Public Service Pensions and Judicial Offices Bill
Monday 11th October 2021
(3 years, 1 month ago)
Grand CommitteePublic Service Pensions and Judicial Offices Act 2022 View all Public Service Pensions and Judicial Offices Act 2022 Debates Read Hansard Text Amendment Paper: HL Bill 44-I Marshalled list for Grand Committee - (7 Oct 2021)
The Deputy Chairman of Committees (Baroness Garden of Frognal) (LD)
My Lords, Members are encouraged to leave some distance between themselves and others and to wear a face covering when not speaking. If there is a Division in the Chamber while we are sitting, the Committee will adjourn as soon as the Division Bells are rung, and it will resume after 10 minutes.
Member’s explanatory statement
This would require, rather than allow, pension scheme regulations to make provision for circumstances in which a liability owed by a person to a scheme will be reduced or waived. This is to probe further details on what circumstances will be provided for and how the schemes will be designed.
Lord Ponsonby of Shulbrede (Lab)
My Lords, I rise to speak to Amendments 1 to 3 in my name. They are probing amendments to draw out some further detail, and I thank the noble Baroness, Lady Janke, for adding her name to them. I put on record my thanks to the Police Superintendents’ Association for raising its members’ concerns with us.
Recurring themes will emerge in our deliberations on this Bill—particularly questions of oversight, of the details and the actual mechanics of when and how the remedy is to be delivered and of how that will impact on members. With these amendments, we are trying to flesh that out.
I recognise that the Bill is essentially an enabling Bill, and it provides powers for schemes to do the detailed work required by the remedy. Therefore, it is one piece of a very complex picture. The Committee will particularly benefit from the expertise of some Members here today, and we hope to probe some key questions and add to the understanding of what impacted scheme members can expect.
Amendments 1 to 3 are simple probing amendments to Clause 16. Currently, the clause provides that a scheme “may” make provision to waive or reduce a scheme’s members’ liability. These amendments would change that word to “must”. The Explanatory Notes state:
“Clause 16 provides that scheme regulations for a legacy scheme may make provision whereby a liability on an individual to repay overpaid benefits … or to pay an amount in respect of underpaid contributions … is reduced or waived.”
In simpler terms, due to the changes and choices that the Bill provides for, some members may end up owing their scheme funds due to their having underpaid contributions or having been overpaid pension benefits.
Clause 16 provides that schemes have the power to waive or reduce those costs for people in certain circumstances, but the Bill does not provide any detail of what those circumstances will be. The Explanatory Notes give the following example:
“where a pensioner member has been overpaid their pension benefit and reimbursing the … scheme would cause hardship, the pension scheme could write off part of the liability.”
That is a welcome example, but it appears only in the Explanatory Notes. There is no level of detail reflecting that, or indeed any of the possible circumstances, in the Bill itself.
So, I have number of questions for the Minister. Can he provide more detail on the circumstances in which the Government would expect relief to be provided under this clause? Secondly, has the department estimated how many people may be affected in this way? Thirdly, I know the Minister will tell us that the Government’s aim is to provide the schemes with discretion to support their members, but should not every scheme at least be required to set up provisions to provide relief where necessary? Furthermore, on the question of when a waiver or reduction would be necessary, are there situations in which the Government would expect every scheme to provide relief, such as where financial hardship is caused? In this case, would it not be appropriate to include those details in the Bill?
Another question concerns Clause 24, which provides that the powers under this clause must be exercised in accordance with Treasury directions. So, the Treasury intends to provide some directions to the schemes on these issues, but outside the Bill and away from parliamentary scrutiny. What plans do the Government have to consult on the directions and the circumstances this clause may be applied to, so that the schemes reflect the actual situations experienced by members?
I know that the Minister is only too aware of this issue and, in many ways, we keep coming back to it. This is a complex Bill and we have a number of hours to look into that complexity. Clause 16 recognises that the impacts may need to be mitigated. What we are seeking is clarity on the protection and assistance that will be available. I look forward to the Minister’s explanation. I beg to move.
Baroness Janke (LD)
I signed Amendments 1, 2 and 3 and support the reasons laid out for us today by the noble Lord, Lord Ponsonby. It is be important that all members of the scheme understand how this system will work. As we have heard, it is a complex Bill that will affect many people, so I agree that an estimate of the number affected would be helpful. The transparency and consistency of the scheme need to be clear, and I hope the Minister will be able to provide that clarity. I also agree that it would be helpful to have the Treasury directions on the face of the Bill, rather than outside it, so that there are no misunderstandings and the people affected by this provision understand clearly how it will work for them.
Viscount Younger of Leckie (Con)
My Lords, I thank the few noble Lords who have spoken for their contributions to this first debate in Committee: the noble Lord, Lord Ponsonby, and the noble Baroness, Lady Janke. I also thank the noble Lord, Lord Davies, who I believe was originally intending to speak.
Before I address the points raised, and as we are commencing Committee, I will set out briefly the core principles which underpin this Bill; in my view, this will provide a nice bridge between Second Reading and Committee. At the core of the Bill are fairness and equal treatment. The Bill ensures that those who deliver our valued public services continue to receive guaranteed benefits in retirement that are among the best available, on a fair and equal basis. This core objective is underpinned by the principles of greater fairness between lower and higher earners, fairness for the taxpayer, future sustainability and affordability of public sector pensions.
I thank noble Lords for continuing to work with me to ensure that these important objectives are achieved through this Bill in support of the vital public services on which we all rely. I also draw noble Lords’ attention to the policy statements covering various key elements of this Bill, which were deposited in the House Libraries on 4 October. I trust that noble Lords will have seen these despite the tight timetable; I am aware that many noble Lords will have only just returned from recess.
These amendments are intended to ensure that a comprehensive remedy is delivered for all members by requiring, rather than enabling, regulations to be made under Clauses 16 and 19. I take the point made by the noble Lord, Lord Ponsonby, that these are probing amendments, but I would like to give a full response and hope that I can answer the five or six questions that he asked. If not, I will certainly write to the noble Lord and, indeed, copy in other noble Lords who have spoken.
Before considering the specifics of noble Lords’ amendments, I thought it would be helpful to remind this Committee about the practical effects of stating that regulations “must” be made as opposed to “may” be made. When an Act states that regulations may be made for a particular purpose, it grants whoever is responsible for making those regulations a power to make them. In all likelihood, they will make those regulations but, if it is not necessary or appropriate, they can choose not to. Where an Act states that the regulations must be made, it imposes a duty on that person to make those regulations. If they do not, they are breaking the law even if those regulations are not necessary or not the most appropriate course of action in a particular set of circumstances. Accordingly, it is appropriate to exercise caution about occasions when a duty to do something is imposed since otherwise it could lead to unintended consequences and possibly to unmeritorious litigation about whether a particular duty has been complied with.
Amendments 1, 2 and 3 proposed by the noble Lord, Lord Ponsonby, would require, rather than allow, pension scheme regulations to make provision for a liability owed by a person to a scheme to be reduced or waived. The amendments put forward by the noble Lord, Lord Davies, would amend the Bill so it requires, rather than allows, pension scheme regulations to make provision for transfers into and out of a scheme in relation to remediable service.
As a general point, there are 17 new public service pension schemes in scope of Chapter 1 of the Bill. For each of those schemes there are also connected legacy schemes. Pension provision for these workforces has evolved considerably over several decades. In view of the complex landscape—which the noble Baroness, Lady Janke, referred to earlier—that has resulted from this, it is particularly important that schemes have flexibility to deal with some of the more specific circumstances in which members may find themselves. Therefore, the Bill enables rather than requires regulations to be made in Clauses 16 and 19.
As set out in the consultation response published in February 2021, the Government are committed to taking a proportionate approach to the recoupment of overpaid benefits. The powers provided by Clause 16 allow the Government to uphold this promise. Put simply, when a member owes overpaid pension or lump-sum benefits to a scheme, Clause 16 provides a power to allow scheme regulations to make provision to reduce or waive that member’s liability.
The reasons for the inclusion of Clause 16 should be spelt out, and they are threefold. First, the clause provides that contributions owed by or to a member may be reduced to reflect tax relief that was paid or due on those contributions. The purpose of this is to ensure the member is placed in the correct position net of tax. Secondly, it provides that contributions owed by the scheme to a person under Clause 14 may by agreement be waived. This is to ensure that members who become legacy scheme members under Clause 2(1) and owe contributions as a result, can have that liability waived until they make a choice under Clause 9 whether to receive legacy benefits or instead elect to receive new scheme benefits. Where a member knows they want to receive new scheme benefits, this will allow them to avoid having to pay legacy contributions in the interim period. Corresponding provision is also made for amounts owed by the scheme to the member to be reduced or waived with the member’s consent. Finally, the clause allows schemes to reduce or waive amounts owed by members where that arises other than by choice of the member and requiring the payment would cause undue hardship or prejudice. This is for a small group of members who had tapered protection and will be placed in a worse position regardless of whether they choose legacy scheme benefits or new scheme benefits in relation to their remediable service.
