The Firefighters’ Pension Scheme Amendment (Increased Pension Entitlement) (Scotland) Order 2019

EXPLANATORY NOTE

(This note is not part of the Order)

This Order amends the Firefighters’ Pension Scheme Order 1992 (S.I. 1992/129) (“the 1992 Order”) to authorise the payments made by fire and rescue authorities between 12 November 1979 and 8 April 2019 of annual increases to certain persons who are entitled to a guaranteed minimum pension.

Section 5 of the Pensions (Increase) Act 1971 (“the 1971 Act”) requires pensions authorities to increase annually pensions to which that Act applies. The 1971 Act is modified by sections 59 and 59A of the Social Security Pensions Act 1975 (“the 1975 Act”). Pensions authorities pay annual increases on pensions in accordance with the annual Pensions (Increase) Review Orders (“the annual PIROs”) which are made under section 59 of the 1975 Act. The combined effect of section 59(5) of the 1975 Act, Directions by the Treasury made under section 59A of the 1975 Act and relevant provisions of the annual PIROs is that the amount of increase payable by a pensions authority under the annual PIROs is reduced by the amount equal to the rate of the GMP which is paid by the Department of Work and Pensions (“DWP”).

Contracting-out of the state second pension ended from 5 April 2016, with the introduction of the single tier state pension. Schemes were expected to undertake a reconciliation exercise to check the contracting–out data held against that held by HMRC. This reconciliation exercise has been undertaken and any inconsistencies corrected. This order provides that going forward GMP related overpayments are converted to an Increased Pension Entitlement (“IPE”) and therefore become part of the members entitlement under the scheme.

Regulation P3 of the 1992 Order defines a GMP-related payment as a payment made by the fire and rescue authority applying the annual PIROs as if no reduction fell to be made in relation to the person’s GMP.

Regulation P4 authorises the past payment of GMP-related payments. This provision has effect from 12 November 1979 until 8 April 2019. New paragraph (2) provides that where a fire and rescue authority has made such payments to an affected pensioner, it may not recover them.

Amended regulation P5 sets out the entitlement to IPE. Although entitlement to IPE begins on 8 April 2019, the effect of the 1971 Act is that annual increases must apply to IPE from the beginning date of the pension (usually the day after the person’s date of retirement). IPE is therefore defined as the amount a pension would have to be at the beginning date of a pension in order for that amount, after annual increases have been applied under the annual PIROs, to equal the GMP-related payment for the tax year 2019-2020. The effect is that for the tax year 2019-20 the IPE that the affected pensioner will receive is equal to the GMP-related payment he or she would have received were the fire and rescue authority to apply the 2009 PIRO as if no reduction fell to be made in relation to the person’s GMP. Thereafter, IPE will continue to be increased in line with the annual PIROs although future PIROs will no longer be applied as if no reduction fell to be made.