Public Service Pensions and Judicial Offices Bill [HL]

Debate between Lord Ponsonby of Shulbrede and Viscount Younger of Leckie

Consideration of Commons amendments
Wednesday 9th March 2022 Lords Chamber

[Lord Ponsonby of Shulbrede (Lab)]

My Lords, I thank the Minister for his presentation, and I shall speak first to Amendment 48, on the cost control mechanism. We agree with the points made by my noble friend Lord Davies of Brixton, reiterated and added to by the noble Baronesses, Lady Kramer and Lady Janke. In the Commons, we raised these concerns over the introduction of what the Government call the “symmetrical economic check” and voted that this particular reform of the mechanism should not be added to the Bill. I will not repeat the background, which has been expertly put forward by my noble friend, but will just echo the concern that this breaks the Treasury’s 25-year guarantee that there would be no further fundamental reforms.

In 2011, the Government’s Paymaster-General said that those reforms represented a settlement for a generation, and they arose out of the 2011 Hutton review. Further, does the Minister recognise our concern that these reforms risk undermining the faith of public service workers in their pension schemes? What does the Minister expect of future reforms? Since the Government are clearly set on pushing ahead with the economic check, what would be most helpful now are answers to the questions put by my noble friend Lord Davies on how that would work in practice.

We raised concerns in the House of Commons that the check was insufficiently transparent and gave too much room for ministerial interpretation. As has been said, the Government’s answer is that discretion will be limited as the check will be linked to objective and independent figures from the OBR, although that particular element is not set out in the Bill. I should be grateful if the Minister confirmed that. I am hopeful that he will be able to provide some more detailed answers on the process that we should expect and how the OBR figures will be used—a point made by my noble friend Lord Davies.

Turning to Amendment 54, it is fair to say that it is an unexpected addition to what is in reality a technical Bill. It causes one to reflect on the Government’s lack of control of their own Back-Benchers in the House of Commons. The Labour Party supports the broad thrust of the new clause but shares concerns over its wide scope and possible unintended consequences. We also agree with the noble Baronesses, Lady Kramer and Lady Janke, that there is a huge element of government overreach here and we are mindful that the amendment represents directions, not guidance.

We in the Labour Party are unequivocal in our opposition to the divisive and discriminatory use of BDS against the State of Israel. We do not believe that such an approach is appropriate or would enhance the prospects of peace through a negotiated settlement to the conflict, based on a two-state solution. However, regrettably, the clause is poorly worded, too broad in scope and, as we have heard, could cause difficulties for local authorities wanting to take a principled stance on, for example, China’s treatment of the Uighurs. Many other examples have been given in the debate. It is clear that the Government have chosen to progress the Bill with this additional clause but also intend to introduce further legislation in the Queen’s Speech that will be more detailed in this area. It would be helpful if the Minister clarified what comes next and how concerns raised in today’s debate will be considered. What ongoing engagement are the Government having with the Local Government Association, which has raised concerns, and many other bodies interested in this area? I understand that a full consultation process is required before any guidance or directions can be issued under the new clause. What will that consultation process look like? Are there plans to launch a consultation, or will that not be entered into until further legislation is brought forward at the Queen’s Speech?

Finally, I repeat a question on Russia asked by a noble Lord. If schemes want to divest quickly, for example because of links to Russia—Gazprom was mentioned—would anything in the directions under this clause of the Bill put that ability to act in jeopardy in the future? Can the Minister talk to this specific point? It is obviously extremely pertinent right now but there may well be similar issues in future.

Just to be clear, if my noble friend were to press his amendment to a vote, we would abstain.

[Viscount Younger of Leckie (Con)]

My Lords, I am pleased to know that the great majority of the amendments have been well received. I thank all noble Lords for their considered contributions. There was quite a bit to cover and a number of questions. As noble Lords would expect, I will do my best to answer them all, or as many as possible within the timeframe allowed.