Clause 16 is part of a package of measures intended to mitigate such circumstances. Therefore, it is expected that the responsible authorities and scheme managers will consider using this power in conjunction with the power in Clause 21 to pay compensation and the power in Clause 23 which permits responsible authorities to make regulations setting out the process by which relevant amounts may be paid such as, for example, in instalments.
Lord Ponsonby of Shulbrede (Lab)
My Lords, I thank the noble Viscount for his explanation and for addressing some of the questions which I asked. I will reflect on the answers. I should also apologise to my noble friend Lord Davies as I gave him some bad advice and he did not speak to his amendments. He tells me that similar issues are coming up in the next group; I do not know whether it would be possible for him to speak to his amendments out of order. Nevertheless, having said that, I will reflect on the detailed answer which the Minister has given, and I beg leave to withdraw my amendment.
Lord Davies of Brixton
Member’s explanatory statement
This amendment would require, rather than enable, scheme regulations to make provision about cases where a member has paid voluntary contributions.
Lord Davies of Brixton (Lab)
My Lords, effectively these issues have been presented by my noble friend Lord Ponsonby and I have the great advantage, of course, of having the Minister’s reply to the questions that I have not yet asked. In a sense, I am happy to take them as read.
I do not have an interest to declare but it would be helpful to the Committee if I declared a non-interest: I did have a declarable interest up to the end of August, in that I was a paid adviser to various trade unions on this very issue. Clearly, there would have been a conflict, but I ceased to hold that role at the end of August. The declaration will appear in the register of interests for a year but is no longer valid. I think that covers me for the whole of the Committee stage and that I do not need to say that again.
It might be helpful for the Committee if I say a little more than that, in that I have been a close observer and participant in the process of the reform of public service pensions, it seems, for the whole of the 21st century so far. Although we had the report of the noble Lord, Lord Hutton, in 2011, the process actually started earlier than that in 2005 with what was known as the Warwick accord between the then Labour Government and public service unions. I was involved at that stage, and in the discussions before and after the presentation of the Hutton report. Indeed, if I had to nominate my specialist subject in “Mastermind”, a strong possibility would be public service pensions reform in the 21st century.
These are not exactly random thoughts, but I thought that it might be helpful if I just set out three relevant and little-known facts about public service pension reform. As I mentioned, it did not start with the Hutton report but with the Warwick accord, going back to 2005 and the subsequent public service forum agreement of that year. Major changes took place in public service pensions at that time.
Just to clarify, the reforms were carried out in accordance with the heads of agreement of 15 December 2011 with the then coalition Government. Although it is described as a heads of agreement, it was not a total agreement but, effectively, a decision by the Government that was accepted by some, but not all, trades unions. A background point but an important one is that the new schemes were not worse for everybody. A non-trivial proportion of the public service workforce will gain from the reformed schemes, so the situation is not as simple as it is sometimes presented.
Turning to Amendments 10, 11 and 12, the issue here is that if people had had what they were entitled to following the Supreme Court decision, they might have made different decisions from those which they made at the time. Clause 19 refers to transfers. If you were in the old scheme you decided to make a transfer, but had you been in the new scheme, you might have decided not to, and vice versa. These issues are therefore important. To be honest, I do not envy the job of administering this process, but it is there and the Government are obliged to pursue it.
I listened to what the Minister had to say on the issue of “may” or “must”. I should add that I did some research, along with my noble friend, and we are grateful to the Police Superintendents’ Association for having drawn these issues to our attention. We have with us a magnificent set of legal talent, and perhaps at some stage we might have a definitive view on the difference between “may” and “must”. The problem here is that from the viewpoint of the Police Superintendents’ Association and other members of public service pension schemes, there is a level of mistrust. The issue is not some semantic definition of whether “may” or “must” works; they see “may” and they think, “Maybe the Government are not going to do what they’ve promised.” Saying “We’re going to do it anyway” does not totally answer the question that is put before you by having to choose “may” or “must”, because it invites the rejoinder, “Well, if you’re going to do it anyway, let’s have ‘must’ in there, and everyone can feel comfortable.”
There is no doubt that these issues are going to have to be dealt with in the process of implementing the court judgments, and from the perspective of the scheme member, “must” seems to work. My noble friend and I heard what the Minister had to say, and we will read with interest the precise wording. I take it that the Minister will not be writing separately on the issue, but the statement as set out in Hansard will be the definitive government position and we and the scheme members will study that, come to a view and, if necessary, return to the issue on Report.
I do not know whether I should do this now, but I happily indicate my intention not to push my amendments to Clause 19.
The Deputy Chairman of Committees (Baroness Garden of Frognal) (LD)
I am so sorry—I am getting slightly muddled. In the interests of clarity, I point out that the amendment proposed is:
“Page 15, line 31, leave out ‘may’ and insert ‘must’”.
I do apologise to the Minister.
Viscount Younger of Leckie (Con)
Just for my own clarity, I thank the noble Lord, Lord Davies of Brixton, for his comments, but he might like to speak to the amendments in this group, which are 4, 5, 6, 7, 8 and 9.
Lord Davies of Brixton (Lab)
Essentially the same background applies: this is the position in which we find ourselves following the Supreme Court judgment. It is a dog’s dinner really. We would never choose to be here but, now that we are here, we have to sort it out—but it is a mess. One of the most complicated issues which will need to be resolved is about people who paid ADCs in one scheme and would not have paid them in the other scheme or did not pay ADCs in the scheme they were in but would have done so if they had been in the other scheme. Some sort of assessment of some alternative reality has to be made, so the issue is complicated.
These amendments repeat “must” and “may” issue—and I have dealt with that—but they also deal with how the issue is resolved. There is a problem with additional voluntary contributions, which people pay voluntarily to secure additional benefits. It clearly is a decision determined by the scheme in which they will accrue benefits. If they misunderstood which scheme they were in, they may well have taken a different decision. The Bill gives the scheme administrator the decision about how that matter is resolved. Amendment 8 would place the decision about how the issue is resolved directly in the hands of the member rather than, as the Bill stands, leaving in the hands of the scheme administrator. It is an issue of the hypothetical: if a member had been in a particular scheme they would have paid contributions. As I understand it—and I would be grateful for the Minister’s clarification—the Bill as it stands deals only with how the contributions that the member has made are handled, but there is also the issue of the additional voluntary contributions that the member did not make but would have made. Finally, Amendment 9 seeks to make it clear, when a refund of contributions is decided on, the contributions that were made will be repaid with interest included in the sum. That covers the issues and I will be grateful for the Minister’s comments. I beg to move.
Viscount Younger of Leckie (Con)
My Lords, here we address six amendments that have been brought forward on Clause 18 by the noble Lord, Lord Davies of Brixton. I note again his declared interests that he pointed out at Second Reading and his expertise in this area, and I very much look forward to his appearance on “Mastermind” on his specialist subject.
Clause 18 provides for scheme regulations to make provision in relation to additional voluntary contributions paid during a member’s remediable service. As the noble Lord, Lord Davies, said, the first two amendments would require, rather than allow, scheme regulations to make provision about these matters. I hope that I can reassure the noble Lord that this is not necessary. I want to give a full response, although not quite as full as on the first group—but it is a full response on some of the important issues that the noble Lord has raised.
The reason this clause is enabling rather than directive is that not all additional benefits purchased during a member’s remediable service will need to be revised as a consequence of the Bill. For example, some legacy schemes provide that members may purchase additional pension by way of a lump-sum payment or periodic additional contributions, so the Government have agreed that members may complete the payment for these benefits when they have already commenced. The resulting benefits will not be changed, regardless of a member’s choice of whether to receive legacy or new scheme benefits. However, making Clause 18 directive would require schemes to vary the benefits, contrary to what schemes and members have asked for and government has agreed to.
The third amendment brought by the noble Lord would extend Clause 18 to require scheme regulations to provide members who were moved to the new schemes but did not make additional contributions with the option to purchase additional legacy scheme benefits, where they can show that they would have done so had they been able. I once again thank the noble Lord for tabling this helpful amendment. The Government will consider the principles underlying it and will take this away before returning with a thorough explanation of how the matter may be addressed in due course. The drafting of this amendment, at present, does not achieve the overall intention here, since Clause 18(1) provides that this applies only to cases where a person has paid voluntary contributions.
