Date posted: 01/04/2014
Audience: This Notice will be of particular interest to:
- Finance Directors and Managers involved in the preparation of resource accounts.
Action To :
- Ensure that a copy of this document is issued to each member of staff that is involved in the preparation of the Remuneration Report, and that it is read and understood by them.
- Note that for the PCSPS you will be requesting information from MyCSP, and for Ministers you will be requesting information from RPMI, in order to compile your Remuneration Report
- Note that there is a new requirement this year to provide a “Single Total Figure of Remuneration” in the Report and, although this does not require employers to provide MyCSP with any new information, you will need to send back to MyCSP some information they gave you last year – to enable them to produce comparative figures for 2012-13
- Send the note at Annex 13D to all senior management reported on in your Remuneration Report. This does not include Ministers.
- Note that Section 13 of the Employers’ Pension Guide (EPG) will be replaced shortly with the attached pages.
Timing: Immediate – you must apply this guidance when you prepare the resource accounts for 2013-14, and should discuss timings with your pension administrator as soon as possible
- Resource accounts must include a ‘Remuneration Report’, which contains information about the pay and pension packages of Ministers and the senior management team*. The Remuneration Report should include information about your remuneration policy and the individual’s contract of employment (service contracts). As well as salary and pension information it must also include detailed information about compensation paid to senior management. Disclosure of compensation information, unlike salary and pension, can only be made after you have told the individual and shown them what you plan to publish. This Notice includes guidance sent on behalf of the Cabinet Office about the preparation of the Remuneration Report.
- This year, for the first time, the Remuneration Report must include a Single Total Figure of Remuneration. This is simply a different way of presenting the remuneration for each individual for the year, and employers do not need to identify any new figures (but will need to dig out some information from last year to enable MyCSP to calculate comparative figures for 2012-13). The table used is similar to that used previously, and the salary, bonus payments and benefits in kind elements are unchanged. However, the amount of pension benefits for the year which contributes to the single total figure is calculated in a new way, similar to the method used to derive pension values for tax purposes. This does not replace the requirement to provide information about the Cash Equivalent Transfer Value (CETV). The pension value for the Single Total Figure of Remuneration is included in a different table to the CETV information.
- Disclosure of salary and pension information: Following a decision by the Information Commissioner in 2006, salary and pension information about an individual can be disclosed without their permission. All such information must be disclosed in Remuneration Reports, unless the member argues, giving reasons, that publication would prejudice their rights, freedoms or legitimate interests, or that it would or be likely to cause unwarranted substantial damage or distress to themselves or another. If a member raises such an argument (under section 10 of the Data Protection Act (DPA)) you must consider whether to accept it. You are strongly advised to take legal advice in such a case, because if you decide not to publish this may be challenged under the Freedom of Information Act. You can also find further details in the Government Financial Reporting Manual (FReM) paragraph 5.2.26.
* Please note that references to ‘senior management’ that follow in this EPN are taken to mean members of your most senior management team only (i.e. board members)
- New pension figure for Single Total Figure of Remuneration: The pension value for the single total figure will be calculated for employers Departmental Resource Accounts 2013-14 by MyCSP. No new information is required by MyCSP from employers to enable this (apart from for the comparative figure for 2012-13 – see below). The value of pension benefits will be calculated as follows:
(real increase in pension* x 20) + (real increase in any lump sum*) – (contributions made by member)
* excluding increases due to inflation or any increase or decrease due to a transfer of pension rights
- To enable MyCSP to calculate the comparative figure for 2012-13, please provide to them the following figures which were included on the Annex 13A form last year for each individual:
- Member contributions for 2012-13 (provided by employer)
- Real increase in pension (provided by MyCSP)
- Real increase in lump sum (provided by MyCSP).
If you are unable to locate these figures from last year, please talk to your MyCSP Pension Service Centre (PSC).
- Disclosure of Compensation at an individual level: Before disclosing compensation paid to a member of your senior management team you must:
- Notify the individual concerned that you propose to publish details of the benefits they received;
- Invite them to see what you intend to publish in the report; and
- Tell them that they can make a case for non-disclosure under s10 of the DPA.
- If a member objects to disclosure of their compensation payments, they must explain why disclosure is likely to cause them substantial and unwarranted damage or distress. They cannot merely say that they refuse permission. You will need to take legal advice on whether the individual’s arguments satisfy the exemptions under the DPA. If the member is successful in arguing that disclosure should not take place, the fact that certain disclosure has been omitted should be disclosed in the Remuneration Report. But you will need to consider with your legal advisers how this should be done in a way that does not itself cause problems in relation to exemptions under the DPA.
- Annex 13D includes a note for you to send to senior management to tell them of the arrangements for disclosing compensation payments and their right to object under the DPA. It is important that this notice is also issued to any new senior management if they are likely to be included in the Remuneration Report.
- Ministerial severance payments are made under statute, outside of the Civil Service Compensation Scheme arrangements, and are not covered by this guidance.
- Annex 13C is an example of what a Remuneration Report might look like. Please note that you should not make changes to the notes explaining pension benefits without the agreement of the Cabinet Office.
- Compromise agreements: Where you have a compromise agreement with an individual, which contains a confidentiality clause, disclosure may still be required. You should always seek your own legal advice wherever a confidentiality clause in a compromise agreement exists or is under consideration.
