Public Service Pensions and Judicial Offices Bill [HL]

Lord Ponsonby of Shulbrede Excerpts

Report stage
Monday 29th November 2021 Lords Chamber

[Baroness Janke (LD)]

I too thank the Minister for his time and for the engagement he has provided throughout the Bill, particularly regarding these amendments. Considering the scale, complexity and magnitude of the Bill, together with the millions who will be affected by it, I understand that these amendments try to cover a variety of contexts and circumstances to provide a comprehensive remedy to the previous discrimination. I recognise that the whole range of contexts and circumstances means that many will require fine detail. I hope these will, in many ways, support the millions of public sector workers who have suffered discrimination as a result of earlier circumstances.

We will see later some of the specific issues we raised in Committee. I hope the Minister can assure us that these amendments have taken account of those. We will explore that later.

[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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[Baroness Janke (LD)]

My Lords, I thank the Minister for responding to many of the issues that arose in Committee and welcome the additional flexibility with regard to the voluntary contributions and the period when remedial contributions can be made.

I would like to question the eligibility for voluntary contributions. One of the areas we discussed was about people—for example, with caring responsibilities—who would wish to make up their pension and in their legacy scheme would have been able to do that. Examples include women who have taken time out to look after children or people with caring responsibilities who have done the same. Will these members have the chance to make these remedial contributions to augment their pensions, as they would have been able to within the legacy scheme? Perhaps the Minister could clear that up for me.

[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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[Baroness Janke (LD)]

I thank the noble Lord, Lord Davies, for his explanation of the amendment. I know we had quite a lot of discussion about this in Committee. My understanding of it in this specific case is how it affects members of the Police Superintendents’ Association. Previously, a number of years’ service entitled them to their pensions whereas the new scheme is age-related. As the noble Lord, Lord Davies, said, that prevents them being able either to retire early and still have their pension, as was guaranteed, or work later to augment their pension.

This is an important issue, particularly in terms of public services such as the police, where undertakings were given and promises made. These were parts of agreements about pay levels and general conditions of service. So I believe the Government have some obligations here, and I very much hope that this can be looked at further as the scheme progresses and that it can be evaluated and solutions found. I hope the Minister can give us some clarification on that. I certainly support the spirit of the amendment and hope that we can resolve this in future.

[Lord Ponsonby of Shulbrede (Lab)]

My Lords, my noble friend Lord Davies has given a thorough explanation of this issue, which will impact members of certain public service pension schemes. I simply echo the hope that the Government will look carefully at this issue before the Bill goes into its Commons stages.

To reinforce the point made by the noble Baroness, Lady Janke, the Police Superintendents’ Association has reported that this issue is one of the most-raised questions in sessions that it is holding with its members, and it is trying to talk through the possible remedies and related pension issues as they affect police superintendents. This is an unintended consequence that has arisen due to the current complexities, rather than an intentional outcome of what the Government are seeking to do.

With that in mind, could the Minister inform us, first, whether the Government have considered ways to remedy this issue, in which certain members will be caught, and, secondly, what ongoing consultation and engagement are the Government undertaking with those who are affected? I will be interested to hear the Minister’s response.

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[Baroness Janke (LD)]

My Lords, I again thank the noble Lord, Lord Davies, for his explanation and for raising these issues, as he did in Committee. I listened again with interest to the noble Lord, Lord Hodgson, as he has intervened in two Bills on the issue of secondary legislation. I am sure that many Members of this House would support his view that there is inadequate scrutiny of secondary legislation and that the House’s powers are so severely curtailed that it requires us to ask whether we adequately exercise our scrutiny of subsequent legislation as we do with primary legislation.