The fourth and fifth amendments are concerned with members who did make additional contributions to a new scheme. They would require scheme regulations to provide members with the options available under the Bill—to alternative or equivalent benefits in a legacy scheme, or to compensation for the contributions made. This provision is permissive rather than directive, because not all three options are intended to be used in every case. Alternative benefits are an approach whereby the benefits awarded in the legacy scheme are effectively recreated as though the member’s additional contributions had always been made there. Equivalent benefits are for situations where an appropriate alternative does not exist in the legacy scheme. In such circumstances, a member would instead be offered a benefit in the legacy scheme that is of directly equivalent value. So in both cases, the policy is that the member may choose instead to receive compensation for their additional voluntary contributions, where they do not wish to receive the alternative or equivalent benefit. Making this provision directive rather than permissive would not therefore work, as not all options will exist in all cases. I hope that explanation is clear and helps to answer the questions raised by the noble Lord.
The final amendment brought forward by the noble Lord relates to interest, as he mentioned, and requires that interest is paid on compensation payments. It is a fair point. The Government have committed to pay interest on these compensation payments, and provision is already made under Clause 23 accordingly. With those assurances on all the noble Lord’s amendments, I hope he is willing not to press them.
Lord Davies of Brixton (Lab)
I welcome the Minister’s comments, particularly on unpaid AVCs. I will look forward to his response with interest. In light of his other comments, we will read Hansard with interest and decide what to do on Report. I therefore withdraw Amendment 4.
Lord Davies of Brixton
Member’s explanatory statement
This amendment would require, rather than enable, scheme managers to pay compensation in respect of compensatable losses.
Lord Davies of Brixton (Lab)
My Lords, I shall speak also to Amendments 14 to 19, so it is a bumper bundle. Again, we have the “may/must” issues, and I assume the same position will apply.
Amendment 14 brings us to the issue of Treasury directions, on which we will probably have a more substantive debate in a later group of amendments. There is a general argument about Treasury directions being used in this context—it will be useful to have that debate. The issue raised here is whether it is appropriate to have any directions at all; the issue elsewhere is whether we have directions or regulations. The Bill appears to say that these unknown Treasury directions will lay down how the compensation will be made and the parameters set. I think the strong view here is that it should be in the Bill rather than in directions.
Amendment 15 would add a new subsection setting out where compensation would be paid. I readily admit that it probably needs tighter wording, but it raises the three areas that are of concern to scheme members. Again, I have to mention that the lead here has been taken by the Police Superintendents’ Association.
The first circumstance is where individual scheme members would have made other decisions had they been in another scheme and, because of that, have encountered some financial loss; that is, had they known they were really in scheme B rather than thinking they were in scheme A, their decisions would have been different and, because of that, they have incurred some financial loss. I do not envy the job of working out how to assess losses in these circumstances, but they can be real and important, so the issue needs to be addressed. The example we have been given is where, because of the fall in their income, members have incurred loss in selling and buying a house; they incurred financial charges because they thought their income would be lower as a result of being in a different scheme. However, they were not in a different scheme so they did not need to incur that expenditure.
The second area set out in the amendment again affects the police service in particular and concerns where a scheme member genuinely thought that a binding commitment had been given by the Government on the nature of the scheme to which they belong, and they believe that that binding promise has been broken. This is the subject of legal action at the moment. There is no doubt that it is a real concern; it is going through a legal process. We should recognise the level of concern among members about the losses they have incurred because the Government are resiling from promises which they reasonably thought had been made.
The third area of loss is what is called the pensions trap. I will spend a bit of time talking about that because it has gained considerable traction. The first point to make is that, although the uniformed services—the fire service, firefighters and the police—have made most of the running on this issue, it affects all schemes; well, I have not checked them all, but it affects all the major schemes. It is just that, in the case of firefighters and the police, it is of much greater salience. That is why those services have raised this issue most strongly. I think we would admit that there are also areas of employment where we would be particularly concerned because of what we owe to our uniformed services.
Lord Ponsonby of Shulbrede (Lab)
My Lords, first, I thank my noble friend Lord Davies for his comprehensive speech introducing these issues. I also thank the noble Baroness, Lady Janke, for putting her name to the amendments in my name.
There are two issues raised in Amendment 15 to which I would like briefly to add my voice. These are the realities of the current situation which various police forces have raised with us. As I understand it, proposed new paragraph (b) in Amendment 15 refers to members who were given a commitment that they could retain access to the legacy scheme until their retirement but are facing difficulties because their retirement is based on years of service, not a retirement age. What is particularly concerning is the reported risk that the changes will be disproportionately impactful on female officers, who are more likely either to have worked, or to be currently working, on a part-time basis. That permission has been granted for a judicial review on this issue is testament to the complexities which sit alongside this Bill and which still have to be navigated. The amendment would not alter anything in the Government’s plans but would require this situation to be considered as one type of compensatable loss. I am interested to hear what the Minister has to say on this issue.
Proposed new paragraph (c) in Amendment 15 makes reference to what has been introduced to me as the “pensions trap”—as referred to by my noble friend—in which an officer who makes financial decisions based on one pension will find their contributions from the alternative scheme reduced as a consequence. I look forward to the Minister’s response on this issue. As my noble friend says, it has gained a great deal of traction in the press.
Baroness Janke (LD)
I, too, would like to speak to the amendments in my name. I do not have a great deal to add to what the noble Lord, Lord Ponsonby, has said other than to say that I think that this is a particularly important part of the Bill. We have heard from many people who are affected by this Bill about the need for confidence in the measures contained in it and for trust in light of what happened to lead to the need for this legislation. These amendments are to probe what the Government are planning in terms of a compensation scheme and, as has already been said, the right of appeal and members’ rights as to how their representatives may be involved in any compensation scheme. The requirement for consultation clearly goes without saying, and the Government need to do much more work on this part of the Bill to ensure that members have confidence in it.
The noble Lord, Lord Davies, referred to promises having been made but not being honoured and the fact that many outstanding issues still await resolution. I hope that the Minister can clarify what the Government intend and that the proper process will fill members with confidence and ensure much greater trust than has been the case so far.
Viscount Younger of Leckie (Con)
My Lords, I thank the noble Lord, Lord Davies, once again and indeed the noble Lord, Lord Ponsonby, and the noble Baroness, Lady Janke, for their valuable contributions and remarks. Given that the noble Baroness is right that this is an important part of the Bill, I wish to give a pretty full response, so I hope the Committee will indulge me as I want to go through in some detail the issues that have been raised and, of course, answer as many questions as I can.
I start by saying, just as a point of agreement, that this group of amendments seeks to ensure that members are correctly compensated for any detriment that they have suffered as a result of the discrimination that has arisen. I reassure this Committee that this is certainly a shared objective.
The noble Lord, Lord Davies, put forward three amendments to Clause 21. It may be helpful if I set out the intended purpose of this clause. It confers power on scheme managers to make payments in relation to compensatable losses. This is compensation in relation to losses incurred as a result of the discrimination, the remedy provided by the Bill, or in respect of certain tax losses. The clause allows for matters that are not directly remedied by the Bill or scheme regulations to be put right.
Amendment 14 would remove the requirement that losses may be compensated only where they are of a description specified in Treasury directions. However, in the Government’s response to the consultation on remedying the discrimination, we set out that some member representatives and employers considered that there would be a need for consistent treatment across and within schemes.
The Treasury directions are one way in which we intend to ensure that such consistency is achieved. The proposed amendment would remove the central consistency that we have committed to provide and would instead require scheme managers to determine all claims in an exercise of their own discretion alone, which could lead to inconsistent and potentially unequal treatment across schemes. I am sure this Committee would agree that we do not want that. That approach would give rise to the concerns that respondents to the consultation raised. We do not consider that is a responsible or appropriate approach. The Government have committed to providing a consistent and full remedy to members and we believe that will be best achieved by the current drafting.
Amendment 15—which was spoken to eloquently by the noble Lords, Lord Davies and Lord Ponsonby—seeks to compensate members for the closure of the legacy pension schemes and for any contingent decisions taken where a member had a period of remediable service that was under a new scheme. Paragraphs (b) and (c) of the amendment from the noble Lord, Lord Davies, in particular, closely relate to an ongoing judicial review challenge before the courts—which the noble Lord alluded to—and it would be inappropriate to discuss in detail. However, the effect of the amendments would be to provide the substantive remedy that the claimants are seeking in the judicial review claim. It would compensate members who were in scope of transitional protection but have not yet retired and will now be in scope of the prospective measures set out in Clauses 76 and 77 of this Bill. Providing compensation in this circumstance would therefore be contrary to the intention of those clauses that all members are to be treated equally from 1 April 2022 by accruing service in the reformed schemes, regardless of their age.