As the noble Lord, Lord Davies, said, two key themes have emerged in today’s debate. The first is guidance on investment decisions for the Local Government Pension Scheme, and the second is the economic check element of the cost control mechanism reforms. I will start with the latter and turn first to the CCM, as it is called, and in particular the economic check, as raised specifically by the noble Lord, Lord Davies of Brixton. I will speak to Amendment 48. I understand from the noble Lord’s contribution that his concern is specifically with this check, but it is important to note that the effect of rejecting Commons Amendment 48 would be also to reject the framework for the reformed scheme-only design, which, as the noble Lord will be aware, is widely supported overall.

I turn to why we think the economic check is needed. It will ensure consistency between member benefit or contribution changes and changes in the wider economic outlook, as I addressed in my opening speech. To address the question of whether this is objective, the economic check will be linked to the OBR’s independent and objective measure of expected long-term GDP growth and the long-term earnings assumption. It will operate purely mechanically, with no scope for interference from individuals or groups from within government or outside. It will therefore operate transparently and be linked to an objective and independent measure of expected long-term earnings and GDP growth. Further details on the design and operation of the economic check have been set out in the Government’s consultation response published, as the noble Lord in particular will be aware, in October 2021.

I will go a little further on the clause making reference to different sectors of the economy. The Bill implements the framework for the economic check, which will ensure consistency with member benefit and contribution changes. The Bill will allow Treasury directions to set out how the economic check should operate its scheme valuations, including whether and to what extent the growth in the economy, or any sector of the economy, of the UK or any part of the UK should be taken into account. This will allow the economic check to be based on the OBR’s independent projections of long-term UK GDP growth. I will talk more about directions in just a moment. We believe that these reforms will make the mechanism more stable from the 2020 valuations onwards and allow it to operate more in line with its objectives, giving members greater certainty with respect to their retirement incomes.

I turn to points raised by the noble Lords, Lord Davies and Lord Ponsonby, my noble friend Lady Altmann and others on the 25-year guarantee. I took note of the points raised, but the Government do not believe that these reforms breach the 25-year guarantee. The elements protected by the 25-year guarantee are set out in legislation—namely, Section 22 of the Public Service Pensions Act 2013—and the cost control mechanism is not included.

The Government are making these changes following a thorough and independent review of the mechanism by the Government Actuary and a full and open consultation process. As I have noted, the Government Actuary’s report makes clear that it does not seem possible for the mechanism to be able to protect the taxpayer unless it considers the wider economic outlook. The symmetrical operation of the economic check will also protect members. Furthermore, the reforms will lead to a more stable mechanism, with both benefit reductions and improvements becoming less likely, which aligns with the spirit of the 25-year guarantee.

I turn to the original objectives of the cost control mechanism, on which I will again delve into more detail to try to give noble Lords some reassurance. The noble Lord, Lord Davies, asked for greater clarity on the CCM. As I set out in my opening remarks, the Government asked the Government Actuary to review the mechanism following provisional results from the 2016 valuations. This was the first time the mechanism was tested, and the provisional results indicated floor breaches across all schemes for which results were assessed, leading to concerns that the mechanism was too volatile.

As part of this review, the Government Actuary was asked to assess whether and to what extent the mechanism was working in line with the original policy objectives for the mechanism. These objectives are to protect taxpayers from unforeseen costs, to maintain the value of schemes to members and to provide stability and certainty on benefit levels, so the mechanism should be triggered only by extraordinary, unpredictable events. These objectives have been retained since the mechanism was first introduced in the Public Service Pensions Act 2013.

The mechanism was introduced following the recommendations of the Independent Public Service Pensions Commission in 2011. The commission, as the House will know, was chaired by the noble Lord, Lord Hutton of Furness, and specifically recommended a mechanism to protect the Exchequer from increased costs. However, the final mechanism negotiated between the Government and member representatives is symmetrical and so also maintains the value of pensions to members when costs fall.

Let me now turn to the second theme of BDS, as raised by several noble Lords. I hope I can give some reassurances. It was particularly raised by the noble Lord, Lord Davies, and the noble Baronesses, Lady Sheehan and Lady Kramer. I thought the remarks from the noble Lord, Lord Mann, were interesting, very balanced and very helpful. I hope my remarks chime to a large extent with what he said.