- The confidentiality clause should expressly state that it does not prevent disclosure of information about the individual’s compensation where this is required by law or any requirements of a Parliamentary Committee, or where inclusion of the details of compensation paid is required in the Departmental Resource Accounts pursuant to the provisions of the FReM. Where disclosure is required in these circumstances, it does not require the individual’s permission.
- Disclosure of exit packages: Employers must provide summary data on the use of exit packages by the department, the department and its agencies, and the whole departmental group, including NDPBs. This is in addition to the details of individual packages for those covered by the Remuneration Report. You must show the number of exit packages by cost band, and these need to be broken down by the number of compulsory redundancies and the number of other departures agreed. Comparative data must also be provided for last year (2012-13).
- For staff who left under the voluntary exit or voluntary redundancy terms, the cost to be used must include any top-up to compensation provided by the employer to buy out the actuarial reduction on an individual’s pension. Compulsory redundancies are exits under the compulsory redundancy terms. Exits to be reported in the category of other departures include all cases where compensation has been paid, including dismissals on the grounds of inefficiency. Completing the forms and working with the pensions administrator
- The form Annex 13A should be used to request the pensions and compensation information you require for your accounts from MyCSP, and Annex 13B for the pensions information you require for your accounts from RPMI. You should send your request as soon as possible so that they can ensure they have all the data they need on the individuals concerned. Pensions administrators will not be able to start calculations until they have updated the pension records to reflect your March payroll.
- Under the Contract between Cabinet Office and MyCSP, the work you are asking to be done is a ‘Core Service’. As such no additional charges should be made or invoices raised with you by MyCSP.
- Employers are responsible for identifying the individuals for whom disclosure information is required and for requesting pension as described above. On receipt of the Request Form, the pensions administrator will carry out the necessary pension calculations and enter the details in the relevant boxes in the Request Form. The form is then returned to the employer contact for their action.
- You must enter an up to date salary for the member and an accurate figure of the contributions paid by the member. You will have to contact your payroll to provide you with this information. If you do not supply this information promptly you will delay your pensions administrator from getting the information back to you. The payment of legitimate expenses is not part of the salary. You must send the completed Annex 13A to your pensions administrator. As described in paragraph 5 above, you must also enter some figures from last year to enable a comparative figure for 2012-13 to be produced.
- The pensions administrator will not process your calculations unless the information is sent to them on a fully completed Annex 13A. You are responsible for the security of sending the Annex 13A to the pensions administrator so please ensure that you are following your department’s guidelines.
- Employers should submit their Annex 13A electronically to their respective PSC, ensuring that the email request has a subject heading of “Annual Disclosure – 2014:
Cheadle PSC email@example.com or firstname.lastname@example.org
Liverpool PSC email@example.com or firstname.lastname@example.org
Newcastle PSC email@example.com or firstname.lastname@example.org
Worthing PSC email@example.com or firstname.lastname@example.org
- Partial Retirement Under the scheme rules, people may take partial retirement if they reshape their job so that their pensionable earnings are reduced by at least 20%. On partial retirement they may draw all or part of their pension and their accrued benefits/reckonable service are adjusted accordingly.
- For the purposes of disclosure, someone who has taken partial retirement will be reported as having a mix of active and pensioner benefits. This disclosure should be made both in the year when partial retirement happens and in subsequent years.
- Reporting year in which partial retirement takes place: The start-of-year figures will be displayed as normal but the end of year figures will reflect a mix of active and pensioner membership benefits:
Director 2 has taken partial retirement from 1 December 2013 and he draws all his benefits – a pension of £43,572 and a lump sum of £130,716. (These figures must reflect any commutation decision and reflect the award sent to Capita Hartshead. However, if there was a pension share against the member then the figures reported must be pre-debit.)
At the end of the scheme year Director 2 has accrued benefits not yet in payment of £290 pension and a lump sum of £870. Add the pension/lump sum paid and the pension/lump sum accrued, but not yet in payment, together. You will receive the completed Annex 13A from your pensions administrator as below.
Pension at ED (£)
£43,862, of which
£43,572 is in payment
Lump sum at ED (£)
£131,586 of which
£130,716 has been paid
- Reporting partial retirement in subsequent reporting year(s): It should still be noted in the Remuneration Report that a member has taken partial retirement and the amount of any pension and lump sum taken. This information should be published as a footnote in the Remuneration Report for as long as the member is being reported on.
- The lump sum disclosed for the 'active' element not yet in payment will only apply to members in classic and classic plus as per normal.
- Ill-health retirement. If a member has retired early on ill-health grounds during the year, employers must report the additional accrued pension liabilities that have resulted. You must obtain this information from your pensions administrator.
- Reasons for negative values in CETVs: There are many reasons that would cause a negative value in the “real increase in CETV” including:
i. If a rise in pensionable salary is less than the rate of inflation (with the current pay restraint, this is likely to happen in some cases);
ii. If someone joined or left mid year:
iii. In classic plus the lump sum for service up to 30.9.02 will always give a negative value
iv. The pension factors for the over 60s decrease the value of the pension that could have been taken at 60.
This document replaces EPNs 359 and 360
If you have any questions about the content of this notice, if you have a question about the distribution of EPNs or you need to receive them in a different format contact email@example.com.