It is important to stress that the Court of Appeal found in the McCloud and Sargeant case in 2018 that the transitional protections offered under the Public Service Pensions Act 2013 amounted to unlawful discrimination. Accordingly, offering compensation to transitionally protected members would effectively undermine the Court of Appeal judgment by perpetuating this unlawful discrimination through different means. The effect would be that instead of allowing transitionally protected members to continue in service in legacy schemes, they would now be receiving the benefit of financial compensation. Non-transitionally protected members would not receive such compensation, so there would still be an unfair difference in treatment.
I will pick up on a point made by the noble Lord, Lord Davies, to try to be helpful concerning police stakeholders. The Government really do understand the concern raised by stakeholders regarding the difference in when members can access their full pension in the 1987 and 2015 police pension schemes. I can reassure noble Lords that the Home Office is engaging with police stakeholders on these matters. However, it is the Government’s view that it will be appropriate for future pension accrual to occur in a scheme with different retirement provisions, for the reasons set out by the noble Lord, Lord Hutton, in his report. As set out in the consultation response regarding this specific issue, it is right that the Government be able to make changes when they judge it necessary to do so. The commission’s original objectives and recommendations, leading to the 2015 reforms and reform schemes, still hold. The Government therefore consider that this is not appropriate and that it is crucial to the effectiveness of the remedy that the discrimination is not perpetuated.
Returning to paragraph (a) of the amendment, this clause already makes provision for losses that arose as a result of the discrimination; that is covered by the first condition, contained in subsection (4). I hope that I can therefore reassure the noble Lord, Lord Davies, that the amendment is not needed.
The noble Lord has also put forward four amendments to Clause 23. Amendments 16 and 17 would require, rather than allow, scheme regulations to make provision under which interest is required to be calculated and paid on amounts owed to or by members under or by virtue of the Bill, and about the process by which amounts and any interest on them are to be paid; I know that this matter cropped up in debate slightly earlier. Where sums are owed to schemes or members, for example relating to contributions or benefits, Clause 23 provides powers for scheme regulations to make provision about the payment of interest on those amounts. Interest will be added to amounts payable by schemes or members. The Government consider that the addition of interest is necessary to ensure fairness between members. For example, where members owe contributions, their comparators in the scheme will have been paying the correct level of contributions throughout, so would not have had the benefit of the additional money over time. Interest will be paid on benefits or contributions owed to members to reflect that the payments relate to earlier periods of time.
Clause 23 also provides that scheme regulations may make provision about the process by which amounts due to and from schemes are to be paid. This includes matters such as providing for when amounts are to be paid, allowing for those to be paid by instalments if appropriate, netting off amounts owed by a person against amounts owed to a person, and conferring rights of appeal against a decision taken under the regulations. The amendments would require scheme regulations to make such provision. However, the Government do not consider that imposing a duty on schemes to make such regulations would be appropriate. Doing so could lead to vexatious claims that schemes have not made regulations to deal with obscure situations that could arise. Rather, the Government consider that granting schemes a broad power, exercisable in accordance with Treasury directions, is the right approach to ensure that schemes can make all the necessary and appropriate provision in scheme regulations, while providing sufficient flexibility to account for the differences in the public service pension schemes that I referred to earlier.
The noble Lord’s third amendment, Amendment 18, would remove provision for schemes to make a payment only on the making of an application. This provision is there for the benefit of members: for example, members may not wish to receive amounts that they are owed. This could arise if they are an active or deferred member and intend to choose reformed scheme benefits upon retirement in order to avoid double corrections, as envisaged by Clause 16(8).
Member’s explanatory statement
This probing amendment raises the need for information in a remediable service statement to be provided in clear, easy-to-understand language.
Lord Ponsonby of Shulbrede (Lab)
My Lords, this group deals with a straightforward issue, which should not need much explanation, but should be at the heart of our deliberations on this Bill. I raised it at Second Reading and it was also raised powerfully by the noble Baroness, Lady Janke, with whom I share this group. I will speak to her amendment within the group.
In recommendations made in 2011, predating the pensions reforms that gave rise to the discrimination that the Bill seeks to address, the Public Accounts Committee recommended that
“HM Treasury should work with employers and pension schemes to ensure that clear and relevant information is provided to employees on the value of their pensions.”
In June this year, a decade later, the PAC reported that it was “disappointed” by the “limited progress” that had been made and that
“more needs to be done to improve employees’ understanding.”
The crucial relevance to the Bill today is captured—one could almost say understatedly—by the PAC when it says:
“The problem has been exacerbated with further complexities being introduced as a result of government’s response to the McCloud judgment.”
I do not need to put too fine a point on how complex the remedy and the legislation before us today are. We are the people attempting to scrutinise it, and we are only too aware of these complexities. Imagine the impact of this sudden deluge of remedies, liabilities, regulations, protections and decisions on those of our public service workers who are building up their pension in their career, perhaps as a teacher, a firefighter or a civil servant. It must be an utmost priority that scheme members are given accessible, timely, easy-to-understand and easy-to-access information to help them to understand what has happened and what it means for them.
Clause 26 makes provision for remediable service statements—essentially, annual benefits statements for members that would include information on the benefits available under the legacy scheme, information on the impact that making certain choices under the Bill would have on those benefits and a description of how and when a choice can be made. This is the primary mechanism in the Bill for providing information to members on how the remedy could have an impact on them.
Amendments 21 to 23 in my name would require the information in those statements to be provided in “clear and accessible language”. Their aim is to probe whether the content included in the statements will be plain-language, practical descriptions of what these options mean for the value of a person’s pension, or whether members will find themselves faced with a complex financial statement that is too difficult to use.
Amendment 25 raises a specific concern around tax returns: ensuring that members have what they need to fill out a self-assessment tax return. For example, members of affected schemes will have to work out tax relief on contributions, as well as their annual allowance and other values. Will a remediable service statement include the necessary information to allow a member to navigate the tax impacts of the changes to their pension status? If not, will financial advice be available to ensure that they can accurately fill out a self-assessment statement, taking the remedy into account?
Finally, Amendment 24 in my name and Amendment 33 in the name of the noble Baroness, Lady Janke, deal with the key to this issue: what guidance, help or services the Government plan to provide to help impacted members to understand what this means for them, and how members will be signposted to them. If a person has no idea what their statement means, how their pension has been affected and when they are likely to be required to make a decision, who do they call? Where do they go for practical advice? I look forward to the Minister’s reply.
Baroness Janke (LD)
My Lords, I very much agree with the points made by the noble Lord, Lord Ponsonby. There is a huge challenge here for the Government. When you think of how many individuals with individual futures will be affected by this Bill, it is something that really needs deep thought in terms of what kinds of guidance and support will be provided, how they will be resourced and how the Government will signpost them.
It does not sound too challenging to say that members get to retirement then make whichever choice is best for them, but actually lots of complicated decisions requiring support and high levels of knowledge need to be taken. For example, in some cases, members may have built up rights that fall due at different ages. If there is no single retirement age, when do they have to make their choice? In some cases, a higher pension may be owed at the time under one set of rules but, as retirement continues, it may turn out that the other set of rules would have given a bigger total pension. Again, help needs to be given.
The Government have already accepted that people with complex tax issues can have financial advice, but what about the millions of public sector workers who will have to make these choices? On financial planning, we encourage people to make plans for their pensions and explore how they are going to live post retirement, but how easy will it be to make a proper plan with the new system being put in place? For example, will the pensions dashboard provide the information they need?
It is an enormous task for schemes to unpick, administer and communicate. Members are going to need a lot of help to understand what is happening, so it would be very helpful to know what the Government intend to provide in the way of support systems to enable members to make the best choices, and to trustees of the pension schemes as well. We welcome how this is to be resourced and I hope that we will have a clear and detailed statement on supporting elements for the implementation of the scheme. I look forward to the Minister’s response.
Viscount Younger of Leckie (Con)
My Lords, once again I start by thanking the noble Lord, Lord Ponsonby, and the noble Baroness, Lady Janke, for introducing this theme and for their contributions. Providing sufficient guidance for members to make informed decisions regarding their pensions is of course of the utmost importance and worthy of proper scrutiny, so I am pleased to respond to their points and hope that I can give reassurances. The noble Baroness is correct that it is a challenge, but I hope that I can prove, or show, that much thought has been put into this important matter already.
Amendments 21 to 25, tabled by the noble Lord, Lord Ponsonby, and Amendment 33, tabled by the noble Baroness, Lady Janke, all deal with the important matter of communication: communicating the impacts of the remedy and the choices available to members. Amendments 21 to 25 seek to ensure that the information provided to members is clear and easy to understand, as well as signposting them to sources of further information and assistance and ensuring that certain tax information is provided. Amendment 33 seeks to require the Government to publish guidance for members and provide further assistance, such as a helpline or online services, as well as laying a copy of such guidance before Parliament and providing a report on the effectiveness of this guidance.