As for the cost cap mechanism, I know that there was great criticism, both from the Public Accounts Committee and the National Audit Office, about the costs of the remedy and how they would be paid for by the members, whereas it was an error by government and it was certainly felt, as the noble Lord, Lord Davies, said, that it should be faced by government. However, the Government have certainly produced a more satisfactory cost cap mechanism, with a number of concessions relating to the future costs of the pensions. We welcome the new arrangements for payments for any breach of the cost cap or floor, which were to be paid for by the members of the new scheme, as we do the widening of the margin for material breach of the ceiling or floor. We also appreciated the new application of the economic test should the cost floor be breached. We feel that the Government have made some attempt to address criticisms of the cost cap mechanism and will follow with interest how that operates in future.

[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 Hope of Craighead (CB)]

My Lords, I support this amendment. I raised the issue in my speech at Second Reading because I look back with gratitude to the guidance I received shortly before I retired as to the choices I had to make under the judicial pension schemes. I think my position was relatively simple compared with the position we have now, because there were two clearly expressed schemes, the guidance I was given was intelligible and I was happy to follow it. Of course, I was aware—as I am sure everybody would be under this new arrangement—that the choice I made was going to be irrevocable, and I had to be very careful to make the correct choice.

I cannot claim to have studied the impact of this Bill—and, indeed, all the amendments that have just come to the House today—but my impression is that the situation is a good deal more complicated than the one I had to deal with when I was on the point of retirement. There is a great deal of force in this amendment, and I am delighted that it has been brought back on Report so that we can have a full response from the Minister.

[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.

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Moved by

[Lord Ponsonby of Shulbrede]

126: Clause 107, page 78, line 27, leave out “75” and insert “72”
Member’s explanatory statement
This would set the judicial retirement age to 72, rather than 75 as currently provided in this bill.

[Lord Ponsonby of Shulbrede (Lab)]

My Lords, I will speak on the group of amendments consequential on Amendment 126. We have been talking about complex matters to do with public sector pensions, but this is a simple amendment that I will seek to explain to the House. I open by thanking the noble and learned Lord, Lord Etherton, and the noble and learned Baroness, Lady Hallett, for supporting this amendment. I look forward to the contribution later from the noble and learned Lord, Lord Etherton.

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I end by noting that legislative consent Motions are being processed in Scotland and Wales, while one has been passed in Northern Ireland, to agree to the UK Government changing the mandatory retirement age to 75. I must stress how important it is, in the Government’s view, that we retain a consistent mandatory retirement age for judicial officeholders in all four nations. These amendments could seriously jeopardise that imperative. With that, I hope that noble Lords will not press their amendments.

[Lord Ponsonby of Shulbrede (Lab)]

My Lords, let me provide some context to the figures that the noble Viscount has given. He said that there are 12,000 magistrates in England and Wales today, but when I became a magistrate 14 years ago there were 30,000, so there has been a managed decline of the magistracy. I support, of course, the recruitment programme, which is targeting and, as he said, marketing to try to get greater diversity through that process.

The simple point is that you cannot run away from diversity. There is an absolute imperative to increase diversity within the whole of the judiciary. It is not good enough just to wring your hands and say, “It’s all very difficult”. It has been very difficult for decades and the situation has not improved. The maths is very simple; we heard the maths from the noble and learned Lord, Lord Etherton, who also quoted the noble and learned Baroness, Lady Hallett, who is in a particular position to know. There need to be vacancies for people to progress through the system. It is a simple argument, which I do not think a number of noble Lords fully took on board.

When I introduced this debate, I made a simple example of my role as a youth magistrate and how I felt that I was moving further and further away from the youths I was judging. I gave the example that I am older than the grandfathers of nearly all the youths I am judging. Not one noble and learned Lord addressed that point. They addressed points about the difficulties of recruitment and the ins and outs of the pension scheme, but not the central issue that I tried to raise about the judiciary being further away from the people who they are judging. I argue that we need to have some level of connection to reach fair judgments.

My amendment is a modest compromise. It says that 75 is too far and that 72 is a better age to see how it goes. I acknowledge that people are working and living longer—I made those points when I introduced the amendment—but I say to the noble Viscount and to a number of contributors to this important debate that I am not convinced. I wish to test the opinion of the House.