any further reviews after that stage.

          13. Although it is proposed to retain the use of national average earnings for reviews
          between 60 and 65 against which to consider loss of earning capacity, it is proposed to
          revert back to using the officer’s last police pay when the minimum retirement income
          guarantee is calculated.

Any changes would not to officers already retired when the changes came into force:

          Any changes made as a result of the review will apply to officers serving at the time of
          implementation, regardless of whether they have already sustained an injury. They will
          not apply retrospectively however, that is, to officers who have already retired when the
          changes come into force—they will still be dealt with under the system as it currently
          stands, even if they have not yet applied for an award. 135




133
      ‘Policing for the People Interim report of the Police Reform Taskforce’, April 2007
134
      Home Office, Review of Policy Injury Benefits. Government Proposals, August 2008
135
      HC Deb, 10 September 2008, c125WS



                                                         44
The Home Office published a summary and analysis of consultation responses to its Police
Injury Benefits review in April 2009. 136

In a written answer of 27 February 2012, the Police Minister explained that the Government
was considering the implications of recent court judgements:

           Fiona O’Donnell: To ask the Secretary of State when she plans to publish guidance
           arising from the review of police injury benefits.

           Nick Herbert: The implications of recent judgements given by the Administrative Court
           on existing guidance are currently being considered. Home Office officials will consult
           the Police Negotiating Board on any revised guidance on police injury benefits. 137

Home Office Circular 007/2012 advised that that part of the guidance entitled ‘review of injury
pensions once officers reach age 65’ was cancelled:

           This circular advises recipients that parts of guidance on police injury award reviews,
           as specified below, are cancelled.

           The relevant parts are:

                (i) Home Office Circular 46/2004: in Annex C the section entitled 'Review of injury
                       pensions once officers reach age 65'

                (ii) Guidance on medical appeals: paragraph 20 of section 5, entitled 'Degree of
                         disablement after age 65'

           The High Court gave a decision on 21 February 2012 in the judicial review case of
           Simpson. This judgment concerns guidance on police injury award reviews, principally
           that contained in Home Office Circular 46/2004 concerning reviews of the injury
           awards of former officers who have reached age 65. The court concluded that the
           relevant guidance on this particular issue is inconsistent with the Police (Injury Benefit)
           Regulations 2006 and unlawful.

           Under Regulation 37 of the 2006 Regulations, the responsibility for such reviews lies
           with the relevant police authority. (Note. This is subject to amendment by the Police
           Pensions (Amendment) Regulations 2011 (SI 2011/3063), in consequence of changes
           made by the Police Reform and Social Responsibility Act 2011 and the introduction of
           police and crime commissioners in 2012.) We would advise, in the event that such
           reviews are being conducted or considered, that police authorities should satisfy
           themselves that they are acting in accordance with the regulations and the relevant
           case law in the light of the decision in Simpson.

           We are currently considering the further implications of the court's decision and will
           provide further information and advice as appropriate in due course.




136
      Home Office, Review of Police Injury Benefits: Summary and analysis of consultation responses, April 2009
137
      HC Deb, 27 February 2012, c17W



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