Thirty years plus: retaining officers

Report: 6
Date: 14 September 2001
By: Commissioner

Summary

This paper sets out options for retaining officers with over thirty years of service as a means of reducing police wastage. The MPA Full Authority remitted it to the Human Resources Committee on 26 July for detailed consideration. It is recommended that the MPS seek to pilot changes to regulations so that more police officers are encouraged to stay beyond thirty years service and that this pilot is reviewed annually so that the effect on the service profile, the take up by officers, and other consequences can be monitored. There are major financial implications to be considered.

A. Recommendations

Members of the Human Resources Committee are asked to

1. consider the options contained in this paper;
2. consider whether they wish to support the proposal that the MPS pilots a retention scheme, subject to the views of the Finance, Planning and Best Value Committee;
3. note the proposal for annual reviews; and
4. note the further work in hand and the provision of additional information.

Members of the Finance, Planning and Best Value Committee are asked to

5. consider the financial implications contained in this report, together with additional financial information

B. Supporting information

1. A similar paper was initially considered by the MPA Full Authority meeting on 26 July, when it was remitted to the Human Resources Committee for more detailed consideration (and subsequently to be submitted to the Finance Planning and Best Value Committee).

2. The MPS intends to have 28,000 serving officers by March 2004, subject to funding. To achieve this the MPS will have to recruit over 2,500 officers this year and for the foreseeable future.

3. The current employment market is challenging, not only because all forces are recruiting officers due to the Crime Fighting Fund initiative, but also because we are operating in a fiercely competitive employment market. The economy is growing and demographic factors are moving against us; in the southeast full employment is nearly with us.

4. This recruitment target is based on current wastage levels. If these were to increase, the targets would rise beyond what is achievable. Because of this, the MPS is focusing on retention and ways in which it can be improved. A group has been set up to look at how the retention of officers can be enhanced. This paper seeks to address one cause of wastage, ordinary retirements. Ordinary retirements have accounted for 33 per cent to 38 per cent of all wastage in the last five years, in other words over 500 officers each year.

5. Clearly, officers will retire at some time, but one of the unique aspects of police employment is the manner in which it is structured around a thirty-year career, almost to the exclusion of anything else. The pension is designed to provide for a thirty-year career, and is geared to the latter part of service. Officers contribute 11 per cent of their salary towards the pension scheme. However, once thirty years is accrued an officer draws no increased benefits apart from an increased pension/lump sum, though they still contribute at the same rate.

6. This makes no financial sense to officers and they in effect work for a relatively small amount of income. This is because an officer can retire on two-thirds their salary after 30 years (with an option to commute a large lump sum and receive a lesser pension.) Whereas if the officer remains in the Service after thirty years, although they will continue to receive a full salary and other allowances such as housing allowance and possibly overtime, the benefit of this is reduced by other costs. These costs include paying 11 per cent pension contributions, higher tax, travel costs etc. In addition, the quality of life issues, the stressful nature of policing add to the social costs incurred by staying in the MPS. The buoyant economy provides many retiring officers with opportunities to find a second career earning an additional income as well as draw a police pension. It must be remembered that many of the officers attaining 30 years are only 49 years old.

7. Existing officers are subject to current pension regulations and any change to these should not disadvantage them. Further the very nature of policing, its stresses, the hours and conditions of work make it a career that for many thirty years is enough. Around 60 per cent of officers do not even attain thirty years. Currently, there are 500 officers with over 30 years service in the MPS, though the figure for 32 years plus reduces to 240. Of these senior officers and detectives are disproportionately represented although constables still make up about 48 per cent of the total number in each category, compared to 76 per cent amongst serving officers.

8. This paper is submitted on the premise that the number of officers remaining after thirty years service could be increased if conditions of service make this option attractive.