As I set out in opening, Commons Amendment 54 does not put a requirement on schemes to make any immediate decisions regarding their investments. It expands existing powers for the responsible authorities to issue guidance or directions, both of which would be drafted and consulted on. I reiterate that this would involve extensive engagement with the LGPS community over the usual 12-week consultation period, during which time all views and concerns would be considered. Any guidance or directions produced would set the parameters out in detail.

There will be consultation with the LGPS community when framing such parameters to ensure that all views and concerns are considered, including on ESG matters, which were raised by the noble Baroness, Lady Janke. I understand that the contributions made by several noble Lords, including the noble Baroness, were to do with ESG. I hope I can ease concerns by assuring the House that this amendment is strictly in relation to UK foreign and defence policy, as reiterated very strongly by the noble Lord, Lord Mann. Any guidance or directions issued would not seek to restrict decisions that meet the Law Commission’s test for investment decisions influenced by non-financial considerations except in a very narrow area concerned with UK foreign and defence policy.

In all other areas the existing tests would apply, namely that scheme managers must have good reason to think that scheme members would share their particular concern and the decision does not involve a risk of significant financial detriment to the fund. If issued, such guidance would seek to provide protection to LGPS funds by preventing decisions which would otherwise have been subject to challenge under the aforementioned Law Commission tests. To reiterate, this power would not be used to restrict the proper account of ESG matters in investment decisions.

To go a little further, I reiterate that these anti-boycott provisions are not about fossil fuels or climate change. The Government have passed legislation to require pension schemes to state clearly their policy on how they take account of climate change and its risks. Clearly, climate change will have long-term financial consequences. Notwithstanding that, fuels like natural gas will continue to play a vital role in Britain’s energy mix, particularly in the production of hydrogen as we transition to a net-zero economy. We need fossil fuel companies to invest in the new technologies to help deliver what we must do to reach net zero.

I will move on to focus on the use of “directions” as opposed to “guidance”—or just to discuss both—a point raised in particular by the noble Lords, Lord Davies and Lord Ponsonby. Administering authorities must have regard to guidance issued by the responsible authority. Directions allow responsible authorities to direct specific action by a scheme manager. For example, a direction may be considered appropriate if the responsible authority is satisfied that the administering authority is failing to act in accordance with guidance.

Public Service Pensions and Judicial Offices Bill [HL]

Debate between Lord Ponsonby of Shulbrede and Viscount Younger of Leckie

3rd reading
Monday 6th December 2021 Lords Chamber

[Lord Ponsonby of Shulbrede (Lab)]

My Lords, I echo what the noble Baroness, Lady Janke, has said. I thank the Minister and his team for their comprehensive support to my noble friend Lord Davies of Brixton and myself. It was a very complicated Bill and I know that, like the noble Baroness, Lady Janke, I needed some guidance through it. This is important legislation for public service pensions. It will guarantee pensions for public servants—something which, of course, we all agree with. We are aware that there may well be further amendments in the other place as well as further legislation given that there are ongoing cases currently in court. My noble friend Lord Davies of Brixton is relatively new to the House and, I have to say, he has started extremely well. It is not often, when taking part in your first Bill, that you manage to influence government policy in the way that he has; my noble friend deserves congratulations.

I was present throughout all the debates and, when we debated the mandatory retirement age, I felt there was a sense of relief because it was an easily understood issue. Many noble and noble and learned Lords took part in that debate with a level of passion not forthcoming in the other more technical parts of the debate. Nevertheless, I thank the Minister for his support as the Bill transitioned through the House.

[Viscount Younger of Leckie (Con)]

I thank all noble Lords who have just spoken for their kind remarks; I am pleased that we have got to this stage.

Public Service Pensions and Judicial Offices Bill [HL]

Debate between Lord Ponsonby of Shulbrede and Viscount Younger of Leckie

Report stage
Monday 29th November 2021 Lords Chamber

[Lord Ponsonby of Shulbrede (Lab)]

My Lords, I thank the Minister for his explanation of this extensive group of amendments. I too thank him and his Bill team for engaging with me and my noble friend Lord Davies leading up to Report and for the explanation of the late additions to the Bill. The Minister recognised that it is unusual to bring forward such a large number of amendments at such a late stage. However—and this is unusual on our part—we are content that he has done so. As my noble friend said, we understand that there may be further amendments when the Bill goes to the other place.

