Firemens Pension Scheme 1992 · CAS-84084-B7D5 — Pensions Ombudsman determination

CAS-84084-B7D5

Ombudsman’s Determination Applicant Mr S

Scheme Firemen’s Pension Scheme 1992 (the Scheme)

Respondents South Wales Fire & Rescue Authority (the Authority) Rhondda Cynon Taff County Borough Council (the Council)

Complaint Summary

Summary of the Ombudsman’s Determination and reasons

1 CAS-84084-B7D5 Detailed Determination Material facts

Mr S was born in April 1965. He was previously employed by the Fire and Rescue Service (the Service) and was an active member of the Scheme from 19 September 1988 until he retired, on 14 August 2017.

In 2017, as Mr S was approaching his 30th year of service, he requested retirement quotations for the benefits he could receive at retirement. At the time, his substantive role was Station Manager Competent. He had been temporarily promoted to the role of Flexi Duty Station Manager Competent (Flexi Duty Station Manager), between 1 August 2016 and 6 August 2017 inclusive.

The quotation he was subsequently sent (the Quotation) informed him that, at retirement, he could receive an annual pension of £23,784.99, and a lump sum of £167,191.51.

Mr S retired in August 2017 and received the benefits stated on the Quotation.

On 1 February 2019, the Service wrote to Mr S (the February Letter). A summary of the February Letter is detailed below in paragraphs 12 to 22.

1 Relevant sections of the 1992 Order are in Appendix 1. 2 Details of the Old and New Rule B5C are detailed in Appendices 2 and 3 . 2 CAS-84084-B7D5 It had come to light at the end of November 2017, that the Authority had not implemented the New Rule and had continued to treat temporary promotions as pensionable pay under the old regulations. It included such payments in final salaries for pension purposes, where they had occurred within three years of retirement.

3 CAS-84084-B7D5 A further report was being presented to the Authority on 11 February 2019, to make three recommendations (the Recommendations), on how it should address the situation moving forward. 3

Mr S’ pension benefits, at the time he retired, were based on pensionable earnings either in his final year before retirement or based on an average of pensionable earning over a specified period prior to retirement. The pensionable earnings would have included any additional salary received during a period of temporary promotion during that time.

This resulted in the final salary figures used to calculate his pension benefits being inflated, as additional salary received during a period of temporary promotion should have been excluded. His final pensionable salary should have been based solely on his substantive role at the point of retirement. Accordingly, he had been identified as a recipient of an overpayment of benefits.

If, at its meeting on 11 February 2019, the Authority accepted the Recommendations, it would result in Mr S’ annual pension being adjusted with effect from 1 April 2019. However, there would be no requirement for the Authority to recover any previous overpayment of pension, including lump sums, already paid, up to 31 March 2019.

It appreciated that the information in this letter would have been the first communication Mr S would have received in respect of this matter and that it would have caused him great concern. So, it provided details of the meetings it had arranged to discuss this matter and asked Mr S to confirm if he would like to attend one of those meetings or if he would like to have a meeting on an alternative date.

Following the Authority’s meeting on 11 February 2019, it would write to him to formally notify him of the decision the Authority had taken, in respect of the Recommendations.

On 12 February 2019, the Service sent Mr S a further letter, detailing the outcome of the Authority’s meeting held the day before. This letter said the Authority had determined that:

3 The three recommendations are detailed in Appendix 4.

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Summary of Mr S’ position

Prior to receipt of the Quotation, the Service had verbally informed him of the benefits he could get at retirement. The figures provided in the Quotation were consistent with the figures he had previously been given by the Service. Had he been given correct information concerning how his pension would be calculated, he would not have retired in August 2017.

Loss of higher salary/income

By 2017, he had completed four out of the five stages of the promotional process to become a Flexi Duty Station Manager. He decided to withdraw from the promotional process and retire, because by August 2017, his pension would have been based on a year’s worth of his temporary promotion salary.

Had he been correctly informed about how his pension should have been calculated, he would not have withdrawn from the promotion process. He was only 52 years old

4A summary of Mr S’ schedule of loss is detailed in Appendix 5.