The Government recognise the importance of providing members with clear, accessible and accurate information. It is this information that will inform members’ decisions about whether to receive legacy or reform scheme benefits in relation to their remediable service, or whether to opt for service to be reinstated under Clause 5. Perhaps I may provide reassurance to the Committee on the measures already in the Bill which provide for members to receive information that shows the option of benefits available to them in the form of remediable service statements. That will include details of any lump sum, pension and survivor’s benefits under the scheme. For the vast majority of members, the decision will be very straightforward: the member will simply choose the option that is most valuable to them.
Clause 26 already contains the appropriate provisions as to what should be included in the remediable service statements; for example, subsection (5) outlines that a statement
“must include … a description of when and how any election”
should be made. The information contained in the remediable service statement will be personal to the member. The statement will set out their entitlements and allow them to clearly understand the benefits available, under the options available, to determine which one they wish to take.
The provisions in the Bill are additional to existing requirements under the Public Service Pensions Act 2013—an important point—which already require the public service schemes to provide members with information about their entitlements. Clause 26 ensures that members are provided with additional information, specifically about their remediable service only. To break this down, first, for active members statements will be provided on an annual basis and enable members to see how the two sets of benefits compare as their careers progress and they get closer to retirement. Secondly, for deferred members, a one-off statement will be provided initially but the member will be able to request up to one further statement per year. For pensioner members, and in respect of deceased members, a one-off statement will be provided, ensuring that these members have the information they need to make an immediate choice in respect of their remediable service.
Schemes will also develop further guidance and tools where appropriate; we expect that some will choose to provide retirement calculators, for example. However, in view of the different requirements of workforces, the different methods of communication currently used by schemes and the different tools they already provide, it would not be appropriate for the Bill to require this to take a particular form. To give an example, the NHS scheme is, as the Committee can imagine, one of the largest—if not the largest—occupational pension schemes in the world. It has considerable expertise in providing bespoke member communications, guidance and support. The information required under this clause will supplement and become part of an established service provided for members.
Furthermore, in relation to Amendment 25, it is worth noting that most individuals affected by the Bill will not have to correct their tax position, either through the tax system or by claiming compensation. The Bill also contains various provisions to reduce interaction with self-assessment. In addition, schemes are already required to provide members, where appropriate, the relevant information to complete their tax return on an annual basis, and this information will be updated and provided to the member where their tax position changes. Therefore, this amendment would duplicate the existing processes. However, where there is an interaction with the tax system, the Government recognise that there will need to be further guidance to complement existing HMRC guidance and scheme processes which already provide the required information to complete a self-assessment return, and this will be provided in time to allow members to make an informed choice, which is an important point to make.
I wholly agree that communication with members will be key to the successful implementation of the remedy but I hope I have reassured the Committee that the Bill already provides for all the information required for members to make necessary informed decisions. Taking all this into consideration, I hope that the noble Lord will withdraw his amendment.
Lord Ponsonby of Shulbrede (Lab)
I thank the Minister for that explanation. I have to say that he did not provide me with a great deal of reassurance because on the one hand he said that all the information will be provided in any event and then, on the other, he said that he recognises that further guidance will be necessary. I am grateful that further guidance will be forthcoming. It is a concern that has been raised directly by the various police forces I have spoken to about this issue. Nevertheless, I beg leave to withdraw the amendment.
Lord Davies of Brixton
(1A) In subsection (3), for “directions” substitute “regulations” .(1B) In subsection (4), for “directions” substitute “regulations” and delete paragraph (c).”Member’s explanatory statement
This amendment requires the calculation of the employer cost cap to be set in accordance with Treasury regulations, rather than Treasury directions. It also removes from the calculation the effect of changes in the cost of connected schemes.
Lord Davies of Brixton (Lab)
Amendment 26 is a twofold amendment. Two issues that are connected, but are potentially distinct, are wrapped into one amendment. On the one hand, the amendment states that the requirements for the cost cap mechanism should be set out in regulations rather than directions; on the other, it states that the cost of remedy should be excluded from the cost cap mechanism. They work together, but they are distinct.
The use of directions as opposed to other means of establishing regulations and subsidiary legislation of any sort is an important issue that potentially needs to be discussed in principle. I shall not start discussing it in principle today. There is a debate to be had and concern that a Government could use directions to exclude important matters from parliamentary scrutiny. It is a real fear that should be taken seriously. However, that is not the case I am making today. There is a general, generic problem with directions.
The argument is related directly to these directions. It is important to understand that “directions” in this amendment are not directions in the current Bill but directions under the provisions of the principal legislation: the Public Service Pensions Act 2013. Section 12 of that Act sets out the basis on which the cost cap mechanism works. It provides in subsections (3) and (4) that the cost cap mechanism should be
“in accordance with Treasury directions.”
The Minister said, quite rightly, that when this Bill went to the Delegated Powers and Regulatory Reform Committee, it had no comment on it. I remind the Committee that it is not the directions in this Bill that I am talking about today but the directions in the principal legislation. The debate on the principal legislation took place on 5 December 2012. In the memorandum prepared by the Treasury, comments were made about these directions. The Treasury’s submission to the committee, which was accepted, was:
“The effect of the directions on the design of the scheme will be subject to parliamentary oversight when the scheme regulations are made. It is therefore considered unnecessary for the directions themselves to be subject to additional parliamentary control.”
My argument now is that the directions—which, coincidentally, were agreed last Thursday—do impinge on the design of the scheme and hence are not subject to regulations and are outside parliamentary control. The specific issue is the generic use of directions, but in this case, the Government are seeking to introduce directions—they did so last Thursday—which do subvert parliamentary control.
They do that in two important ways. The decision is made in those directions that the cost of the remedy should be included in the cost control mechanism. I believe that there is a debate to be had about that issue and the Government are avoiding it by making the decision in the directions.
I must mention again that this is currently subject to legal action—potentially; I am not sure whether or not the formal case has been submitted. A number of trade unions are in the process of challenging the inclusion of the cost of the remedy in the cost control mechanism. Obviously, we cannot interfere in the legal process but, as a matter of parliamentary sovereignty, we need to assert that a decision as important as how the cost of the remedy should be met should be subject to parliamentary oversight.
Lord Ponsonby of Shulbrede (Lab)
My Lords, I wish to speak briefly to this amendment. I open by paying tribute to my noble friend Lord Davies for the expertise with which he has raised these issues surrounding the cost control element. I look forward to a comprehensive response from the Minister on this difficult issue—that would be to the benefit of the whole Committee.
I particularly ask the Minister to respond to the point made by the cross-party Public Accounts Committee that this is the Treasury’s mistake, yet, in the words of the committee:
“The Treasury now wants pension scheme members to pay the estimated £17 billion cost to put that right.”
I want also to touch on the Government’s response to the consultation on the cost control mechanism, which was published only a few days ago, as my noble friend said. I know that the details of the reforms are to be dealt with in future primary legislation, and I am sure that that will be thoroughly debated at the time, but the response did not give us any information on how the proposed reforms interact with the issues that we are dealing with in the Bill in front of us today. This is essentially the question that my noble friend was asking.
The response said:
“The Government will provide further details on … the extent to which there will be any interaction with the McCloud remedy at future valuations, in due course.”
It seems that, at the same time as we are having complex discussions on the immediate impact of the 2016 valuations on members, there is little or no information about how the Government plan to deal with this issue in the long term.
Clause 80 is welcome, but Ministers will be only too aware that it neither fully answers the concerns of the trade unions over the inclusion of the remedy in the 2016 valuations nor sheds any light on the Government’s intentions for the treatment of the remedy costs in future valuations. I understand that this is a complex matter, and I look forward to the Minister walking us through this complex landscape of issues.
Viscount Younger of Leckie (Con)
My Lords, we have come to another important part of the Bill. I recognise that the operation of the cost control mechanism is of considerable interest to the Committee, particularly the noble Lord, Lord Davies, whom I thank once again for his remarks, and the noble Lord, Lord Ponsonby, who—I remind myself—gave some valuable contributions at Second Reading and touched on this topic. We should also remember that the cost control mechanism should be considered within the wider context within which the Bill should be considered.
I hope that my subsequent letters on this topic have proved informative on progress being made in this area. I am happy to be able to expand on some of those key areas during this debate, but obviously there are some questions that need answers arising from this particular debate, and I will do my best to answer them.
First, on the subject of letters, I deposited a letter in the Library last week to bring to the Committee’s attention the fact that, on 7 October, the Treasury published amending directions that will allow schemes to complete the cost control element of the 2016 valuation process. As previously announced, these amending directions confirm that the McCloud remedy will be captured as a member cost in the completion of the 2016 valuations. This is right, given that addressing the discrimination identified in the McCloud and Sergeant judgments, giving members a choice of scheme benefits for the remedy period, involves increasing the value of schemes to members.
