Letter to the Rt hon Sir Paul Kennedy
from [***], Secretary to the Parliamentary Contributory Pension
Fund, 13 January 2011
(III) LETTER FROM THE SECRETARY TO THE TRUSTEES
OF THE PARLIAMENTARY CONTRIBUTORY PENSION FUND
As Secretary to the Trustees of the Parliamentary
Contributory Pension Fund (PCPF) I have been asked to write to
you about the pension position of Mr Harry Cohen, the former Member
of Parliament for Leyton and Wanstead. I have been shown a submission
to you from Mr Cohen, which in paragraph 32 mentions his pension
entitlement and the 'loss' he considers arose as a result of advice
provided by the Pensions Unit.
The Trustees very much regret that incorrect information
was given to Mr Cohen in December 2005 by the then Head of Pensions,
[***]. [***] advised Mr Cohen that he would reach his maximum
pension entitlement in October 2009, whereas Mr Cohen would not
have reached that position unless he remained an MP until September
2010. However, any loss to Mr Cohen is not entirely obvious for
reasons explained below.
In 2002 Mr Cohen had the choice whether to change
his pension accrual rate from fiftieths to fortieths, which would
have had the effect of bringing the date at which reached his
maximum entitlement forward. He chose to remain on fiftieths.
From 2002 until December 2009, under the pension scheme rules,
it was not possible for any scheme member to alter their pension
accrual rate (and the associated contribution rate). Hence, even
if Mr Cohen had noticed immediately in 2005 that [***]'s letter
was incorrect, he could not have changed his PCPF pension arrangement
to hasten reaching his maximum pension entitlement.
The pension scheme ruled changed in 2009 to allow
existing Members a one-off opportunity to revise their pension
accrual rate and to backdate this to either April 2008 or April
2009, subject to the appropriate increased contributions being
paid. In December 2009 the Pensions Unit wrote to all Members
to advise them that as a result of these changes, it was possible
to increase (or reduce) their pension accrual rate in exchange
for the payment of a higher (or lower) pension contributions.
This letter prompted Mr Cohen to ask to meet staff from the Pensions
Unit to discuss the changes.
At the meeting, Mr Cohen was presented with options
for increasing his pension accrual rate in order to increase his
PCPF pension on retirement. One option would have required his
to pay some £5000 (gross) in order to increase his accrual
rate from fiftieths to fortieths from April 2008. Mr Cohen said
that he could not afford to top-up his pension.
Mr Cohen also said that he had not been provided
with sufficient information to enable him to top-up his pension
in previous years. It was pointed out to Mr Cohen that there
had been no facility to change his pension accrual rate since
2002. It was also drawn to his attention that his annual benefit
statements gave information on his pension entitlement and that
it was apparent from these statements that his estimated pension
in May 2010 would be less than the maximum pension (ie that he
ought to have considered his overall pension position if his estimated
income in retirement was a matter of concern). It was after this
meeting that Mr Cohen discovered the earlier correspondence from
[***] and drew it to the attention of the Pensions Unit and the
Trustees.
Turning to the question of the loss Mr Cohen Attributes
to the incorrect information provided in 2005, arguably, this
could arise in the event of one of the following circumstances
i. That the incorrect pension advice in 2005
significantly influenced his decision to stand down as a Member
of Parliament in 2010. This seems improbable.
ii. That the incorrect advice led him to discount
entirely the idea of making any other provision for his retirement,
notwithstanding the information that was sent to him over the
intervening period.
It is my opinion that the Trustees took the view
that Mr Cohen had had opportunities to improve his final PCPF
pension. Any such decision by him would have involved the payment
of increased contributions into the pension fund. For whatever
reason, Mr Cohen chose not to avail himself of these opportunities.
The incorrect advice was nonetheless regrettable.
It is not clear from the documentation provided to
what use he put the money that he would otherwise have had to
pay by way of additional contributions. I can confirm that he
did not take up any other savings options that are available as
part of the pension scheme, such as the Additional Voluntary Contribution
(AVC) scheme within the PCPF, to increase his income in retirement.
Mr Cohen raised the matter of the incorrect advice
directly with the Trustees, who considered his case in October
2010. His letter informed the Trustees that if he received an
apology he would not raise the matter with the pension ombudsman.
The then Chairman of Trustees sent his a personal apology that
same month.
I hope that this explains the position.
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