NILGOSC

 

Circular 04/2006 – 16th May 2006

 

To:     Salaries and Wages Officer  Please forward a copy of this Circular to your Human

All Employing Authorities      Resources Officer or Department

 

 

Dear Colleague

 

Discretionary Compensation Regulations

 

Last week the Department for Communities and Local Government (DCLG) (formerly the Office of the Deputy Prime Minister) issued, for consultation, draft Regulations to replace the Local Government (Early Termination of Employment) (Discretionary Compensation) Regulations 2000 (the Compensation Regulations). The new regulations set out to ensure that the discretionary powers to award compensation to local authority staff whose employment is terminated early will meet the requirements of the European Employment Directive. The regulations are intended to come into operation on 1 October 2006, corresponding with the Employment Equality (Age) Regulations 2006. It is therefore highly likely that the draft regulations will be replicated in Northern Ireland with the same operational date.

 

The new regulations, as currently proposed, will have the effect of providing local government employers with discretionary powers to award employees a one-off lump sum of up to two years’ pay where employment is terminated early. This award is irrespective of the employees’ age. The new regulations do not provide for the award of compensatory added years as in the past. However, it should be noted that the discretionary provision to award additional membership under regulation 54 of the Local Government Pension Scheme Regulations (Northern Ireland) 2002 will still be available to employers.

 

Employing authorities are required to formulate, publish and keep under review their policies on compensation under the Local Government (Early Termination of Employment) (Discretionary Compensation) Regulations (Northern Ireland) 2003. Employers therefore need to start giving thought to how they will implement the new regulations and to how their discretionary policies with regard to the award of lump sum compensation under the Discretionary Compensation Regulations or augmented membership under regulation 54 of the LGPS Regulations (NI) 2002 should be framed. In view of the changes in local governance which will occur in the next few years as a result of the implementation of the Review of Public Administration, it is important that employing authorities begin to formulate their policies for compensating for early retirement.

 

New Tax Regime and Changes to the LGPS(NI)

In Circulars 02/2006 and 03/2006 we advised you of the new tax regime coming into operation on 6 April 2006 and anticipated changes to the LGPS to give effect to the increased flexibility offered by the new regime. Employers are reminded that NILGOSC needs to be advised at least two months in advance of retirements where the member has an immediate entitlement to the payment of benefits. This is because all members now have an option to take up to 25 per cent of their retirement fund as a lump sum. We therefore need time to advise members of their options and to receive their options before benefits can be paid. HMRC also require additional documentation to be completed by the member before benefits can be paid.

 

A new-style LGS51 (Claim for Retirement Benefits) Form is available from the NILGOSC website at www.nilgosc.org.uk/LGS51(interim).doc and should be used for all retirements with entitlement to immediate benefits. Other Scheme guides and forms will be updated and made available as soon as we receive clarification from HMRC and DCLG on a number of grey areas which exist in the legislation as it stands. The draft LGPS(NI) regulations are also currently on hold, although NILGOSC has been given powers to anticipate the GB Regulations, awaiting the issue of amendments to the England and Wales Regulations by the DCLG.

 

Annual Returns

Employers are reminded that annual returns must be submitted by 31 May 2006 at the latest. If you are unable to meet this deadline, please contact NILGOSC as soon as possible to explain why. Returns submitted after 31 May, without prior approval, will be subject to an administrative charge.

 

Yours sincerely

 

Lynda White

 

L M White (Mrs)

Pensions Manager