We have no objection to the amendments. They are largely technical and clarifying in nature. For example, they would ensure that the Bill operates as intended when a member of one of the affected pension schemes dies. I also accept that adding these amendments now will ensure that the Bill will start its scrutiny in the House of Commons with these points clarified, which we welcome. For these reasons, we are content with this group.

[Viscount Younger of Leckie (Con)]

My Lords, I will make a few very short closing remarks. I thank the noble Lords, Lord Davies and Lord Ponsonby, and the noble Baroness, Lady Janke, for their brief remarks. In particular, I thank the noble Lord, Lord Ponsonby, for his supportive remarks and his understanding—there is probably a better word to use—of what we needed to do for this group of amendments and the next one. I appreciate it.

As I said in my opening remarks, the Bill deals with a complex and unprecedented issue. These amendments reflect the several months of continued work with the schemes, stakeholders and departments to check and recheck the Bill to ensure that it will offer a complete and effective remedy for members affected by the discrimination identified by the Court of Appeal.

The noble Lord, Lord Davies, raised a good point about what might happen next with potential amendments in the Commons, but I reassure him that, as I outlined, this is a highly complex area and the Government are committed to ensuring that members in all relevant schemes receive an effective remedy. We will continue to work closely with stakeholders, including the pension schemes in scope, to consider whether any areas of the Bill require further clarification to ensure legal operability.

I also took note of the points raised by the noble Lord, Lord Davies, concerning additional voluntary contributions and the cost control mechanism. The noble Baroness, Lady Janke, alluded to the fact that we will be addressing them in subsequent groups. I think it probably makes sense to do that, but I have taken note of the noble Lord’s questions, and I am sure he will raise these matters as the afternoon goes on.

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[Lord Ponsonby of Shulbrede (Lab)]

My Lords, once again I thank the Minister for his explanation of this group. We are content for these changes to be made to the Bill. I particularly welcome the provisions on voluntary contributions, which will now allow for a member to make voluntary contributions where they would have done, but did not due to the pension changes that led to the arising discrimination. This responds to a concern raised by pension schemes and by my noble friend Lord Davies in Committee, which was recognised by the Minister. I wonder whether the Minister can give us an assurance that more information will be forthcoming, over the Bill’s passage through the Commons, on how this will be provided for in practice.

I also welcome the provision providing flexibility for judges over their election period and that every member must be provided with an information statement by the scheme before their election period starts. At later stages this afternoon we will come back to this question of how information and guidance are provided to members and how they will access support. That is in an amendment to be moved by the noble Baroness, Lady Janke. I am glad to see that this has been recognised, at least to some extent, in this group. We are happy to support these amendments.

[Viscount Younger of Leckie (Con)]

My Lords, once again, my closing remarks will be relatively brief. I thank the noble Baroness, Lady Janke, and the noble Lord, Lord Ponsonby, for their broad support for these amendments. As one or two questions were raised, I will give some more information on additional voluntary contributions, which may be helpful, particularly with regard to the question on eligibility raised by the noble Baroness.

The proposed new clauses provide that scheme regulations may not permit a member to enter into such arrangements after one year from the day on which the member is provided with their remediable service statement, or their information statement in the case of the judiciary, or such later time as the scheme manager considers reasonable. The proposed new clauses will be subject to Treasury directions, which I understand we will be speaking about in a later group—under Clause 24 for Chapter 1 schemes and under Clause 58 for judicial schemes. This is set out in Amendments 45 and 90, and is consistent with the similar powers in Part 1 of the Bill. These directions will help to ensure that scheme regulations take a consistent approach, which is very important in providing members with remedial voluntary contribution arrangements.

I hope that this offers some explanation but, again, bearing in mind the technical nature of the noble Baroness’s question, I will be keen to read Hansard and will write if further information is required.