6 CAS-84084-B7D5 at the time and would have continued to work until age 55, which would have been in April 2020.

He had provided all the evidence he could feasibly have, to demonstrate that he clearly met the standard of the balance of probabilities in this case, that he would have remained employed until April 2020. By contrast, the Authority has provided no evidence to rebut his position.

Loss of chance

There was a substantial chance as opposed to a speculative one, that had he not retired in August 2017, he would have been promoted to the role of Flexi Duty Station Manager. The promotion process occurred every year. Had he remained in employment and not retired in August 2017, the next promotional round for Flexi Duty Station Manager would have taken place in April 2018.

During the April 2018 promotion process, 18 candidates were interviewed and of the 18, 12 were promoted. He understood that four or less of those appointed were the same level as his substantive post, and the others were Watch Managers, who were less qualified than him.

He believes that having been promoted to the role of Flexi Duty Station Manager on three previous occasions, he was well placed to compete for the role in the promotion process. Further, his line manager had said in an email that it was likely that he would have achieved the next step in the promotion trail, given his experience and capability. 5

As set out by the Court of Appeal in Allied Maples Group Ltd v Simmons & Simmons [1995] 1 W.L.R. 1602 (Allied Maples), and approved by the Supreme Court in Perry v Raleys Solicitors [2019] UKSC 5; [2020] A.C. 352 (Perry), where a chance of a better financial outcome is lost on the basis of the act of a third party, then this is assessed on the loss of chance basis.

Whether or not he would have been successful in obtaining a promotion would have been dependent on the assessment of those involved in any promotion process.

In light of Allied Maples and Perry, the following questions needed to be asked:-

The evidence from his line manager was compelling evidence that he had excellent prospects of promotion to Flexi Duty Station Manager. This evidence was not

5 Mr S provided a copy of his line manager’s email to The Pensions Ombudsman.

7 CAS-84084-B7D5 contested. The chance could have been as much as 100% if he was almost bound to succeed. 6

The Authority provided no evidence to demonstrate his chances of promotion or otherwise. In circumstances where his case is not disputed by the Authority, the Pensions Ombudsman (the PO) should accept the evidence of his line manager, and assess his loss of chance of a promotion, a higher salary and a higher pension, accordingly.

The fact that the Authority asserted that there was a substantial chance that he would have retired was the incorrect approach in law. The question was whether, having found that but for the negligence, he would not have retired, the PO considers that there was a substantial chance that he would have been promoted. A substantial chance is a low threshold. He has given cogent evidence on this point, and it was clear that it could not be “entirely speculative” that he would have obtained a promotion if he was already acting up in the role.

Turning to the measure of loss to be awarded to him for the loss of chance of a promotion he submitted that:

Overpaid pension contributions and spouse’s pension

6 Hanif v Middleweeks [2000] Lloyd’s Rep. PN 920 at [14] per Mance LJ

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Conclusions

7 Musawi v Bevis Trustees [2009] 055 PBLR - [2009] EWHC 1915 (Ch) at para 16 NHS Business Services Authority v Leeks & Ors [2014] EWHC 1446 (Ch) at para 59 NHS Pensions Agency and another v Pensions Ombudsman and Beechinor [1997] OPLR 99 at 102

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Westminster City Council v Haywood [1998] Ch. 377 at 394

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“When a court has to decide what people would have done in the absence of professional negligence, the standard of proof differs according to whose actions are under consideration. Where the question is what a party to the proceedings would have done, the matter is decided on the balance of probability. Thus, if the court considers that it is more probable than not that the claimant would have acted in a particular way, the court will proceed on the basis that the claimant would indeed have acted in that way; while if that burden is not met, the court will proceed on the basis that the claimant would not have done so. The same all-or-nothing approach applies where the question is what the defendant would have done. By contrast, where the question is what a third party would have done, to the extent that there is a substantial doubt about the matter the approach of the court, as established by cases such as [Allied Maples] and many others, is to assess the chance that the third party would have acted in the relevant way and to award damages which reflect that chance.”

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Would Mr S have continued with the promotion steps?

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“[Mr S] was a very capable leader when working in the department and if he had not taken the decision to retire would have attended the competitive process which are run on a yearly basis for permanent promotion to Station Manager Flexible Duty, with [Mr S’] experience and his capability it is quite likely that he would have achieved the next step in the promotion trail.”