9. Working within existing Regulations a scheme was recently launched in the West Midlands Police open to any officer attaining thirty years service. The officer could retire, take their commutation and then immediately rejoin. The officer had to rejoin as a constable, and was paid at the highest pay point for that rank. The officer rejoined subject to the conditions applied to post 1994 officers. However, the response to the scheme was poor, with only two officers showing interest in the offer. As a result, West Midlands Police have written to the Home Office proposing some variations. This would enable an officer to retire, rejoining as a constable or as a sergeant, take their commutation but also drawing an annual pension. A response from the Home Office is still awaited.

10. It is the view of the MPS that a more radical and flexible option is required which at low cost can make the MPS more attractive to officers in this 'thirty plus' category. The MPS scheme would allow officers to be retained in their own rank and posts, avoiding a loss of skills and experience. The Government may well have an appetite to support changes that address this point. The MPS would seek to pilot such a scheme.

The proposal

11. Officers in the thirty plus category should:

12. Pay a reduced pension contribution: 1 per cent of pensionable pay, contrary to Police Pension Regulations. This sum would provide them with all the existing provisions of the pension scheme, e.g.: death in service benefits, and allow their pension to reflect their final salary

13. The officer would also be eligible to receive a lump sum. This would be in anticipation of their commutation and be free of tax. The amount paid would be the same as if the officer was retiring with 30 years service. This would lead to an appropriate reduction in pension payable when the officer actually retires. An officer might take a lesser amount to preserve a higher annual pension. (About 98 per cent of officers take a lump sum on retirement, with 98 per cent of that number taking the maximum sum.)

N.B. The figure of 1% has been proposed on the basis that it provides a financially attractive package, while still getting officers to contribute. It is not a figure yet informed by actuarial information. The MPS is in the process of gaining actuarial advice.

Eligibility: two of the options under consideration

Option A

14. Any officer who attains thirty pensionable years' service would remain eligible to continue their service, unless their OCU commander, or Assistant Commissioner in the case of Superintendents and above, considered this would not be in the interests of the Service.

15. The OCU Commander/Assistant Commissioner would need to satisfy themselves that the individual was fit enough to remain in the Service. This would be informed by applying the Attendance Management Policy; only in cases of doubt, would there be a referral to the Chief Medical Officer.

16. These two conditions would be considered on the officer attaining thirty years service, and on attaining 55 years of age. It is further proposed that the policy of officers having to seek annual extensions from 55 years old would cease, contrary to police regulations.

17. Officers could remain in their current post, subject to the current posting policy and arrangements specific to that post, until they attained the age of 60 years old. An officer in this thirty-year plus category would be subject to all the same conditions of service and opportunities as any other officer.

Option B

18. This scheme would focus on officers who possess certain key competencies, and have delivered those competencies to a high standard.

19. Any officer would be eligible to remain as at present, subject to the current pay and conditions.

20. Additionally, OCU commanders, or Assistant Commissioner in the case of Superintendents would identify individual officers in their commands who demonstrably possess and deliver key competencies that are important if the Service is to effectively police London.

21. Those identified officers would then be encouraged to stay for a fixed period e.g. five years, under the new enhanced pay conditions. The officers would continue in their role through out that period.

22. The officers would need to satisfy the Attendance Management Policy.

23. This scheme has the advantage of focusing the enhanced package at key areas, where the performance of the organisation is critical.

The West Midlands options

Initial scheme

24. The initial scheme launched in the West Midlands and outlined above, if applied in the MPS, would allow officers reaching thirty years service the opportunity to retire, and take their commutation. The officer could then rejoin as a Constable, and would be paid at the top of the pay scale. They would lose their housing allowance but would benefit from the London pay lead. The officer would not draw their pension, until they retired from this ‘second’ career. The officer could choose to continue to pay pension contributions or withdraw from the pension. If they withdrew the officer would lose some rights, such as death in service benefits. Under present regulations, officers cannot take a police pension and a police salary.