This matter led to a couple of questions being raised, first by the noble Lord, Lord Davies, who made the point that he thought that it was not appropriate for members to pay the costs of remedy. Separately, the noble Lord, Lord Ponsonby, raised the question of the inclusion of remedy in the 2016 valuations. Indeed, he questioned the role of the Treasury and government.
Lord Davies of Brixton (Lab)
I thank the Minister for his detailed response and I look forward to the opportunity for more detailed discussion at a meeting. I am not totally convinced, and I suspect that this is something we will return to on Report, but I beg leave to withdraw the amendment.
Baroness Janke
“Review of the impact of this Act on fairness
(1) Within six months of the day on which this Act is passed the Secretary of State must lay before Parliament a review of the impact of this Act on fairness to members in receipt of pensions to which this Part applies.(2) The review under subsection (1) must make reference to the impact of the provisions on women in particular.(3) The review under subsection (1) must make recommendations as to whether further legislation should be brought forward by the Government to try and close the public service pensions gap between men and women.”Member’s explanatory statement
This amendment would require the Government to report on the impact of this Part on fairness, especially with regards to women.
Baroness Janke (LD)
My Lords, this amendment calls for a review of the fairness and just treatment of some of the issues that have already been raised, particularly with regard to disbenefits to members of current schemes. We have heard of those today; the pensions trap was already described in detail by the noble Lords, Lord Davies and Lord Ponsonby. Women police officers are also being unfairly treated in the Bill, in that those who have taken time off for caring responsibilities can make up the time they had lost under the police pension scheme, but under the new scheme, which is based on age, they have to work longer. That is an example of some of the issues caused by the Bill that may not be addressed by some of the amendments we have put forward.
Gender in pensions is not a new issue. The gender pension gap is a serious matter; the average pension pot for a woman aged 65 is one-fifth of that for a 65 year-old man. Women receive £29,000 less state pension than men, over 20 years. This deficit is set to continue, closing by only 3% by 2060. This amendment seeks to highlight the importance of this issue and the need for urgent measures to address it, so we are raising specific disbenefits in the new scheme, particularly in relation to women and the gender pension gap. I look forward to the Minister’s response.
Lord Ponsonby of Shulbrede (Lab)
My Lords, I will speak briefly on this matter, but I acknowledge its importance and I thank the noble Baroness, Lady Janke, for raising it. The amendment touches on a number of key issues that we have debated today: the long-term oversight of the Bill and its impact; fairness, particularly the consequences for women and part-time workers; and the need for decent, accessible information for workers on the value of their pensions. We have seen what happens when the effects of pensions legislation are not fully taken into account or monitored. It results in the Bill in front of us and all the related complex consequences we see here today.
On the gender pension gap, during the course of today, we raised specific concerns about the different impact some changes will have on women, who are more likely to have been part-time workers or to have taken time out of their careers for caring responsibilities, leaving them with interrupted contributions and interrupted years of service. The noble Baroness made this point all too clearly. What is particularly shocking about the gender pension gap is how little it is commonly talked about and recognised. I hope that this Committee stage will slightly raise the profile of the issue, but I know that the noble Baroness, Lady Janke, as well as my noble friend Lady Drake and others, has consistently raised it across the House and brought it to the Government’s attention at every opportunity.
The cross-party Women and Work All-Party Group has called on the Government to “take urgent action” to close the gap which, as it points out, has persistently
“remained at about 40% for the last five years”.
The recommendations of the all-party group include that:
“The Government should publish guidance directed at women on how to adequately prepare for retirement and encourage employers to calculate their gender pension contributions gap in order to compare this to their gender pay gap data.”
There is cross-party understanding of this issue and cross-party support for it has been raised in other forums. What is needed to tackle it adequately is political will. I look forward to the Minister’s reply.
Viscount Younger of Leckie (Con)
This was a much shorter debate. I begin by thanking the noble Baroness, Lady Janke, and the noble Lord, Lord Ponsonby, for the points they made and for raising this important matter. As I touched on earlier in debate, of course I agree that fairness and equal treatment lie at the heart of the Bill—that is, fairness between lower and higher earners and fairness for the taxpayer—as well as the future sustainability and affordability of public service pensions.
Let me go further. The Government agree with the importance of assessing the impact of the Bill on members of the public service pension schemes with protected characteristics, including—importantly—women. This is why the Government sought responses to the consultation on equalities impacts and conducted a full equalities impact assessment of the Bill, which was published alongside its introduction. In addition, when making the necessary changes to their scheme rules to deliver remedy, schemes will carry out any appropriate analysis of equality impacts for their specific schemes alongside consultations on these changes, in compliance with the public sector equality duty contained in Section 149 of the Equality Act 2010.
The Government’s equalities analysis highlights a number of important features of this Bill, which aims to ensure equal treatment between men and women. I note the points made by the noble Lord, Lord Ponsonby. For example, with regard to the main public service schemes, requiring members in scope of remedy to choose their benefits long before retirement could disadvantage women, who may be more likely to take a career break or work part time between implementation of the remedy and their retirement. By allowing this choice to be made at retirement, the deferred choice underpin avoids additional complexity for these groups by allowing them to make their decision in full knowledge of how part-time work or career breaks have affected their earnings and pension accrual. Similarly, by making remedy available to individuals who were in service on or before 31 March 2012 but subsequently left and rejoined, provided that their break in service was less than five years, the Bill ensures parity for groups that may have been more likely to take career breaks—for example, to care for young children or elderly relatives.
The Bill also provides that, from 1 April 2022, all public service workers who remain in service will do so as members of the reformed schemes, which provide career average—so-called CARE—benefits. CARE schemes offer fairer outcomes to those who experience lower salary progression over the course of their careers. As such, statistically, a higher proportion of women and those with other protected characteristics are likely to be better off under CARE schemes, which are broadly more beneficial for lower and some middle earners. The Bill also provides that men and women in the same scheme and of the same date of birth will have the same scheme normal pension age—NPA—under their particular reformed scheme design, and the same NPA for their legacy scheme benefits.
More broadly, the Government recognise the importance of public service pensions in addressing the pensions gap in society between men and women. As women make up roughly 65% of active public service pension scheme members, the provision of generous defined benefit public service pensions actively serves to reduce that gap. Nevertheless, the Government recognise that, in the public sector, differences remain in average annual pension payments and accrued pensions; this was alluded to by the noble Baroness, Lady Janke. However, these reflect past differences in earnings over members’ careers rather than differences in their pension terms.
Therefore, the best way to combat differences in pensions accrual is to tackle the gender pay gap and promote equal opportunities for career progression, regardless of sex or other protected characteristics. The Government are taking active measures on both, including through mandatory gender pay gap reporting. As a result, the gender pay gap continues to be lower in the public sector than the private sector; I have some statistics that I could give to the Committee. As already mentioned, these differences should reduce over time as a result of the move to a CARE benefit design, which all members will accrue from 2022 and which will lead to fairer outcomes for those with lower pay progression.
Given the extensive analysis that has already been conducted and published, as well as the further analysis that schemes will carry out, the Government do not think that a further review is required at this stage. I understand the sentiments behind the amendment but we do not agree that it is necessary. I therefore ask the noble Baroness to withdraw her amendment.
Baroness Janke (LD)
I thank the Minister for his response and take his assurances very seriously. Again, this is perhaps something we need to reflect on as it affects society as a whole. I believe we should use every occasion we can to address these fundamental unfairnesses. Having said that, I am sure we will reflect on this, but at this point I beg leave to withdraw the amendment.
Member’s explanatory statement
This would set the judicial retirement age in the Judicial Pensions Act 1959 to 72, rather than 75. This is a probing amendment to raise the issue of the appropriate retirement age for the judiciary.
Lord Ponsonby of Shulbrede (Lab)
My Lords, we now move to a different aspect of the Bill: the retirement age of members of the judiciary. I thank noble and learned Lords who have sat through the past couple of hours of quite detailed discussion of other aspects of the Bill. This amendment has one great merit, which is that it is easy to understand. I remind the Committee that I sit as a magistrate in London.
I raised this subject at Second Reading, as did other noble Lords, and I received a letter from the Minister in which he set out the Government’s view that 75 is a more appropriate age for the retirement of members of the judiciary than 72. He did that based on responses to a public consultation run last year. The letter prays in aid some statistics based on the response to the consultation and some representative bodies, which basically backed 75 over 72. As I made clear in my Second Reading speech, there are other representative bodies which back 72 over 75. Just to repeat what I said in the Second Reading debate, the Lord Chief Justice of England and Wales, the Lord Chief Justice of Northern Ireland, the President of the Supreme Court, the Lord President of Scotland, the Magistrates’ Leadership Executive, the Chief Coroner of England and Wales and the President of Tribunals favoured 72, not 75.