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Directions

8 Provided that this does not exceed the maximum accrual of pensionable service under the Scheme Rules.

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Dominic Harris

Pensions Ombudsman 11 March 2025

19 CAS-84084-B7D5 Appendix 1

“…

PART G

PENSIONABLE PAY AND CONTRIBUTIONS

G1 Pensionable pay and average pensionable pay

(1) Subject to paragraphs (2), (9) and (10), the pensionable pay of a regular firefighter is the aggregate of—

(a) the amount determined in relation to the performance of the duties of his role (whether as a whole-time or part-time employee) other than those amounts payable to him in respect of the benefits within rule B5C(5); and

(b) the amount (if any) of any benefits which are pensionable under rule B5C(1).

(2) …

(3) The average pensionable pay of a regular firefighter is, subject to paragraphs (5) to (7C), the aggregate of his pensionable pay for the year ending with the relevant date.

(4) The relevant date—

(a) for the purposes of rule C7 (spouse’s or civil partner’s award where no other award payable), and the Compensation Scheme, is the date of the person’s last day of service as a regular firefighter, and

(b) for all other purposes of this Scheme, is the date of the person’s last day of service in a period during which contributions were payable under rule G2.

(5) Subject to paragraphs (6) and (7), if he was in receipt of pensionable pay for part only of the year ending with the relevant date, his average pensionable pay is the aggregate of his pensionable pay for that part multiplied by the reciprocal of the fraction of the year which that part represents.

(6) For the purposes of paragraphs (3) and (5), any reduction of pensionable pay as a result of any—

(a) sick leave;

(b) stoppage of pay by way of punishment;

(d) paid additional maternity or additional adoption leave; or

(e) unpaid additional maternity or additional adoption leave where contributions have been paid under rule G2A,

shall be disregarded.

(7) If the amount determined in accordance with paragraphs (3) to (6) is less than it would have been if the relevant date had been the corresponding date in whichever of the two preceding years yields the highest amount, that corresponding date shall be taken to be the relevant date.

(7A) The average pensionable pay of a regular firefighter who—

(a) is entitled to a long service increment; and

(b) retires after 30th September 2006 and before 1st October 2007, or becomes entitled to a deferred pension under rule B5 within that period,

shall be calculated—

(i) as if his long service increment had accrued at the rate of £990 per annum (disregarding the reduction in the amount of the long service increment that had effect in relation to times on and after 1st October 2006), and

(ii) disregarding any LS-related payment.

(7B) The average pensionable pay of a regular firefighter who—

(a) is entitled to additional pension benefit under rule B5B (additional pension benefit: long service increment), and

(b) retires on or after 1st October 2007,

shall be calculated on the basis of whichever of the following paragraphs yields the greater amount—

(i) the calculation is made with regard to the amount credited to him under rule B5B, but without regard to his long service increment and any LS-related payment, or

(ii) the calculation is made with regard to his long service increment and any LS-related payment, but without regard to the amount credited to him under rule B5B.

(7C) The average pensionable pay of a regular firefighter shall be calculated without reference to any additional pension benefit credited under rule B5C (additional pension benefit).

21 CAS-84084-B7D5 Appendix 2

“B5C Additional pension benefit: continual professional development

(1) A regular firefighter who, in any CPD year beginning with the year commencing on 1st July 2007, receives CPD payments, shall be credited with an amount of additional pension benefit in respect of that year.

(2) Subject to paragraph (3), the amount of additional pension benefit in respect of a CPD year shall be determined on 1st July immediately following the year in question in accordance with guidance and tables provided by the Scheme Actuary.

(3) Where the Retail Prices Index for the month of September preceding the relevant tax year is higher than it was for the month of September in the CPD year in question, the amount of additional pension benefit for that CPD year (as calculated in accordance with paragraph (2) and, if applicable, this paragraph) shall be increased by the same percentage as the percentage increase in the Retail Prices Index.

(4) Any increase in accordance with paragraph (3) shall be applied with effect from the first Monday of the relevant tax year.

