Select Committee on Joint Committee on Statutory Instruments Forty-Third Report



APPENDIX III


Memorandum by the Scottish Office Pensions Agency

NATIONAL HEALTH SERVICE SUPERANNUATION SCHEME (SCOTLAND) (ADDITIONAL VOLUNTARY CONTRIBUTIONS) REGULATIONS 1998 (S.I. 1998/1451)

1.  This Memorandum is submitted by the Scottish Office Pensions Agency to the Joint Committee on Statutory Instruments in response to their letter of 15 July 1998 in which they raised the following points:-

  1.    Explain the purpose of each of subparagraphs (a) and (b) of paragraph (3) of regulation 3 and whether they are intended to apply alternatively or cumulatively.

  2.    Paragraph (3) of regulation 3 provides that an election under paragraph (1) by a person in pensionable employment to pay contributions is not to have effect if [(a)] that person is on leave of absence from work on the date on which the notice of election is received by the Secretary of State.


      Explain -

      (a)  whether sub-paragraph (a) is intended to apply in all circumstances, for example even where the person making the election is away on a day's leave when the notice is received;

      (b)  how that person is to know when the notice is received by the Secretary of State.

  3.    Paragraph (7) of regulation 3 provides that, for the purposes of paragraphs (1) and (6), an election is to have effect from the date when the election is accepted by the Secretary of State. Explain why no express provision is made that the Secretary of State's acceptance must be communicated to the person who made the election.

Point 1

2.  Sub-paragraph (a) of paragraph (3) of regulation 3 is intended to secure that if a person is on leave of absence from work he is not entitled to make an election to pay additional voluntary contributions. By leave of absence from work is meant periods when the employee is excused from performing his normal contractual obligations, in particular long term sick leave and unpaid leave of absence. It is not intended to include holidays and other periods of leave normally allowed under contract in the course of work. The reasoning behind this provision is that additional voluntary contributions are deducted from remuneration and this would not be appropriate in periods of reduced or no remuneration.

3.  Sub paragraph (b) is intended to deal with a situation which in practice will only apply to those contributors to the NHS Superannuation Scheme (Scotland) who are general medical or dental practitioners. People who have taken out an annuity contract providing a life annuity for themselves in old age, approved under section 620 of the Income and Corporation Taxes Act 1988, or providing an annuity for dependants, approved under section 621, can under section 619 seek tax relief on the premiums paid, subject to certain limits. (This only applies to contracts before 1 July 1988.) From July 1988 similar tax relief would be given in respect of a personal pension under Chapter IV of Part XIV of the 1988 Act. In order for general medical or dental practitioners to obtain such relief on the full amount of the premiums, including the part deemed to derive from NHS income, they must opt to forego tax relief on their superannuation scheme contributions under section 594(1) of the 1988 Act. Sub-paragraph (b) is intended to secure that a person who has done this is not entitled to elect to pay additional voluntary contributions.

4.  The two sub-paragraphs are intended to apply alternatively, so that either would prevent the election from having effect. It is considered that this is the natural interpretation if each sub-paragraph is read separately with the opening words, and in the absence of any connecting word. This interpretation is supported by the fact that as described above the paragraphs deal with quite unconnected circumstances.

Point 2

5.  As indicated in paragraph 2 above, sub-paragraph (a) is only intended to apply where the employee is excused from performing his normal contractual obligations, in particular long term sick leave and unpaid leave of absence. It is not intended to apply to holidays or other periods of leave normally allowed under contract in the course of work.

6.  The person cannot know in advance when precisely the Secretary of State will receive his notice. Given the limited circumstances where sub-paragraph (a) applies this is unlikely to cause practical problems. Where leave of absence was anticipated a person who wanted to make an election first would have to ensure that notice was sent in good time. Administrative procedures provide for immediate acknowledgement of receipt of a notice and for the person to be notified when a decision has been taken to accept or not accept the election.

Point 3

7.  The Regulations do not make express provision for the acceptance to be communicated to the person because they do not in general attempt to spell out administrative procedures in detail, and good administrative practice would in any case require decisions to be communicated to those affected. Administrative procedures provide for all decisions to accept or not accept an election to be notified to the person concerned. As such notification does not itself produce any legal effects express provision for it in the instrument was not needed.

20th July 1998


 
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