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[Lord Ponsonby of Shulbrede (Lab)]

My Lords, I again pay tribute to my noble friend Lord Davies for his contribution and for setting out the range of concerns surrounding the cost-control mechanism and the inclusion of the remedy as a member cost. I recognise that this question is subject to ongoing legal action and once again put on record that we welcome the provisions in Clause 80, although, as the Minister is only too aware, it does not deal with the wider question of plans for the cost-control mechanism.

Members of the House are not the first to raise questions over the Government’s plans. The cross-party Public Accounts Committee said:

“HM Treasury should have foreseen the age discrimination issue that gave rise to the 2018 McCloud judgment, and putting things right will take many decades to resolve. HM Treasury wants members to pay to put this right—at an estimated cost of £17 billion—despite this being its own mistake.”


That point was repeated by my noble friend Lord Davies and the noble Baroness, Lady Janke.

I look forward to the Minister’s response on this issue but, before I finish, I want to echo one specific question. Am I right that there will be a number of members who will not benefit from the remedy but will be impacted by it if it is included as a member cost?

I listened with interest to the noble Lord, Lord Hodgson of Astley Abbotts, on Parliament being subject to the creeping control of the Executive—I think that is the way he put it. He talked about examples of secondary legislation and indeed gave this as an example of tertiary legislation. I think a lot of us will have sympathy with what he said.

[Viscount Younger of Leckie (Con)]

My Lords, an amendment has been put forward to Clause 80 by the noble Lord, Lord Davies of Brixton, which concerns the employer cost cap. The noble Lord seeks to amend this clause to prevent the increase in value of schemes associated with the McCloud remedy being accounted for in the cost-control element of the 2016 valuations. I thank the noble Lord for bringing this to the attention of the House and am grateful to him for his prior engagement on the policy.

I can confirm that the Government have received pre-action protocol letters on behalf of some trade unions which have indicated that they may issue judicial review proceedings to challenge the Government’s decision to include the costs of remedy in the cost-control mechanism at the 2016 valuations. As the House will expect, and as the noble Lord, Lord Ponsonby, acknowledged, I cannot comment on the specifics of live or threatened litigation.

I acknowledge and appreciate the support the noble Baroness, Lady Janke, has given in general to the changes we have made to the cost-control mechanism—but there is more I want to say. I will talk through the general background, to reassure the noble Lord, Lord Davies, of the reasons for the Government’s decision. I will start by commenting on the policy rationale, starting with amending directions.

In Grand Committee, I brought to your Lordships’ attention that the Treasury had published amending directions on 7 October 2021 that will allow schemes to complete the cost-control element of the 2016 valuation process. These amending directions confirm that the increase in value of schemes associated with the McCloud remedy will be taken into account in the completion of the cost-control element of the 2016 valuations. The Government believe this is right, given that addressing the discrimination identified in the Court of Appeal’s judgment by giving members a choice of scheme benefits for the remedy period involves increasing the value of members’ pensions.

The cost-control mechanism was designed to assess costs arising from a change in value of schemes to members. Failure to capture the value of the remedy could have meant that members’ benefits may have changed going forwards, based on an incomplete and inaccurate assessment of the value of these pension schemes. This would represent an unacceptable risk to taxpayers, contrary to the objectives of the mechanism.

Turning to some specific detail on ceiling breaches, the Government have previously announced their intention to waive any ceiling breaches that arise from the 2016 valuations, and this is implemented by the current version of Clause 80. However, any floor breaches that occur will be honoured. This means that no member will see a reduction to their benefits as a result of the 2016 valuations. This decision, and the completion of the 2016 valuations, should provide certainty to scheme members over their benefits.

I will attempt at this stage to answer the point raised by my noble friend Lord Hodgson of Astley Abbotts and the noble Lord, Lord Ponsonby, about the use of directions. The Government acknowledge the key interest of the House in the scrutiny of secondary and tertiary legislation. The DPRRC considered this Bill and chose not to bring forward any comments for the attention of the House. The Government have powers under Section 12 of the PSPA 2013 to set out in Her Majesty’s Treasury’s directions what costs must be taken into account as part of the cost-control valuations. More broadly, I acknowledge the points my noble friend made; I have no doubt that Hansard will be read and I will say simply that his points are noted.

