JAN-1993 17:59
PAUL FIFOOT
is neither reasonable nor necessary.
It is not reasonable as it constitutes a departure from the existing pension law which recognises that the needs of officers are different; some will need more capital on their retirement, some will need more income; the choice is left to them and it severely limits the advantages of a safeguard if they are required to commute, even if this is not in their interests. This will be particularly the case if provision is made for,
Further or some officers wish to take, early retirement. you cannot apply a comparable requirement to officers who have already retired and been awarded a pension before the Scheme is published. It is not necessary as you can apply the Scheme on a notional basis i.e. as if the officer had exercised the option to commute to the maximum. I have therefore drafted on the basis that the officer has notionally, not actually, commuted and, in principle, the safeguard only applies to that part of his pension which would equal the amount of a reduced pension. Do you agree?
(II) I write, "in principle", but there is the other notional factor to be taken into account in this category and that is (with an exception referred to below) that the initial calculation is not necessarily made on the pensionable emoluments received by the officer. Following, your assumption iv), in section 3(A) I have reduced the figures to be taken in calculating personal emoluments to the corresponding 1992 figures and the reduced pension is, therefore, based on the assumption that the officer commuted a portion of a pension that has already been reduced (if that turns out to be the case) to 1992 levels. I read para 6(e) of the Portillo letter as recognising the notional nature (indeed the now double notional nature) of the element to be safeguarded which is to provide the multiplier for the safeguard, and as desiring to compensate for reducing it to 1992 levels by adding the UK RPI to that multiplier. Hence the last 5 lines of section 3(A)(iv). It should be noted that the addition of the RPI at this stage serves a different purpose from the addition of the RPI to the UKPB up to the date taken for calculation under section 4(1). In the latter case the addition does not increase the multiplier
P.04/08