Teachers' Superannuation (Commutation of Small Pensions

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A decision made 6 September 2013:

Decision Reference: MD-C-2013-0102
Decision Summary Title :	Teachers' Superannuation (Commutation of Small Pensions – Amendments) (Jersey) Order 2013		Date of Decision Summary:	6th September 2013
Decision Summary Author:	Project & Research Officer		Decision Summary: Public or Exempt? (State clauses from Code of Practice booklet)	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	N/A
Written Report Title :	Teachers' Superannuation (Commutation of Small Pensions – Amendments) (Jersey) Order 2013		Date of Written Report:	6th September 2013
Written Report Author:	Law Draftsman		Written Report : Public or Exempt? (State clauses from Code of Practice booklet)	Public
Subject: Teachers' Superannuation (Commutation of Small Pensions – Amendments) (Jersey) Order 2013
Decision(s): The Chief Minister made the Teachers' Superannuation (Commutation of Small Pensions – Amendments) (Jersey) Order 2013
Reason(s) for Decision: The amendments allow for an arrangement to convert a teacher’s or former teacher’s entitlement to a very small pension into a cash lump sum based on the value of the benefits accrued under the Jersey Teachers Superannuation Fund.
Resource Implications: There are no financial or manpower implications.
Action required: The Chief Minister’s Department shall – (1) inform the Greffier of the States and the States Greffe Publications Editor immediately the Order is made. (2) deliver the signed and sealed order to the Publications Editor.
Signature:		Position: Chief Minister
Date Signed:		Date of Decision (If different from Date Signed):

Teachers' Superannuation (Commutation of Small Pensions - Amendments) (Jersey) Order 2013

Jersey Crest

Teachers’ Superannuation (Commutation of Small Pensions – Amendments) (Jersey) Order 2013

Explanatory Note

This amending Order analogously amends the Teachers’ Superannuation (New Members) (Jersey) Order 2007 (the “New Members Order”) under Part 1 of this Order, and the Teachers’ Superannuation (Existing Members) (Jersey) Order 1986 (the “Existing Members Order”) under Part 2, together referred to as the “Superannuation Orders”.

The amendments concern the arrangement to convert a teacher’s or former teacher’s entitlement to a very small pension, into a cash lump sum based on the value of his or her benefits which have accrued in the Teacher’s Superannuation Fund (the “Fund”). This arrangement is also known as a “commutation of a trivial pension”.

Currently, Article 34 of the New Members Order provides that the Fund’s Management Board has the discretion, on a teacher’s retirement, to commute for a lump sum payment, 100% of any pension which is a trivial pension, i.e. a sum of not more than £104 per year, or such greater amount as may be specified by the Comptroller of Taxes. And, where a teacher dies (whether in retirement or not), any person entitled to receive contingent benefits under the scheme, may at the discretion of the Management Board, have any trivial pension to which he or she is entitled commuted into a lump sum payment.

Up until 1st January 2009 the amount specified by the Comptroller was £520 per year (instead of £104). Since that date the Comptroller has withdrawn that specified amount and the sum of £104 per year now applies in default.

At present there are no trivial commutation provisions under the Existing Members Order.

The Income Tax (Superannuation Funds) (Jersey) Order 1972 (the “1972 Order”) provides for the treatment of commuted pension benefits for income tax purposes in respect of tax approved pension schemes. The sum of £520 per year that was previously specified by the Comptroller has in effect been superseded by sums prescribed in the 1972 Order. That Order provides for the income tax treatment in certain cases of lump sums representing commuted benefits valued up to £5,000 and £30,000.

The amendments will –

(1) align the New Members Order with the associated provisions in the 1972 Order so as to provide for the circumstances in which a trivial pension, subject to a maximum amount prescribed in the 1972 Order, can be commuted into a lump sum payment upon retirement or leaving service (if earlier); and

(2) in respect of the Existing Members Order, introduce new commutation provisions dealing with small pensions analogous to those in the New Members Order, as amended by this Order.

Articles 1 and 5 are the interpretation provisions which identify each of the Superannuation Orders that are respectively amended under Parts 1 and 2 of this Order.

Articles 2 and 6 analogously insert a new definition in Article 1 of the respective Superannuation Orders so that any reference to the “Income Tax Law” is taken to mean the Income Tax (Jersey) Law 1961.

Article 7 makes minor amendments to Articles 44 and 45 of the Existing Members Order which are consequential to the introduction of the definition of the Income Tax Law in Article 1 of that Order.

Article 3 substitutes the provisions of Article 34 of the New Members Order with new provisions which will enable a teacher or former teacher to elect on retirement to commute a small pension for a lump sum payment. The making of an election is subject to the person concerned being age 60 and the value of the person’s accrued benefits in the fund aggregated with any other lump sum that the person may have previously elected to receive, must not exceed £30,000. Payment of the commuted lump sum will extinguish the teacher’s or former teacher’s rights as well as the rights of any person contingently entitled to benefits which might otherwise have been payable under the scheme. Article 8 inserts new Article 59A into the Existing Members Order, which is analogous to substituted Article 34 of the New Members Order.

Article 4 which inserts new Article 34A into the New Members Order and Article 8 which inserts new Article 59B into the Existing Members Order, will enable a former teacher who has left service other than by reason of retirement, to exchange his or her contingent entitlement to a small deferred pension or to allowances, for receipt of a lump sum subject to certain conditions including the lump sum not exceeding £5,000. The effect of these provisions is that a former teacher will have the choice of whether to receive an immediate lump sum payment representing the value of his or her benefits accrued in the fund at the time he or she leaves service, or of waiting until such time as he or she would ordinarily become entitled under the Order to draw his or her deferred pension (usually on reaching normal retirement age). However, payment of the lump sum will extinguish the former teacher’s rights as well as the rights of any person contingently entitled to benefits which might otherwise have been payable under the scheme.

Article 9 provides for the title of this Order and for its coming into force 7 days after it is made.

File No. 1030/22

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