Draft Judical Pensions and Fee-Paid Judges' Pension Schemes (Amendment) Regulations 2019

Lucy Frazer Excerpts

Tuesday 12th February 2019 General Committees

[The Parliamentary Under-Secretary of State for Justice (Lucy Frazer)]

I beg to move,

That the Committee has considered the draft Judicial Pensions and Fee-Paid Judges’ Pension Schemes (Amendment) Regulations 2019.

It is a pleasure to serve under your chairmanship, Sir Graham.

The draft regulations relate to the contribution rates for members of two judicial pension schemes. Their purpose is to make provision to extend the current member contribution rates and earnings thresholds in two different pension schemes to the next financial year. The schemes are: the judicial pension scheme 2015, which was established under the Judicial Pensions Regulations 2015, following wider public service pension reforms; and the fee-paid judicial pension scheme, which was established under the Judicial Pensions (Fee-Paid Judges) Regulations 2017, following the Supreme Court decision in the 2013 O’Brien case, and related court decisions.

The reason for extending the rates is that the existing provision for member contribution rates will expire on 31 March 2019. The draft regulations are therefore needed to make an amendment to specify the member contribution rates to apply for the next year, from 1 April 2019 to 31 March 2020. The regulations will enable us to ensure the continued operation of the schemes by deducting the appropriate member contributions for that year. As we propose to continue the same rates, the amendment regulations simply maintain the existing provisions for one further year. This interim measure is required pending the completion of a broader process that relates to the valuation of the judicial pension schemes. That process has been ongoing for a period, and the outcome of the valuations is to be determined.

It might be helpful to set out some background and to explain the ongoing valuations. Following the reform of public service pension schemes in 2015, as reflected in the legislative framework, Departments are required to undertake valuations of their respective public service pension schemes every four years. That obviously includes the Ministry of Justice in respect of judicial pension schemes. The valuations of public service pension schemes do two things: first, they measure the cost of providing pension benefits to members of the schemes; and secondly, they inform the future contribution rates paid into the schemes by both the employer and the members of the scheme. Work has been under way on the first such valuations of public service pension schemes. The Government, however, have paused part of the valuations process because they are seeking permission to appeal a decision of the Court of Appeal in the McCloud case, which concerns pensions.

Let me explain that court decision in more detail. In December 2018, the Court of Appeal ruled that the transitional protection offered to some individuals as part of the 2015 public service pension reforms, including that in the judicial pension schemes, amounted to unlawful discrimination. The issue related to the protection is that, as part of the 2015 reforms, most public servants and judges moved to new career-average pension schemes. However, members within 10 years of their normal retirement age were protected and remained in existing final salary schemes, together with members who were between 10 years and 13 years and six months from their normal retirement age, who were given tapered protection to remain in the existing scheme for a period of time, before they moved to the new scheme introduced by the reforms.

As I said, the Ministry of Justice has applied to the Supreme Court for permission to appeal, and a decision is awaited. As the legal process is ongoing and there is some uncertainty about the impact of the ruling on wider pension reforms, it was considered prudent to pause that element of the valuation, which has the potential to affect future member benefits and/or contribution rates.

Let me turn back to the draft regulations and the steps we took to bring them forward. With a view to reaching an agreement on the proposal, we consulted, in accordance with the relevant requirements, by way of a four-week consultation from 24 October to 21 November last year. We consulted representative judicial organisations with a view to reaching agreement, and received 23 responses, the majority of which agreed with the proposal. Two respondents did not agree, and also raised some points relating to wider pension issues outside the scope of the consultation, which was on the proposal to extend the current rates as an interim measure for one year. For example, they disagreed with the stepped approach for contribution rates and expressed preference for a flat rate to apply, and for a non-contributory scheme. We engaged further, with the aim of reaching agreement, but unfortunately were unable to secure the agreement of the two respondents.

In addition to the consultation, we have laid a report before Parliament that sets out the rationale for the amendment regulations. Furthermore, as the judicial pension schemes to which the draft regulations relate are UK-wide, we have kept the devolved Administrations informed of progress and will continue to engage closely with them on further developments.

Under this interim measure, the cost of accruing pension scheme benefits will remain the same for members of both schemes for the scheme year April 2019 to March 2020. If it is agreed that changes to member contribution rates, or any other changes, are required in future as a result of the valuation process, those changes will be backdated to 1 April 2019 where appropriate.

I conclude by reinforcing the point that the existing arrangements for member contribution rates for both the 2015 and 2017 judicial pension schemes will expire on 31 March, so the draft regulations are a necessary interim measure to continue the effective operation of those pension schemes until a longer-term solution is put in place. I hope hon. Members will agree that the regulations are an important and necessary interim measure to continue the arrangements for member contribution rates and for the effective operation of the judicial pension scheme.