Earlier this month, our union won a huge victory after the government admitted that many firefighters who joined the service between the ages of 18 - 20 were missing up to two years’ worth of pension contributions. Those firefighters are now set to receive compensation, in some cases amounting to thousands of pounds.
This has been a long, hard fought campaign by the union and I am glad to finally see this injustice be set right. Since we announced the good news many members have been in touch asking for some more information. I hope this question and answer session helps clarify some of the issues surrounding this victory.
Q. Who will benefit from this ruling?
Only firefighters who joined the 1992 Firefighters Pension Scheme (FPS) aged 18-20 and who have accrued, or will still accrue, 30 years’ service in the FPS by time they reach age 50.
Q. What is the issue?
Previously these 1992 FPS members had to contribute for up to 32 years in order to receive a 30 year pension at the earliest age of 50. This is because the FPS, unlike many other schemes, has an accrual cap of 30 years reckonable service i.e. no more pension can be accrued after thirty years contributions.
Q. What is the remedy?
The Secretary of State for Communities and Local Government will now amend the scheme rules to allow members under the age of 50, who have accrued 30 years’ service, to take a contributions holiday from the time they attain 30 years’ reckonable service until they reach age 50.
Q. When will this amendment take place?
The ruling states that the scheme rules will be amended within six months of the date of the decision.
Q. What does this mean?
It means that if you are affected (i.e. you joined the scheme before the age of 20) upon reaching 50 you have three options:
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Retire immediately with a pension – As you have reached the earliest age you can retire from the FPS (except in cases of ill health). This is because you have accrued 30 years pension. You can commute the maximum and will not be limited to the lower commutation limit of 2.25 x your annual pension.
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Continue employment and recommence payment of contributions - You can chose to continue working but because you could retire immediately from age 50 with your pension you must resume pension contributions if you wish to retire at your expected NPA (if this is below age 60).
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Continue employment without resuming your pension contributions thereby becoming a deferred member - You can continue to work without resuming your pension contributions, but you will become a deferred member and will not be able to access your pension before age 60, except on ill health grounds. This is an important decision and could cost the individual a significant amount of money. Members are advised to take financial advice before taking this option.
Q. What happens if I have already paid my contributions for this period?
If you have already accrued 30 years in the FPS, are under age 50 and made the contributions for periods over 30 years, you will get a refund for these payments. For example, if you joined at age 18 and you are already 50 you will get the contributions you actually made at age 48-50 (2 year’s contributions) refunded plus interest. If you joined at age 19, and are already 50, you will get the contributions you actually made at age 49 -50 (1 year’s contributions) refunded plus interest.
Q. Why does it only apply from 1 December 2006?
This will apply retrospectively to 1 December 2006 because this is the date when discrimination of this type became unlawful.
Q. If I get a pension holiday after I’ve paid in for 30 years, but I am still unable to retire because I am under 50 years of age, what happens if I get a pay increase or get promoted during this period?
You will still remain a full active member of the scheme during this contribution holiday period and your final salary will reflect any permanent pay increases.
However, when you reach age 50 you will have to make a choice to either retire immediately, continue in employment and resume contributions or continue without resuming contributions. Please note: If you continue in employment but do not resume contributions you will become a deferred member and any further increases in pay or promotion will not be considered. In this situation your pension will be calculated at the point you became a deferred member.
Q. Am I fully covered for ill health, etc during this pension holiday period?
Yes.You are a full, active member of the scheme during this period but again please note that if at age 50 you continue in employment but do not resume contributions you will become a deferred member.
Q. What are the tax implications in relation to any refund?
The ruling outlines that the refund will be adjusted up or down to take account of any tax or national insurance underpayments/overpayments that have occurred in relation to this issue.
Q. Does this cover members who transferred pensions their previous employment?
We have raised this issue with DCLG. Their initial position is that members who transferred pensions in from their previous employment will not be covered by this ruling as members made a choice to transfer their pension with the knowledge of the potential impact of the accrual cap. We are awaiting further information on this point.
Q. Does this ruling cover someone who joined at age 18-20 but is transferred into the 2015 firefighters’ pension scheme before they accrue 30 years?
No. A person who joined at age 18-20, but is transferred into the 2015 scheme before they accrue 30 years, will not suffer the same age discrimination and will be allowed to accrue more than 30 years reckonable service by combining the 1992 service and the 2015 service. This is possible because the 2015 scheme does not have an accrual cap.
There are some options available to members in this situation (there may be other options available dependent on individual circumstances). Here are some examples.
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Firefighter X joins the 1992 FPS at age 18 and transfers into the 2015 scheme at age 48. Firefighter X retires at age 50 as an active member of the 2015 scheme. Firefighter X will receive a full 30 year unreduced pension from the 1992 FPS based upon the salary he or she actually retires on and the commutation factors applicable to age 50. Firefighter X will also be eligible for two years pension from the 2015 scheme, which is payable unreduced at state pension age or reduced from age 55.
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Firefighter X joins the 1992 FPS at age 18 and transfers into the 2015 scheme at age 48. Firefighter X retires at age 55 as an active member of the 2015 scheme. Firefighter X will receive a full 30 year unreduced pension from the 1992 FPS based upon the salary he or she actually retires on, and the commutation factors applicable to age 55. Firefighter X will also be eligible for 7 years pension from the 2015 scheme, which is payable unreduced at state pension age or reduced from age 55.
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Firefighter X joins the 1992 FPS at age 18 and transfers into the 2015 scheme at age 48. Firefighter X retires at age 60 as an active member of the 2015 scheme. Firefighter X will receive a full 30 year unreduced pension from the 1992 FPS based upon the salary he or she actually retires on, and the commutation factors applicable to age 60. Firefighter X will also be eligible for 12 years unreduced pension from the 2015 scheme.