I will now say a few words about the amendment itself. The amendment seeks to amend the Treasury’s powers, set out in Section 12 of the Public Service Pensions Act 2013, to make directions which set the employer cost cap. Section 12 grants the Treasury a wide power to specify in directions which costs should be taken into account as part of the cost-control mechanism.

The amendment put forward by the noble Lord seeks to amend subsection (4) by omitting paragraph (c). I understand that the noble Lord’s intention is to remove the Treasury’s power to specify that the costs of remedy, or any other costs associated with the legacy schemes, should be accounted for in the mechanism.

This amendment may not have what I understand to be the noble Lord’s intended effect of preventing the increased value associated with the McCloud remedy from being included in the mechanism at the 2016 valuations. Subsection (4) sets out the type of costs that Treasury directions may specify for inclusion in the cost-control mechanism, but it is not intended to be an exhaustive list; rather, it provides some illustrative examples of how the wide power in subsection (3) may be exercised. I also note that the 2021 amending directions came into effect on 8 October 2021, as I mentioned earlier, under the existing powers. The noble Lord’s amendment as drafted would have no effect on the 2021 amending directions.

I want to attempt to answer some questions that were raised by the noble Lord, Lord Davies, supported, I think, by the noble Baroness, Lady Janke. There was some debate about why members are being made to pay for, as they put it, mistakes made by the Government. When the cost-control mechanism was established, it was agreed that it would consider only costs that affect the value of a scheme to members. Addressing the discrimination identified in the McCloud and Sargeant judgments by giving members a choice of scheme benefits for the remedy period involves increasing the value of schemes to members. The costs associated with this should therefore be taken into account as part of the cost-control element of the 2016 valuations process. However, any ceiling breaches that occur will be waived, no member will see a reduction in benefits as a result of the 2016 valuations, and any floor breaches that occur will be honoured.

The noble Lord, Lord Davies, asked when we will introduce amendments to reform the cost-control mechanism. I hope I can provide some reassurance by saying that the Government published our response to the consultation on the CCM on 4 October, we are currently working through our options and we will legislate for changes to the mechanism when parliamentary time allows. While a precise date has not been set—I am sorry I cannot give that date—the aim is to implement any changes in time for the 2020 valuations. As should now be clear, the Government have no intention of tabling an amendment in the House of Lords to implement these reforms. Instead, the package of amendments being introduced in this House are technical amendments that ensure the consistent application and legal operability of measures in the Bill.

I hope that, with these explanations, I have provided the noble Lord, Lord Davies, in particular, with some helpful reassurances on the policy rationale and the powers used, and I ask him to withdraw his amendment.

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[Lord Ponsonby of Shulbrede (Lab)]

My Lords, I pay tribute to the noble Baroness, Lady Janke, for tabling and introducing this amendment, to which I have added my name. I also thank the noble and learned Lord, Lord Hope, for giving it his support.

This is the issue which I think is really at the centre of deliberations on this Bill and planning for the introduction of the remedy: how information and advice are going to be provided to members. In Committee, the Minister agreed with the importance of this issue. He said:

“The Government recognise the importance of providing members with clear, accessible and accurate information.”—[Official Report, 11/10/21; col. 357GC.]


The Bill provides for remedial statements to be provided to all members, which in itself is welcome. Before the Bill reaches the House of Commons, I ask the Minister to consider carefully what practical, accessible and time-sensitive help there will be for a member who is struggling to understand the statement and the complex background which precedes it. As I asked in Committee, 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?

The amendment also raises the question of compensation. The Bill provides for applications to be made for compensation, but what information will be circulated to ensure that impacted members are aware that they are eligible to apply?

These are the questions we have to get right to ensure that members can confidently navigate the remedy, which, not to remind the Minister of this too often, was due to a government error. I hope that the Minister can give a commitment to take this away and to look at what more could be done in the Bill to ensure that members are given first-class accessible support in navigating this complex issue.

[Viscount Younger of Leckie (Con)]

My Lords, I am very pleased to be able to debate this important matter. As the noble and learned Lord, Lord Hope, and the noble Lord, Lord Ponsonby, said, these matters must be covered and the Government must be sure that enough information is given to pensioners to make the necessary decisions. I hope my remarks will give the reassurances on this.