As somebody who took part in the consultation, I say that the questions in the consultation were not put in the context of whether the increase in the retirement age promotes inclusion and diversity in the magistracy, which is of primary importance—it is superior to other considerations when considering the retirement age—and whether the appraisal system is adequate properly to appraise older colleagues. Here I have to speak frankly, and as somebody who regularly appraises magistrates. There is a prospect of mental decline, which accelerates as one grows older. Although one has to be robust when carrying out appraisals, it can be difficult to say to a long-standing colleague that they should reflect on whether they should continue in their current judicial role. I think it is more likely that those difficult conversations will have to be had if the retirement age is set at 75 rather than 72.
In the Minister’s letter, he gave the proportion of BAME members in different arms of the judiciary: 13% for magistrates, 10% for judges and 17% for non-legal tribunal members. Clearly, there is an aspiration within the Government—and, I know, within the judiciary as a whole—to increase and improve these figures. One of the central points of the Lammy report which I think the Government have accepted is the importance of increasing diversity. I would argue that increasing diversity within the judiciary is more important than, and trumps, increasing the judiciary’s retirement age. Indeed, increasing the judicial retirement age militates against greater diversity. Because there is only a limited administrative resource, the administrative effort should focus on the recruitment of younger people as a whole but particularly from minority groups within our society.
I have put forward my amendment—to have 72 rather than 75—in a constructive way. It is the way to enable colleagues to continue for another two years but also to focus on what I see as the overwhelming importance of increasing diversity in our wider judicial family. I beg to move.
Lord Etherton (CB)
I thank the Minister for his full letter, following Second Reading, and his suggestion of a further meeting. I am very grateful for both of those. I support everything that the noble Lord, Lord Ponsonby, has said and it is a great pleasure to follow him.
I join in on this amendment and support it because of the adverse impact of the increase in the maximum retirement age to 75, rather than 72, on diversity in our most senior courts, especially the Supreme Court and the Court of Appeal. While all salaried judges are critical to the administration of justice, the most senior courts are those that tend to send the clearest message to our nation, and indeed to other countries, of whether or not we value diversity within the judiciary. At present, we lack a sufficiently diverse senior judiciary. While some progress has been made, particularly in the last 10 years, on the recruitment of women—still inadequate—there is a notorious lack of people from a minority ethnic background. Indeed, in the just over four years that I was Master of the Rolls, it was sometimes extremely embarrassing not to have on the panel of judges in the Court of Appeal anybody from such a minority background.
To increase diversity, there must be sufficient opportunities for appointment to the senior courts. This requires existing judges to retire. The increase in the maximum retirement age to 75, rather than to 72, will in effect freeze the opportunity for the advancement of underrepresented groups and the throughput of more diversity within the judiciary. As the noble Lord, Lord Ponsonby, said, all the most senior judges in England and Wales were in favour of an increase in the judicial MRA to 72 rather than 75. The adverse impact of raising the MRA to 75 in a single stride is plain: the average age of judges in the Court of Appeal is just under 64. This means, potentially, that if the MRA is raised to 75 there will be very few vacancies for a further 11 years.
Lord Woolf (CB)
My Lords, it gives me great pleasure to speak after the former Master of the Rolls, an office that I held at one time before becoming Lord Chief Justice, on this occasion for the first time. I am yet hoping to hear from another judge who will be speaking who I have not had the opportunity to hear from.
I was very much a judge at the time that the MRA for a judge was, and had been, 75. In my view and that of my colleagues, that worked admirably. There was no problem about it, subject to the question of diversity, to which I will draw attention shortly, which is a single matter. I emphasise that at Second Reading, the noble and learned Lord, Lord Mackay, intimated that, when he was Lord Chancellor—I was Lord Chief Justice subsequently—the age of 70 was in operation.
As was confirmed by what the noble and learned Lord, Lord Etherton, said, there is no doubt that reducing the age from 75 to 70 did not work. That is why all the judiciary and the former judiciary believe that there is a real and very important need for the age to be increased, for reasons identified by the noble and learned Lord, Lord Etherton. The only question is whether it should be increased to 72 or 75.
I suggest that the view that 72 will have a particular adverse effect on diversity is not correct. We are concerned about a failure to get enough female judges appointed, especially to the important offices, but that depends on their being appointed, not on the date of retirement being artificially restrained to a lower age than it would otherwise be, if the Government’s intentions proceed as they are at the moment.
I have also had experience of indirectly employing judges to the international courts with which I have been involved—this is referred to in my entry in the register. The fact is that excellent judges who are under the age of 75 are able to be recruited for courts in other countries. The fact is that if we go ahead with the lower age, we would be depriving ourselves of useful powers in the judiciary of this country in the highest posts if they are not able to fulfil the term that, as I submit, they should be able to fulfil. If they do not want to stay on until 75, the MRA of course does not have any impact upon their ability to retire at an earlier date.
The important question, therefore, is whether there really is such a dampening effect on the employment of female judges that it has to give way to what should be the natural term of appointment of the most senior judges in this country. I can say only, based on my experience, that I do not think there is any evidence to that effect. The fact is that in the appointment of judges we would like to recruit more of—that is, able judges of the highest quality who are female—into the judiciary, so far we have not been able to recruit them. That is true; we would like to recruit more, but it has not happened. On appointment, the fact is that those who are responsible for appointment take into account, and are perfectly entitled to take into account, where there is a female applicant, the fact that she is female. Of course, because of the need, that means that female judges are in a position where, if they apply to be appointed, they are more likely to be appointed than their male counterparts, because there is a need for females.
I certainly subscribe to the view, especially with appellate courts, that having a female judge on those courts is a matter of the highest importance, and I would be astonished if those responsible for the appointment did not take that into account in selecting who would be appointed. So, on the basis of my experience, I say that we should not, and it is not right to, deprive very good judges of the full term of their appointment if that be an age in excess of what it is now, to 75, because it might mean—although there is no evidence that it does mean—that female judges would need to be appointed. I appreciate that the noble and learned Lord referred to people being cut out, but to say that in the course of a judicial career that goes to an age above 70, a judge is going to be locked out of the opportunity of being appointed because colleagues can stay to 75, I really suggest is unrealistic.
I urge the Government to adhere to the view of the noble and learned Lord, Lord Mackay, and myself that changing the age from 75 to 70 was a mistake—a mistake that this is an opportunity to correct, and we should do that. We will lose, of course, the opportunity to have those five years, which we now have in international courts, but our first responsibility is to the courts of this country and the standards of those courts.
Baroness Hallett (CB)
My Lords, I support the amendment to make the judicial retirement age 72, rather than 75. I should first declare that I was a judge adversely affected by the current mandatory retirement age of 70: I had to retire in 2019. I thought I had a good five years left in me, but it was not to be. None the less, I support the amendment down to 72.
I was also chair of the diversity committee of the Judges’ Council until 2019 and I spent a lot of my professional life trying to improve diversity on the Bench for judges and magistrates. I had some success, but it was limited success. We organised mentoring schemes, application workshops, outreach events of every kind and support of every kind for women, BAME lawyers, employed lawyers, academics and solicitors, encouraging them to apply for a judicial post. I must have spoken to hundreds over the years, and I never once heard an argument that the retirement age was a factor in their not applying for the Bench. There were many other complex factors, particularly for solicitors, and it was not the retirement age.
Baroness Janke (LD)
My Lords, it is clear that everyone in the Room would say that it is important that our senior judges, in the Court of Appeal and the Supreme Court, reflect the society in which we live if they are to be respected and seen as part of the current era. At the moment, they do not, and we are all concerned about this.
From what we hear, the amendment is acceptable and does not have the effect on diversity that raising the minimum retirement age to 75 would. It is worth noting the comments on the Ministry of Justice’s 2020 statistics:
“Although the proportion of judges that are women continues to increase gradually, women remain under-represented in judicial roles in 2020. This is particularly the case in the courts where 32% of all judges, and 26% of those in more senior roles (High Court and above) were women—compared with 47% of all judges in tribunals.”
The BAME situation is much worse:
“The proportion of judges who identify as Black, Asian and minority ethnic … has also increased … but remains lower for court appointments compared to tribunals, particularly at senior levels (4% for High Court and above, compared with 8% of all court and 12% of all tribunal judges). However, the association between age and ethnicity—with lower a proportion of BAME individuals at older ages, and more senior judges being older on average—should be borne in mind.”