25. The West Midlands experience suggests that this package may not be particularly attractive to officers, but it might appeal to some who would otherwise retire, and it could be delivered within existing Regulations.

26. The Authority may wish to consider whether this option is worthy of implementation.

West Midlands second scheme

27. The new West Midlands scheme is similar to the above but allows officers to rejoin after retirement as constables or sergeants. The officers could take their commutation, and start to draw their pension. In addition, they would receive their salary, without housing allowance but with the enhanced London lead. Again, they could chose whether they wished to remain in the pension scheme for this ‘second’ career.

28. This scheme requires changes to Regulations, and the Home Office has already been approached concerning them. It would appear to be financially attractive to officers.

Conclusion

29. All of the above options would require changes to Police Regulations and Police Pension Regulations, except for the initial West Midlands model. The Authority may consider that not withstanding the low take up experienced in the West Midlands that this is an option that should be delivered in the short term.

30. Further that the MPS, subject to the views of the Authority and further evaluation, should seek to pilot one of the options above.

31. Annual reviews will need to be set into the implementation plan, so that all consequences can be monitored.

32. Certain details and costings (including actuarial advice on pension contributions) for these proposals are in the process of being obtained. Additional information will be provided at the meeting if available. Furthermore, a meeting has been arranged for 31 August with the police staff associations to explore the options and the way forward. A report on that meeting will be provided at the Human Resources Committee meeting.

C. Financial implications

The cost per officer of either option:

Present cost
Cost of average annualised pension £16,404 pa
Cost of replacement officer: the new recruit, salary, allowances, national insurance, less pension contribution £21,610 pa
Total cost £38,014 pa

Proposal cost

Annual cost of retaining officer £46,203 pa
Proposal costs per officer £8,189 pa in first year

In the second and subsequent years, the costs of the scheme diminish as the newly recruited officer progresses up the pay scales, either by promotion or by annual increments.

In addition to this, the costs in recruiting and training a new officer are not incurred. The Crime Fighting Fund provided £8,000 per officer for these expenses. (Initial costs for existing officers with over 30 years service are dealt with below.) This sum is a conservative estimate and does not allow for the costs associated with probationer training at boroughs, for example street duty courses.

For each of the next three years 450 officers are due to reach 30 years service. Historically 60% have retired and taken their full commutation, costing £24 million. If all officers attaining 30 years service took their full pension the cost would be £40 million a year: an extra £16 million a year.

If either option is accepted that there will need to be transitional arrangements put in place for officers who already have attained 30 years service. It is estimated that under the wider option if all officers in this category took their full lump sum the cost would be about £44 million. The current budget provision could not afford such a sum. Instead of paying this sum in one year it could be spread over a number of years either by paying the commutation in instalments, or by progressively introducing the commutation to officers with over thirty years service, i.e. those with 34 years, then 33, etc. Spreading the payments over four years in either option, and allowing the commutation to benefit from annual pay rises would bring the cost to £12.25million each year.

However, the costs associated with the payment of commutation is an existing liability, money that the MPS is already liable to spend over the course of the next few years when those officers chose to retire. Consequently, the ‘extra’ money concerns the timing of the payment, and when viewed over several years, would be at no extra cost.

The Treasurer comments that the MPS has not yet been in a position to respond fully to scrutiny of the financial implication of these proposals. It is anticipated that information, including a more detailed analysis of the possible budgetary effects (in particular the unfounded liabilities) over forthcoming years will be despatched to Members prior to both Committees. It will be essential to ensure that any acceleration of commutation payments does not leave the Authority in a situation where it is committing expenditure it cannot fund.

D. Background papers

MPA/01/70 MPA Full Authority 26 July 2001 “Thirty years plus: retaining officers”

E. Contact details

The author of this report is Robin Merrett, Chief Superintendent, MPS Personnel Department, 020 7230 0684.

For information contact:

MPA general: 020 7202 0202
Media enquiries: 020 7202 0217/18

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