Dear Brother/Sister,

MODEL FORM FOR APPLICATION TO PENSION OMBUDSMAN

This circular is provided so as to update members on the next steps in our campaign for fairer commutations and to enable members affected to submit the paperwork required. Further information will be provided periodically and members are asked to monitor the union website for developments.

To continue to support members with their claim we have provided a model to members who wish to submit a grievance to the Pension Ombudsman re the Fairer Commutation Campaign.

This model application form can be found on the pension section of the FBU website.

Members wishing to submit a complaint should follow these simple steps. (These are identical should the individual have retired pre or post March 2006).

Download an application form by visiting:

http://www.pensions-ombudsman.org.uk/Publications/docs/Application_form.pdf

Or fill the form in on line by visiting

http://www.pensions-ombudsman.org.uk/Publications/docs/Application_Form_Online.pdf

The form should be completed using the information provided in the FBU model form and submitted to the Pension Ombudsman.

In addition to the form, individuals should include the relevant circulars FPSC 5/2008 and 7/2009, which have been placed on the FBU site so as to assist you.

Members should also attach their initial grievance and any response received from DCLG or GAD.

Finally the letter from Sean Starbuck to Martin Hill and the response should be attached (also available for downloading for your ease).

Members will be updated via circulars or the FBU website as the situation develops.

FBU officials have been receiving correspondence from individuals who are concerned that the Union has agreed a cut off date for the retrospective application of the commutation factors. It is important that a full explanation is given on what commutation is. Simplistically it is the conversion of an amount of annual pension into a lump sum. The value of the pension surrendered and the value of the lump sum should be "actuarially equivalent" meaning that as a matter of professional actuarial judgement the two values are the same. Until the recipient dies it is not possible to say that the amounts were in fact mathematically equal in value.

That actuarial judgement has to take into account some assumptions about the future. The most important are about the long term rate of interest that could be received if the lump sum is invested, and the life expectancy of the recipient. A pension of £100 per annum is more valuable if it is paid for 25 years than if it is paid for 20.

Actuarial judgements change from time to time. Long term interest rates are taken from the financial markets.  Assumptions about life expectancies are based on a continuous survey of the ages that people actually die at, and the survey results show that people are living longer than they used to.

That means that an assumption, and a commutation factor based on it, might be perfectly valid and professional in 1998 but unsound if it is still in use in 2008. Commutation factors are never reviewed every day or even every year. The FBU sought an expert view from an actuary on the question of how often commutation factors ought to be reviewed. The answer is that until quite recently reviews were commonly very infrequent but modern practice is to review them every three years or so.

The FBU started the Fair Commutation campaign because it was quite clear that factors set in 1998 should not still be in use in 2008. But a reasonable and professionally determined factor set in 1998 could certainly be used for retirements in 1998, and for a few years after that.

If you retired before 2001 there is no realistic argument that the 1998 factors were not appropriate. They became more and more inappropriate after that but the strength of any argument that you have will depend on how long after the 1998 factors were set you retired.

The FBU has campaigned since the new factors were introduced and have at no time agreed to any cut-off date with the CLG pensions team or with anyone else. The union will continue to press for the best possible settlement on the issue of commutation and this will include taking professional and legal advice as appropriate. With this circular members will have an opportunity to submit a grievance, supported by the FBU, to highlight their particular circumstance.

Yours fraternally,


MATT WRACK
General Secretary
SS/EMH   

Attachments:

Download Application Form
Download Application to Pension Ombudsman