Dismissal

What happens to a member's pension if they are dismissed from their employment?

In nearly all cases, a dismissed employee's pension is treated in exactly the same way as any other member who leaves their employment voluntarily (i.e. they are refunded/receive a deferred pension or they can draw their pension if they are aged 55 or over). However, there are some limited circumstances whereby the employer may be able to recover any money lost, in relation to the dismissed employee's actions prior to their dismissal, or for the pension to be forfeited. These are explained fully in the relevant sections below.

Fund's policy

The Fund's policy is to automatically treat all dismissals as normal pension scheme leavers, including paying a refund if relevant, unless the employer believes the case may be eligible under one of the criterium set out below and they wish to pursue recovery or forfeit. If you do wish to pursue these options, we must be advised of this at the time the member is dismissed as otherwise we may have already advised the member of their benefit entitlements or paid out a refund.

Right to recover

If an employee has financially gained at the expense of the employer Regulation 93 of the LGPS Regulations 2013 allows the employer to recover or retain the monetary value owed in the following circumstances:

• The pension scheme member has committed an act of grave misconduct or a criminal, negligent or fraudulent act or omission.
• The employee has, as a result, left the employment through which they were a member.
• The employee owes money as a result of their misconduct, act or omission to their former scheme employer, and is entitled to benefits under these Regulations, which for the purposes of this regulation includes entitlement to a refund of contributions.

The former LGPS employer can recover that money or, if less, the value of all the employee's pension benefits (subject to a few exceptions). The employer must give at least three months' notice of the amount it intends to recover and show how this is calculated and the effect on the person's prospective benefits. The right to recover does not require a forfeiture certificate, however, if there is any dispute over the amount of money owed specified, the employer cannot recover or retain any amount until the obligation is enforceable under an order of a competent court or the award of an arbitrator.

There is nothing to prevent a scheme employer in seeking a forfeiture certificate from the Secretary of State, pending the outcome of any attempt to recover a monetary amount. However, the direction given by the employer to forfeit the pension that cannot be given, until attempts to recover the monetary amount have been exhausted. 

Right to forfeit

If an employee has met the vesting period in the scheme, they will be entitled to either a deferred pension benefit or a retirement benefit depending on their age. If the dismissal is due to gross misconduct and the employee is subsequently convicted of a relevant offence in connection with his employment, then the employer may apply to the Secretary of State for a forfeiture certificate. Under Regulation 91 of the LGPS Regulations 2013 an LGPS employer can apply to the Secretary of State for that member's pension to be forfeited where:

• The member has been convicted of an offence.
• The offence was committed in connection with the employment through which the person is a member of the LGPS.
• The member has left employment because of that offence.
• The offence was "gravely injurious" to the State or is liable to lead a to serious loss of confidence in the public service; and
• Where the former employer suffered loss, it is not able to recover that loss in another way (including under regulation 93), except after an unreasonable delay or at a disproportionate cost.

A forfeiture certificate is a certificate that the offence ''was gravely injurious to the state or is liable to lead to a serious loss of confidence in the public service''. However, please note that forfeiting a members rights under this regulation will only be applicable if an application for a forfeiture certificate has been made by the former Scheme employer within of three months of the date of conviction. Where a forfeiture certificate is issued, the employer may direct that any of the member's rights under these Regulations are forfeited.

The main difference between 'recovery' and 'forfeiture' is that recovery is limited specifically to the recovery of monetary obligations incurred as a result of the member's actions whereas forfeiture has a wider application and can cover non-financial considerations where it is deemed the gravity of the member's offences are such that their rights in the scheme should be forfeited.  

What if the employee has not met the vesting period in the scheme?

If an employee does not meet the vesting period (i.e. was in the LGPS for less than 2 years), they will not qualify for a pension benefit and in ''normal'' circumstances would usually be eligible for a refund of their contributions. In the case of gross misconduct, the LGPS regulations do not entitle the member to a refund in accordance with Regulation 19 of the LGPS Regulations 2013. However, it is still possible for the employee to receive a refund of some or all of their pension contributions, so long as the employer directs it. Unless we hear otherwise the Fund will assume that you are happy for the employee to receive a full refund.

The employee is also entitled to a transfer out regardless of whether the refund of contributions is permitted, however, the value of the transfer can be reduced where the member has incurred a monetary obligation arising out of a criminal, negligent or fraudulent act or omission by the employee. The reduction must be of an equivalent value to the monetary obligation. If there is any dispute surrounding the amount of the monetary obligation, the deduction cannot take place unless it has become enforceable by way of a court order.

In summary, the Fund has an obligation to explain the position under the scheme regulations when a member has left the scheme due to grave misconduct or a criminal, negligent or fraudulent act or omission in connection with that employment. What action the employer choses to take, if any is ultimately their decision. This can be assessed based on the severity of the gross misconduct and any costs involved. In the event of this scenario, you may like to seek your own legal advice on this matter.

If, you require further information please email :Employer.Relations@wiltshire.gov.uk