Dear Brother/Sister,
Immediate Detriment Memorandum of Understanding (MoU) Unauthorised Payments
Currently, if a member has retired more than 12 months ago and is paid a second pension lump sum (i.e. a top-up to the underpaid lump sum at retirement) it is an “unauthorised payment” and taxed at 55%. The MoU commits the FRAs to paying this unauthorised payment charge, on our understanding that the Home Office has agreed to reimburse them.
The tax legislation needed to deal with the remedy has been published (after the MoU was agreed by all parties), in a draft Finance Bill which will become the Finance (No 2) Act 2021. The detail will be spelled out in regulations which have not been published.
The ministerial statement made when the Bill was published deals with these unauthorised payments, and says that they will be made authorised (so no tax due) from 6th April 2022. However, the regulations will not be published until October 2022.
The issue is that some FRAs may elect to wait until the payments are made authorised so no tax charge would be payable.
Several meetings have taken place with the Local Government Association (LGA) and both parties’ legal teams. Attached is a joint statement on behalf of the FBU and the LGA which provides an update on the advice being provided to Fire and Rescue Authorities and Services in respect of this matter and the action both the LGA and the FBU are taking to resolve it.
To be clear, this only affects members who have retired more than 12 months ago as payments only become unauthorised from that point as second payments made within the first 12 months of retirement are classed as authorised, therefore the rest of the MoU is unaffected.
The FBU recognises that there is an issue, but we cannot accept any further delay. Accordingly, if FRAs do not operate the provision in the Framework as originally intended we will assist affected members in pursuing legal action to secure their entitlements. This may take the form of complaints to the Pensions Ombudsman where compensation would be sought for the distress and inconvenience caused by late or non-payment.
Yours in unity,
MARK ROWE
National Officer
