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TPO upholds complaint against South Wales Fire & Rescue Service

June 10, 2020
in Retirement Pension
TPO upholds complaint against South Wales Fire & Rescue Service
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The Pensions Ombudsman (TPO) has upheld a complaint against South Wales Fire & Rescue Service (SWFRS) over misinformation relating to tax-free cash.

Mr S complained that he had not been informed by either Rhondda Cynon Taff (RCT) or SWFRS that if he retired from work as a wholetime duty firefighter (WDF), taking advantage of a protected pension age (PPA), undertaking other linked employment within 30 days of retirement would invalidate the PPA.

Consequently, when the complainant began work as a retained duty firefighter (RDF) he forfeited his entitlement to a PPA, with all payments received up until age 55 deemed unauthorised payments and subject to unauthorised payment tax charges.

TPO upheld the complaint, giving SWFR 28 days to pay Mr S a sum equivalent to the tax liability he paid to HMRC in 2015 (£47,299.12), as well as £2,000 in recognition of the severe distress and inconvenience caused.

Mr S had been employed as a WDF from September 1985 to October 2013 and a member of the 1992 Firefighters Pension Scheme, entitling him to retire from the age of 50.

He worked as an RDF from December 2007, continuing to do so after retiring from work as an WDF.

Before retiring as a WDF, Mr S had received a letter from SWFR informing him of his pension entitlement but failing to mention any rules relating to PPA.

This was despite HMRC having sent SWFRS a letter in January 2013 that stated: “In the case of regular fire fighters also employed as retained fire fighters both employments have to cease on retirement from being a regular fire fighter in order to retain the protected pension age and take benefits before age 55.”

It added that pension payments or lump sum payments would be classed as unauthorised if employment did not cease.

As such, SWFR found in December 2013 that Mr S had lost his PPA and would be required to pay a 55 per cent tax charge on unauthorised payments received before the age of 55.

Mr S paid the unauthorised tax charge of £47,299.12, including interest of £1,004.52, in October 2015 after an SWFRS committee concluded that he was liable, leading the Fire Brigades Union to contact to the service on behalf of the complainant.

Mr S argued that, based on previous decisions by the ombudsman, the employer of an individual with PPA should inform the member about possible adverse tax consequences of re-employment after receiving pension benefits, adding that it was clear SWFRS and RCT were aware of this prior to his retirement because of the letter from HMRC.

The argument was also made that it had been custom for SWFRS to re-employ firefighters for some time, it should have been more aware of the risks involved in doing so.

SWFRS contested that Welsh Ministers were responsible for the scheme and should have kept it reasonable informed of tax issues, while also stating that it is an individual’s responsibility to understand the tax implications of their actions and claiming it would be an improper use of public funds to pay Mr S’ tax bill.

The organisation said it also had no record of the January 2013 letter from HMRC, even though the letter had been addressed the SWFRS and had since been sent on to RCT.

Outsourced administrator RCT argued that it had not been aware of the specifics of Mr S’ employment situation, as it merely kept records of firefighters contributing to the scheme.

The ombudsman upheld the complaint against SWFRS on the basis that its pre-retirement pension estimate constituted “negligent misstatement”.

The ombudsman did not accept SWFRS’ claim that it had not received the January 2013 letter from HMRC and added that it should have been aware of the tax consequences of breaching the rules relating to PPA even without the letter.

— to www.pensionsage.com

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