Electricity supply sector settlement model
Proposed basis of settlement agreed with UNISON
This framework has been negotiated by representatives of the Electricity Respondents and UNISON,
the union representing the largest number of claimants in the Electricity Sector.
This framework document does not constitute an offer to claimants in the Electricity
Sector and is published for information purposes only. This framework simply sets out the
basis of any settlement offers that may be made and any such offers will be notified in
writing to such individual claimants as the relevant Electricity Respondent may wish to
make an offer. Any offer will be made without admission of liability by the Electricity Respondents.
(A) Method of giving effect to the claims
1. The claimants would be given a back service credit by the grant of special terms by the
Principal Employer under Rule 32 of the ESPS.
2. The back service credit will be equal to the period of back dated membership claimed after
adjustment to reflect the member's contractual hours during that period. The back service credit
will start from the commencement of each claimant's part-time employment (or from their 20th
birthday or 8 April 1976 if later) with any employer participating in ESPS or its predecessor
schemes until the earliest of :-
- The date when they were first eligible to join ESPS (or its predecessor schemes);
- 1 October 1980 (for those contracted to work 20 hours or more per week);
- 1 April 1988.
3. The Employer's records will be used to determine the claimant's contractual hours during
the period of back dated membership. If the claimant disputes the contracted hours, it will be
for her and the employer to reach agreement, based on any records available.
(B) Benefits
Effect on benefits for claimants who are pensioners
4. Where the claimant is now in receipt of a pension from the ESPS, there will be an increase
to her current pension. In addition, arrears of the increased benefits (including interest) will
be payable immediately following special terms coming into effect.
Payment of interest on arrears of benefits to pensioners
5. The interest on the arrears of benefits to claimants who are now pensioners would be paid
by way of an increase in the additional retirement lump sum payable to the claimant subject to
that increase not causing the total amount of the additional lump sum to exceed the maximum amount
approvable by the Inland Revenue.
6. In practice it is likely that there may be some cases where the interest payable on the
arrears of benefits exceeds the maximum increase in the lump sum approvable by the Inland Revenue.
If in any individual case the interest payable exceeds the maximum increase approvable by the
Inland Revenue then the arrears of contribution payable by the pensioner would be reduced by an
amount equal to the excess of the amount of the interest payable over the maximum approvable increase.
Effect on benefits for claimants who are deferred pensioners
7. Where the claimant is a deferred pensioner of ESPS, there will be an increase in her deferred benefits.
Effect on benefits for claimants who are contributing members
8. Where the claimant is a contributing member of ESPS, there will be an increase in her pensionable service.
Effect on benefits for claimants who never joined ESPS
9. Where the claimant never joined ESPS, the back service credit will be her total benefit. It will be necessary
to determine whether she is entitled to immediate payment of benefits and arrears or has deferred benefits.
(C) Contributions
Arrears of member's contributions
10. The grant of the back service credit would be subject to the payment of the arrears of contributions by the
claimant plus interest.
11. The Employer's records will be used to determine the claimant's salary during the period of back dated membership
for the purpose of determining the arrears of contributions. If the claimant disputes the salary data, it will be for
her and the employer to reach agreement, based on any records available.
Features of the special terms granted to pensioners
12. For legal reasons, it may not be possible to offset arrears of contributions and benefits. Where the claimant
is a pensioner, the full cost of the back service credit is met by the Employer either by way of a payment by the Employer
into the Scheme or by being met out of any surplus. The cost of the back service credit would take account of the amount of
interest payable on the arrears of benefits payable by way of increase in the lump sum (see paragraphs 5 and 6 above).
13. The claimant will pay the Employer an amount equal to the arrears of contributions plus interest (see also paragraphs 14 and 15 below).
Payment of arrears of contributions by pensioners
14. It would appear that for a significant majority of pensioners arrears of benefits will exceed the arrears of
contributions payable by them. Employers should, therefore, put arrangements in place so that the payment of the arrears
of contributions by the claimant and payment of the arrears of benefits (with interest) to the claimant would be 'simultaneous'.
The arrangements should ensure that the requirement to pay arrears of contributions does not prevent a claimant from obtaining the benefits.
Equally, its simultaneity should minimise companies' exposure to the risk of default in the payment of contribution arrears.
15. Where the arrears of contributions payable by a claimant exceed the arrears of benefits, then arrangements should be agreed between the
Employer and the claimant for the spreading of payment of the amount of the arrears of contributions (plus interest) in excess of the amount of
the arrears of benefits with interest. (It is however, understood that there will be very few such cases.)
Payment of arrears of contributions by contributing members and deferred pensioners
16. Where the claimant is a contributing member or a deferred pensioner the grant of the back service credit under special terms would be
subject to the member paying the arrears of contributions with interest to the Scheme, rather than to the Employer.
17. The special terms will be on the basis that where, only part of those arrears is paid by the member then only a proportionate back
service credit would be granted to her.
18. The balance of the cost of the granting of the back service credit will be met by the Employer and would be paid over the same period
as the period over which the claimant pays her arrears of contributions (with interest). In the event of only part of those arrears being paid
by the claimant and as a consequence only a proportionate back service is granted, the Employer would meet only the balance of the cost of
that proportionate back service credit.
Tax relief on arrears of contributions paid by contributing members and deferred pensioners
19. It is understood that in the case of contributing members, tax relief would be available on the arrears of contributions
(inclusive of interest) subject to the total amount of those arrears (plus interest) and the other contributions paid by the member not
exceeding 15% of remuneration in the tax year in which they are paid.
20. It is, however, understood that tax relief would not be available to deferred pensioners on the arrears of contributions
(plus interest) paid by them as they are no longer in employment to which the ESPS relates. Similarly, there is no tax relief on
the arrears payable to former employers by pensioners.
