Circular No. NP/145/08
31st October 2008
Missing Periods of Service - TfL Pension Fund
Following an investigation prompted by PCC representatives and pursued by the unions through the TfL Pensions Working Group, TfL has confirmed that 8734 current and former employees have periods of employment which have not been counted as pensionable. The missing periods concern:
- Periods of Training – where the date of pension fund entry erroneously excludes the period of training upon entering employment; ie, the date of entry to the pension fund is the date of completing training not the actual date of employment commenced.
- Fixed Term Contracts – Where employees were initially employed on a fixed term contract prior to becoming a permanent employee and the date of entry into the pension fund does not coincide with the date of moving from fixed term contractor to permanent employee, either because they were mistakenly issued with a fixed term contracts or because of an administrative error.
During discussions at the PWG, Management indicated there are 5,698 members with missing periods of pensionable service during training. The missing service varies between one day and 147 days.
The number of former fixed term contractors with missing pensionable service is 3036. For this group the missing service varies between one-hundred and fifty days to over a thousand days. Management has proposed the following solution to rectify the problem:
Training - Missing Periods
To obtain credit for missing Periods of Training individuals will be required to pay an amount calculated by the Fund Office. The amount payable by each individual varies according to the size of the missing period; however, the average amount over the whole system is approximately £90.
Former fixed term contractors – Missing Periods
To obtain credit for any missing periods when moving from fixed term contractor to full time employee, individuals will be required to provide any piece of evidence of the date they moved to full time employment; such as the offer letter to move to permanent employment.
Management estimate the cost of rectifying the situation is £28m; although they have allowed for the possibility of this rising to nearer £50m. The offer has been supported by the Trustees legal advisers and the scheme actuary. Employer contributions will be paid at the current rate of 6.1 times members’ contributions (ie for every £1 you pay the employer pays £6.10 – an all time high) rather than the rate applicable at the time of the error. The employer will also fund the administration costs.
Therefore employee contributions will be based on the salary at the end of the training period as it would be very labour and time intensive to do individual calculations for 8734 members based on pay when employment commenced. As well as the all time high contribution rate, other factors in your favour are as follows:
- Employees will receive tax relief on their pension contribution at today’s tax rate rather than at the rate at the time their contributions should have been made.
- TfL will not adjust employees NI – thus increasing State Second Pension entitlement
- TfL will not seek interest on employee pension contributions
- Verifying documentation is not required for missing training periods.
In recognition of the potential difficulty in meeting the cost involved, individuals will be allowed to pay over an extended period based on the number of weeks/years of missing service.ie where the missing period is 13 weeks, arrears may be paid over a 13 week period.
I would take this opportunity to stress that management’s agreement does not affect the issue of back service credits for periods of service before employees reached the qualification age for eligibility of entry to the pension fund. That particular issue relates to the Rules covering the age at which employees could join the Fund ie 25 or 21 depending on grade or Fund at entry, and is a completely separate matter. Whilst it has been progressed with management at various times in the past and rebuffed, they have reiterated there is no intention of it being conceded now. However, the back service credit issue (back years) is completely separate from the issue of missing years when members were improperly excluded from fund membership.
The numbers of people affected involve both part timers and full time employees all members concerned will be written to individually. The process will commence with letters being sent to those whose training periods were excluded on 21 October. Letters to the former fixed-term contractors will follow at a later date.
The General Grades Committee has noted the success in rectifying this issue and decided that the primary concern is to ensure members take up the opportunity to increase their pension in line with their eligibility to join the fund. The GGC has also decided to seek an improvement in the offer in respect to the time limits being applied for acceptance of the offer, and to continue to pursue the separate issue of back service credits for periods of service prior to the entry age qualification contained in the Rules Books in the past.
Management’s offer represents a significant victory and opportunity to increase pensionable service which has wrongly been denied. Members are therefore urged to take advantage of the offer.