(5) In this rule—

“CPD payments” , as regards a firefighter, means payments made to him by his employing authority in respect of his continual professional development;

“CPD year” means a period of 12 months beginning with 1st July in which a firefighter is in receipt of CPD payments;

“relevant tax year” means a tax year in relation to which—

(a) the amount of a firefighter’s pension benefits is calculated for the purposes of this Scheme, and

(b) he is not in receipt of a pension under this Scheme or entitled to a deferred pension under rule B5;

and a tax year is a relevant tax year in relation to a particular CPD year if it is the tax year in which CPD payments for that CPD year are taken into account; and

“tax year” means the period of 12 months beginning with 6th April.”

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“…

B5C Additional pension benefit

(1) Where a fire and rescue authority determines that the benefits listed in paragraph (1) are pensionable, and in any additional pension benefit year pays any such pensionable benefits to a regular firefighter, the authority shall credit the firefighter with an amount of additional pension benefit in respect of that year.

(2) Subject to paragraph (3), the amount of additional pension benefit in respect of that year shall be determined on 1st July immediately following the year in question in accordance with guidance and tables provided by the Scheme Actuary.

(3) The amount of additional pension benefit determined in accordance with paragraph (2) shall be increased on the first Monday of the following relevant tax year by the same amount as any increase which would have applied if that additional pension benefit were a pension to which the Pensions (Increase) Act 1971 applied and the beginning date for that pension were the 1st July of the tax year immediately before the relevant tax year.

(4) For the avoidance of doubt, the increase of additional pension benefit in the tax year 2010/2011 shall be increased by the same percentage as the percentage increase in the Consumer Prices Index in September 2010 with effect from Monday 11th April 2011.

(5) The benefits referred to in paragraph (1) are—

(a) any allowance or supplement to reward additional skills and responsibilities that are applied and maintained outside the requirements of the firefighter’s duties under the contract of employment but are within the wider functions of the job;

(b) the amount (if any) paid in respect of a firefighter’s continual professional development;

(c) the difference between the firefighter’s basic pay in their day to day role and any pay received whilst on temporary promotion or where he is temporarily required to undertake the duties of a higher role;

(d) any performance related payment which is not consolidated into his standard pay.

(6) In this rule— 23 CAS-84084-B7D5 “additional pension benefit year” means the period of 12 months beginning with 1st July in which a firefighter is in receipt of any of the benefits listed in paragraph (5).

“the beginning date” means the date on which the pension is treated as beginning for the purposes of section 8(2) of the Pensions (Increase) Act 1971;

“following relevant tax year” means the tax year after the relevant tax year, in relation to which the member is not a pensioner member or entitled to a deferred pension under rule B5;

“relevant tax year” means a tax year in relation to which—

(a) the amount of a firefighter’s pension benefits determined under this rule for the purposes of this Scheme is taken into account for tax purposes, and

(b) the firefighter is not in receipt of a pension under this Scheme or entitled to a deferred pension under rule B5; and

“tax year” means the period of 12 months beginning with 6th April.”

24 CAS-84084-B7D5 Appendix 4

“The first recommendation is that the Fire Authority confirms that temporary promotions are pensionable, and that this decision is applicable from the effective date of the new Rule B5C, i.e. 1 July 2013.

The second recommendation is that the Fire Authority adjust all future pension payments made after 31 March 2019, to ensure they are calculated and made on the APB basis.

The third recommendation is that the Fire Authority does not recover any overpayment of lump sum or pension made prior to 1 April 2019.

The second and third recommendations are based on the principle that there is already a precedent set in respect of recovering pension overpayments in the public sector. The general approach taken by public sector pension schemes to this issue has been to reduce future pension payments to the correct level going forward and to waive the repayment of any historic overpayments to avoid financial hardship to members.”

25 CAS-84084-B7D5 Appendix 5 A summary of Mr S’ schedule of loss

Mr S provided detailed calculations of his past losses he believed he incurred between 14 August 2017 and 12 April 2022. He also provided a summary of the future losses that he believes he will incur. A summary of these losses is detailed below.

9 This is Mr S’ best estimate figure. 10 This figure is the amount after Mr S deducted the pension payments he had actually received during the same period.

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Full determination