The Scottish Government is to provide £20 million to enable police pension commutation arrangements to be backdated to December 1, 2006.
This is on top of the additional £32.8 million in 2008-09 and £22.3 million in 2009-10, already provided, to meet the extra cost of revised pension commutation arrangements for police officers and firefighters.
This decision follows a Judicial Review decision in England and Wales and has been necessary as the Treasury is refusing to fund the extra costs as was done for police personnel south of the border.
Justice Secretary Kenny MacAskill said:
"The Scottish Government recognises the important role our police officers play in making our country safer and stronger.
"Unfortunately the UK Government is not prepared to meet the costs as they did south of the border. However, this Government is not prepared to let these men and women who have served our communities lose out.
"We have therefore agreed to provide the £20 million to meet these additional pension lump sum costs.
"This is the right and proper thing to do for our hard-pressed police service, and allows them to focus their resources on continuing to make our communities safer."
Calum Steele, General Secretary of the Scottish Police Federation said,
"I am pleased the Scottish Government has shown its continued support for Scotland's police officers and agreed to make the pension payments due to our retired officers.
"The slight delay was unfortunate but I understand the critical importance of addressing a funding question whose origins lie in 2006. HM Treasury should be providing funds for Scotland to meet these costs as it did for England and Wales."
Further consideration is being given to how the judicial review decision affects the firefighters' pension scheme and an announcement will be made shortly. Once finalised the Scottish Government will provide the funding necessary to meet any agreed backdating for firefighter lump sums.
The new commutation arrangements set the lump sum that can be bought in exchange for (commuting) a lower amount of annual pension. The Scottish Government funding will be backdated to 1 December 2006, and will ensure that police authorities and boards have the necessary resources to meet these extra costs in 2009-10.
A Police Pensions Circular is being issued by the Scottish Public Pensions Agency (SPPA) to inform Police Boards, Authorities and Chief Constables of the decision. The Circular provides guidance on implementing the new factors, including the actions to be taken for the retired officers who are affected by the decision, the process for calculating individual costs and confirmation that this will be financed by the Scottish Government.