As I set out in Grand Committee, providing sufficient guidance for members to make informed decisions regarding their pensions is, of course, of utmost importance. Indeed, this Bill implements a deferred choice for members so that they know what their pension options are at the time they make their decision. I acknowledge the point that the noble and learned Lord, Lord Hope, made about the complexity of this. I hope he will agree that we have taken this into account.

There are a number of problems with the approach proposed in the amendment, which would require the Government to publish guidance within six months of the Bill being passed. There are a significant number of schemes within the Bill’s scope, and scheme regulations will need to be developed, consulted on and implemented in each scheme. The Bill provides that the remedy must be implemented by October 2023, but that is just the beginning of the process. Decisions will be taken in relation to pensioner and deceased members from that time, but active and deferred members will be making their deferred choice over many years into the future. It would not be possible to produce guidance within six months in relation to regulations that may not have been made, nor useful to report on the effectiveness of such guidance before the remedy is implemented. Leaving aside the detail of the amendment, allow me to explain why the Government do not consider the amendment necessary.

On the question raised by the noble Lord, Lord Ponsonby, on the support that will be given to members, I assure him that members will be provided with information about their choice and will be able to understand the options available to them. In most cases it will be straightforward for a member to determine which benefits they wish to receive, but I also reassure noble Lords that schemes are developing tools to support members in planning for their retirement. Members will have access to up-to-date information about their benefits and be able to understand what each option will be worth at their planned retirement age.

Turning to the detail, as I set out in Grand Committee, the Bill already provides that scheme regulations must provide for each member to be provided with remediable service statements containing personalised information about the benefits available to them. That information will include details of the benefits currently available to them under the legacy scheme, and the benefits available to them if they elect to receive new scheme benefits or to opt for a period of opted-out service to be reinstated.

For active members, statements will be provided on an annual basis, enabling members to see how the two sets of benefits compare throughout their career. For deferred members, a one-off statement will be provided initially, with up to one further statement per year on request. For pensioner members, and in respect of deceased members, a one-off statement will be provided for such members or their relations to make an immediate choice.

However, remediable service statements are only part of the information and support that the schemes provide to members. The Public Service Pensions Act 2013 will continue to require schemes to provide members with information about their pension benefits, not just those relating to remediable service. In due course, members will also see information about their pensions through the pensions dashboard, which the House will be familiar with. Schemes already provide members with a wealth of guidance, support and information, and existing legislation already requires them to inform members about changes to pension schemes.

The noble Baroness makes an important point about members planning for retirement, and legacy and reformed schemes often have different retirement ages attached to them. The schemes have implemented significant changes before and are experience and adept at providing their members with support and guidance. The fact is that, across their careers, members will often have a range of different pension entitlements, with different rules and benefits payable at different ages. Therefore, these complexities are not unique to the remedy under the Bill, and the schemes already provide members with tools and support to help them to understand their options and plan for their retirement.

The Government Actuary’s Department is developing tools that will allow members to see exactly how their entitlements change, depending on when they access their benefits. Again, this is not specific to the remedy, but such tools will help members to understand how decisions about when to retire interact with their scheme benefits.

The amendment introduced would also require members to be notified if they are entitled to compensation, but it is already the Government’s intention that, in most cases, compensation will be automatic—for example, in relation to overpaid tax. In all cases, schemes will set out the process for claiming compensation in scheme regulations and inform members of this.

On tax guidance, schemes are already required to provide members, where appropriate, with the relevant information to complete their tax return, and this information will be updated and provided to the member, where their tax position changes. 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 that already provide the required information to complete a self-assessment return.

That was a rather long-winded response, but I hope that I have reassured the House once again that the Bill, existing legislation, the schemes’ existing processes and the Government’s intentions for implementing the remedy already combine to provide for all the information required for members to make the necessary informed decisions. With that, I ask the noble Baroness to withdraw her amendment.

Public Service Pensions and Judicial Offices Bill

Debate between Lord Ponsonby of Shulbrede and Viscount Younger of Leckie

Committee stage
Monday 11th October 2021 Grand Committee

[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.

--- Later in debate ---

[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.