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									                          GWENT POLICE AUTHORITY

                         AUDIT & RESOURCES COMMITTEE

Date:                 14th February 2006                                Item No: 6(d)

Heading:             Implementation of New Police Pension Scheme – Status

Report Author:        Chief Constable



The purpose of this report is to inform members of the actions necessary for the
implementation of the new police officers’ pension scheme and related financing
arrangements and for the introduction of the new national pension’s tax regime,
together with a comment on progress.



For information.


1.      In April 2006 a new pension scheme will be introduced for all new police
        officer recruits. The existing police officer pension scheme will operate in
        parallel for all police officers recruited up to 31st March 2006. Linking the two
        schemes is a composite financing scheme.

2.      Police authorities are required to set up a Police Pension’s Account which will
        record all the income and expenditure in a financial year. Linking this account
        in the financial ledger, it is proposed to set up a separate Authority bank
        account to handle these transactions.

3.      Under the new arrangements, most pension’s expenditure will be charged to
        the Pension’s Account, however, some expenditure, primarily in respect of
        injury awards (on top of medical retirement pensions), will be charged to the
        Authority’s Revenue Account.

4.      From April, authorities will pay employer’s contributions into the Pension’s
        Account in addition to those from employees. The Home Office (HO) will also
        make a payment into the Pension’s Account in line with any projected deficit in
        the overall Account.

5.      Arrangements will need to be made to undertake these transactions and to
        provide appropriate controls and management information.
6.   In addition to the new police pension’s arrangements, HM Revenue and
     Customs (HMRC) is introducing new national tax arrangements for staff
     pensions (“A Day”). The main element of this is a limit on the overall value of
     an individual’s pension which can be paid without deduction of tax. If a
     person’s pension value exceeds a defined amount (£1.5m for 2006/07), then
     the excess is subject to tax. Individuals and HMRC need to be informed of
     this liability and arrangements need to be put in place for providing this
     information within required timeframes.


7.   Appendix 1 provides details of the action plan for addressing these issues.
     The key elements are:

     a) Set up a Police Pension’s Account on the ledger and open a related bank
        account. This will involve developing financial codes, the administrative
        arrangements for maintaining both the ledger and bank account and the
        financial procedures linked to the various transaction types.

     b) Amending payroll employee and employer contribution rates for all police
        officers and setting up payroll codes and processes for effecting payments
        into and out of the Pension’s Account. Also, setting up systems for
        reconciling transactions, producing management information and
        undertaking performance monitoring.

     c) Making arrangements with organisations which employ Seconded Officers
        for the payment of contributions by them into the Authority’s Pension’s
        Account, including procedures and controls.

     d) Confirming the current position regarding the payment of Injury Awards, in
        addition to medical retirement pensions, and making arrangements for
        identifying and paying future awards.

     e) Producing Comparative Benefits Statements for each police officer in order
        to help them decide whether to stay in the current pension scheme or elect
        to transfer to the new scheme. These do not have to be produced until
        December 2006 at the latest.

     f) With regard to “A Day”, the date for introduction of the new HMRC pension
        tax scheme, the calculation of Accrued Pensions Rights for officers who
        may be near or above the taxation threshold.

8.   Work is underway to implement those arrangements required by 1st April
     2006, as shown in the detailed action plan.

9.   Production of the Comparative Benefits Statements will require the use of a
     computer software system. An initial option appraisal has been undertaken to
     consider the most appropriate way forward. This is in the process of being
     reviewed and finalised. Whilst the costs of the most appropriate solution have
     still to be finalised, provision has been included within the 2006/07 budget
     (£35,000 pa). Although this is an important issue, it is not critical for
      implementation by April 2006. Work is scheduled during the year for
      completion before the December 2006 deadline.


10.   The work is to be undertaken primarily by the Finance Department, however,
      this may require overtime working to achieve the necessary deadline. This is
      unquantifiable at the present time.


11.   As stated in para 9 above. (The funding implications of the police officer
      pensions were reported to the Authority on 10th February 2006 as part of the
      2006/07 budget report.)


12.   HR Department, Rhondda Cynon Taff and Torfaen County Borough Councils
      and the Police Federation.


13.   The necessary work is in train, primarily for completion by 1st April 2006, in
      line with the required deadlines.


14.   D Garwood, Head of Finance.


      a) HO Guidance for police authorities on the financial arrangements for police
         officer pensions with effect from April 2006.
      b) HMRC guidance on the new pension tax arrangements.
      c) New Police Pension Scheme – guidance to police authorities – August
      d) The Pensions Regulator – Briefing No 3 – Pensions tax simplification.

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