I wonder whether the Minister can say whether the Government have thought of doing an impact assessment. The one at the beginning of the Bill does not address this issue at all. If there is some argument about it, it would be good to have an impact assessment that lays out the evidence we have heard from some noble and learned Lords today.
I look forward to the Minister’s response but very much hope that, by the time we get to Report, we have a body of evidence on which to make this judgment. I am sure that the noble and learned Lords here today will be able to make some of that available.
Lord Woolf (CB)
I am sorry; could I just add one thing? The noble and learned Lord, Lord Brown, was sitting here wanting to address the Committee. I know without hesitation or doubt that he was going to support the view I was taking. So, I am afraid that we have to bear in mind that there are some who have a different view from that expressed by other noble and learned Lords and who would take a more relaxed view than has been indicated about the Government’s proposals.
Viscount Younger of Leckie (Con)
My Lords, this has been a rather busy debate. I thank all noble Lords who have contributed, including the noble Lord, Lord Ponsonby, at the beginning, the noble and learned Lords, Lord Etherton and Lord Woolf, the noble Baroness, Lady Janke, and particularly the noble and learned Baroness, Lady Hallett, who I do not think has spoken in any of the debates I have been involved in; she is most welcome. I appreciate the careful consideration that has clearly been given to this knotty issue, and I welcome the opportunity to discuss the matter further and in depth. We obviously covered it in some depth at Second Reading.
I wanted to say something at the outset about Amendment 34, which seeks to raise the mandatory retirement age in the Judicial Pensions Act 1959 to 72, rather than 75 as proposed in the Bill. I point out that the amendment as drafted would have the effect of changing the retirement age to 72 for only a small number of senior judges. However, I understand from the contributions today that this is, if I have got this right, more of a probing amendment, and that its intention is to raise for debate—which we have had today—what mandatory retirement age should be provided for in this Bill for all members of the judiciary. I just wanted to make that point.
I recognise that there are different views, not just among Members of this House but among others outside, including within the judiciary, on the most appropriate age at which members of the judiciary should retire. I therefore appreciate the close interest that this Committee has in the consultation that took place in 2020 on this matter. It is obviously a challenge to get agreement, and I take the view from the noble and learned Lords, Lord Woolf and Lord Etherton, and indeed the noble and learned Baroness, Lady Hallett, that there are definitely different views. We know that.
As the noble Lord, Lord Ponsonby, mentioned, I endeavoured to cover in some detail in the letter I wrote to your Lordships following Second Reading some more information on this issue. However, I welcome the opportunity to provide further reassurance—and I hope I can—on the robust consultation that took place, which has to led to the decision, and to explain why, on balance, the Government feel it is right at this point to raise the mandatory retirement age to 75. I shall expand on that in my remarks.
First, as this Committee will know, a full public consultation ran from July to October 2020 and received 1,004 responses. The vast majority of respondents, 84% in total, believed that the mandatory retirement age should be increased, with 67% of respondents indicating that a retirement age of 75 was the better option—in a measured way and all things considered, I should say. Of the individual respondents who reported their gender, 62% of female respondents supported a mandatory retirement age of 75. But let me now turn to the Government’s rationale for raising the judicial retirement age to 75.
It is interesting to note that there is, of course, a view that the mandatory retirement age should be raised. I think the point was raised that this is about whether it should be either 72 or 75; at least that is some form of agreement. It is important that we set a judicial retirement age which we believe will stand the test of time, given that such changes are once in a generation.
Just to put all this in perspective, the previous adjustment to the judicial retirement age was 28 years ago. I pick up the point raised by the noble and learned Lord, Lord Woolf. In my view, and in his, it would not be ideal to make a modest increase of just two years and then to have to revisit this question in the relatively near future. It is better for the smooth administration of justice that we make a change now—if we want to make a change, and we think it is right—that supports our judiciary to meet the demands of the justice system, both now and in the future.
We have, of course, seen many changes since 1993, when the current retirement age of 70 was set. By 2019, life expectancy had increased for men by 5.8 years and for women by 4.1 years. We have also seen changes in wider societal norms on retirement: the Equality Act 2010 resulted in the removal of a compulsory retirement age from most professions. It is a widely accepted position that the judiciary is different in this respect, and there are very important principles we wish to maintain for setting a judicial officeholder’s retirement age in statute. However, the Government believe that the time is right to review the age at which that should be set. The proposal to increase it now is in line with the wider acceptance in our society that older people continue to make a significant contribution. Indeed, many noble Lords continue to make valuable contributions to the work of this House long past 70 or indeed 72 and even 75. As I expect noble Lords are aware, the average age of Members of this House in January last year was a positively spring chickenlike 77. I think we should bear that in mind.
The noble Lord, Lord Ponsonby, raised appraisal schemes, which I found interesting with my background in human resources. I would love to expand a lot on this, but appraisals are a matter for the judiciary. I shall set out the Government’s position on this as it is an important point. It is not for the Government to direct, but here we are. Having individual assessments undermines one of the core purposes of the mandatory retirement age, which is to maintain public confidence in the health and capability of the judiciary without the need for individual assessments. Individual assessments have the potential to infringe on the principle of judicial independence which is fundamental to our judicial system and must be fiercely protected. Judges must be free to hear and decide cases without the spectre of assessment sitting over their shoulder. Some sitting judges can already have their appointments extended past their compulsory retirement date to 75 without the need for a capability assessment. Subjecting only older judges to individual assessment risks being discriminatory on the basis of age, and we do not currently consider that that would be justified. However, I return to the first point that I made that appraisals are a matter for the judiciary and as I speak for the Government I have to stick with that.
A key issue here is trust. This was mentioned. The legitimacy of our judiciary relies on public confidence that its judgments can be accepted as right and fair. It is very positive that the Ipsos MORI Veracity Index shows a remarkably high level of trust in our judiciary. The 2020 index showed that 84% of the public trust the judiciary. Thank goodness for that. I do not think that more judges, magistrates and coroners sitting up to age 75 will dent that high level of trust.
As the noble and learned Lord, Lord Woolf, said, it is important to note here that the new mandatory retirement is, of course, a maximum, rather than a minimum, retirement age. It is not expected that even a simple majority of the judiciary, and judges in particular, will wish to sit until they are 75, but I take the messages that were relayed by the noble and learned Lord, Lord Etherton, from his experience. I do not dismiss what he said. It again comes back to the balance that we have decided to take. Data from the Forty-Second Annual Report on Senior Salaries showed that from 2011-12 to 2018-19, the average age of retirement across salaried judges in England and Wales was 67, but the Government believe that it is right that this measure would provide the judiciary a little more flexibility over when they retire.
It is known that we already greatly benefit from the expertise of judges older than 70; indeed, many incredibly important inquiries are chaired by former Justices of Appeal and High Court judges whose intellectual capacity was undimmed when they retired at 70. There are also many instances in which members of the judiciary are, at present, able to retire up to the age of 75: a number of judges who, having been appointed before 1995 when the changes to retirement age came into effect, are not due to retire until after 72 or up to 75. Similarly, coroners appointed before the Coroners and Justice Act 2009 do not have a retirement age in statute.
Lord Ponsonby of Shulbrede (Lab)
My Lords, I certainly support 100% the new recruitment programme for magistrates. When I first became a magistrate 14 years ago, there were 30,000 magistrates; there are now 12,000, so it is high time that there was a large recruitment process to address the deficit of BAME magistrates.
The noble and learned Lord, Lord Etherton, kindly supported my amendment and spoke eloquently about the different aspects of the senior judiciary. I say to the noble and learned Lord that I am many things but I am not learned in the context of this Committee. Nevertheless, I am grateful for his support. The noble and learned Baroness, Lady Hallett, spoke with great authority and I hope that the Minister will listen to one particular phrase she used: that the public demand change. It really is not good enough that BAME people are so unrepresented in all levels of the judiciary.
One of the things I do is to sit in Highbury youth court, where a very large proportion of the defendants we see are from BAME communities. However, it needs to be said that the victims are from those communities as well. The defence lawyers are from those communities, as are the prosecuting lawyers and the legal advisers. Obviously, the youths are under 18 but all the professionals I am talking about are in their 20s, 30s and early 40s. There is a large cohort of expertise coming through the system. When I sit there as a magistrate, I am very frequently older than the grandparents of the youths I am dealing with. The way that we as magistrates are represented when we hear those cases is not right and it needs to change.
I will say a few words about the noble and learned Lord, Lord Woolf —my noble and learned friend, if I may say so. He spoke about the frustrations of trying to recruit women to roles as senior judges but did not address any of the issues about recruiting BAME judges at all levels. That is really the central issue; for me, it trumps all other considerations when we are considering magistrates’ retirement age. Having said all that, I beg leave to withdraw my amendment.