A complaint brought about by a retired police officer in respect of the tax implications on his retirement benefits following re-employment has been upheld by the Pensions Ombudsman.
The complainant, Mr Cherry was employed with the Police and Crime Commissioner of South Wales from February 1982 as a police officer until his retirement on 12 June 2011. Then, on 23 June 2011 he was re-employed by the Commissioner, this being within less than one month of receiving his pension benefits.
Due to the re-employment being within one month of him taking his retirement benefits the protected pension age he was afforded was lost resulting in tax charges on his retirement benefits.
It was argued by Mr Cherry, there had been a failure by the Commissioner to inform him about the tax penalties.
It was determined by the Ombudsman that, there was no legal obligation on the Commissioner to give advice to individual employees about their tax liabilities, providing relevant information on the impacts of re-employment and taxation was a concern of the case.
In conclusion the Ombudsman said the Commissioner “should reasonably meet the tax liabilities incurred by Cherry”
The Ombudsman ruling states: “As a responsible employer the Commissioner had a duty of care to inform Mr Cherry of the tax implications of re-employment on his retirement benefits.”
Arshad Khan, associate director, pensions and investment litigation at law firm Sackers, said: “This was a case brought against an employer but the lessons apply equally to pension scheme trustees. While it is clear in principle that an employer/trustees are not under an obligation to provide advice to scheme members, they do have to provide relevant information about the impact on the member’s benefits of decisions they might take, in this case the decision being how quickly to return to work with the police force following early retirement under the Police Pension Scheme.
It is often difficult for schemes to draw the line between giving good levels of information and advice but this case highlights the risk of having to pay compensation to a member for any tax liabilities they could have avoided had sufficient information been provided to them in the first place.”
Comment
As an increasing number of us are remaining at work beyond retirement or state pension age it is worth investigation on just how much better off you are going to be by returning to work and this has to include asking questions about whether continuing to work will have an impact on any pension already earned with an employer.
