Public Service Pensions and Judicial Offices Bill [Lords] Debate
Full Debate: Read Full DebateDepartment: HM Treasury
Simon Clarke
Main Page: Simon Clarke (Conservative - Middlesbrough South and East Cleveland)Department Debates - View all Simon Clarke's debates with the HM Treasury
Public Service Pensions and Judicial Offices Bill [Lords]
Simon Clarke ExcerptsWednesday 5th January 2022
(2 years, 10 months ago)
Commons ChamberRead Full debate Public Service Pensions and Judicial Offices Act 2022 Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: HL Bill 44-R-I Marshalled list for Report - (25 Nov 2021)
The Chief Secretary to the Treasury (Mr Simon Clarke)
I beg to move, That the Bill be now read a Second time.
Our public servants do so much to support this country, and over the past 22 months their efforts have been more vital than ever before. NHS employees have worked long hours on the frontline of the fight against the covid pandemic, in hospitals and in the community; teachers have helped their classes in the most challenging of circumstances; and our police, firefighters and armed forces have kept people safe and solved new, unforeseen problems throughout these difficult months. Just as public servants have supported the country during the coronavirus crisis, so it is only right that in turn the Government should support them, which is why the Government have introduced this Bill to make sure that public servants of all ages receive guaranteed rights in their retirement that are among the best available, on a fair and equal basis.
In addition, the Bill includes measures to help to address the resourcing challenges that face our judiciary, to ensure that it can meet the demands of both the present day and the future. The Bill also lays the foundations for new public service pension schemes for beneficiaries of the existing Bradford & Bingley and NRAM—formerly Northern Rock—pension schemes. Currently, those pensions reside under UK Asset Resolution, the holding company for those businesses.
Let me turn to the Bill’s details. I shall start with how it creates fairer, more equitable and more sustainable public service pensions. As Members will recall, in 2010 the coalition Government established the Independent Public Service Pensions Commission, chaired by Lord Hutton of Furness. The commission carried out a deep, structural review of public service pensions. Following the review, the Government accepted the commission’s recommendations as the basis of discussions with members and their representatives, and ultimately introduced a number of major changes. Pension benefits would be based no longer on an individual’s final salary but, instead, on career average revalued earnings. Member contribution rates were increased and the normal pension age was linked to the state pension age for all schemes, except those for the police, firefighters and the armed forces. The changes were fairer for low earners because they resulted in a more generous pension for many. In addition, the reforms were estimated to save taxpayers £400 billion over the next 60 years.
Before the implementation of the reforms in 2015, the Government agreed, after trade union negotiations, to allow those closest to retirement to remain in the legacy schemes. Members within 10 years of retirement in most public service pensions were allowed to remain in the final salary scheme instead of being moved to the career average scheme. This was known as transitional protection. However, the courts found in 2018 that this transitional protection discriminated unlawfully against younger public service scheme members. Although the legal challenge related only to the judicial and firefighter schemes, the Government accepted the need to remedy the position across all public service schemes. A thorough programme of work therefore followed, to identify and implement a robust solution.
Following public consultations in 2020 and Government responses last year, the Bill creates the framework to bring the remedy into effect. For the remedy period—that is, from when the reforms were implemented on 1 April 2015 to 31 March 2022—all eligible members will be given a choice between the legacy and reformed scheme benefits. Some members, especially lower earners, may be better off in the reformed schemes, so it is important that individuals get to choose which benefits they want to receive. For most members, that choice will be made at retirement, when it will be clearer which scheme is best for them. That is known as a deferred choice. There are three exceptions to this. The first involves members who have already retired. They will be given a choice once the necessary legislation and operational implementation are in place. The second involves the judicial schemes, where affected members will make their decisions in an options exercise to be held once the necessary legislative and data requirements are in place. This process is in line with the approach favoured by respondents to the judicial consultation. The third involves the local government pension scheme, which requires bespoke measures to reflect the unique features of that scheme. I intend to table amendments ahead of Committee stage to ensure that members of the local government pension scheme are also provided with a robust remedy. In short, these measures will ensure that all members of a public service pension scheme are treated fairly, whatever their age.
Richard Graham (Gloucester) (Con)
The Minister will know that some of us have received correspondence from constituents suggesting, probably on the advice of their unions, that they will lose up to £500 a year when pensioned as a result of these changes. Can he confirm whether this is true? If it is not, what method can we deploy to reassure our constituents accordingly?
Mr Clarke
I thank my hon. Friend for his question; it is a good one. It is important to provide reassurance on this point. The McCloud remedy aims to ensure that where pension members are offered a different benefit to remedy the discrimination they have faced, they will be returned to the same financial position that they would have been in had they always been entitled to the benefits that they end up choosing. That reassurance should be clear. For the majority of individuals affected, there will be no change to the tax position. It is important to get on record that there will be no change for the vast majority, and that the Government will ensure that all the appropriate guidance is provided in good time so that people can make an informed choice and not worry about incurring any losses.
As well as giving our public servants fair treatment for the remedy period, the Bill will ensure that remains the case into the future. From 1 April this year, all the legacy schemes will be closed to future accrual. All eligible members will be placed in the 2015 reformed schemes or, in the case of the judiciary, moved to a new scheme. This guarantees that members within each scheme will be put on an equal footing. It also underlines the Government’s commitment to the 2015 reforms and the principles that underpin them. Those principles are greater fairness between lower and higher earners, fairness for the taxpayer, future sustainability and the affordability of public service pensions as a whole.
The Independent Public Service Pensions Commission also recommended that the new 2015 public service pension schemes should include a cost ceiling to protect the taxpayer from unforeseen cost increases. However, the Government have chosen to go a step further in establishing a symmetrical cost control mechanism. This will not only protect the taxpayer from unforeseen increases in pension scheme costs but protect the value of pension schemes for members when costs fall.
On how the remedy in the Bill will interact with the cost control mechanism, it will give members a choice between two sets of benefits and allow them to choose which will be better for them. The result is an increase in the value of schemes to members, and, as is usual, this is managed through the cost control mechanism. Crucially, however, to ensure that no members’ benefits are cut as a result, the Bill includes a measure to waive any result from the 2016 valuations that would otherwise have led to benefit reductions. That goes to the point made by my hon. Friend the Member for Gloucester (Richard Graham). In addition, the Government have committed to honour any benefit increases that are due.
Hon. Members will be aware that, in the light of concerns that the cost control mechanism was not operating as originally intended, the Government Actuary was asked to conduct an independent review of this particular element. Following that review, and a public consultation last summer, the Government confirmed that three changes would be made to the mechanism. All three changes are recommendations from the Government Actuary.
The first change is to implement a reformed scheme only design. This means that the cost of legacy schemes will no longer be included in the mechanism. The second is to widen the margin of the cost corridor, which triggers a correction, from 2% to 3% of pensionable pay. The third change is to introduce what is called a symmetrical economic check. This economic check will ensure that any breach of the mechanism is implemented only if it would still have occurred had the impact of changes to long-term economic assumptions been considered. These reforms will make the mechanism more stable and ensure that it operates more in line with its objectives of protecting the taxpayer and providing stability and certainty on member benefits and contribution rates.
I therefore wish to notify the House of my intention to table amendments before the Committee stage, to set the framework for implementing a reformed scheme only design and the economic check. The wider 3% corridor will be implemented through secondary legislation in due course. This approach will ensure that the reforms are in place in time for the next scheme valuations. That is important to ensure that the mechanism is operating more in line with its objectives to protect both taxpayers and members the next time it is tested.
As I have explained, the Bill builds on the existing legislative framework for all public service pension schemes. Each scheme is complex, because each one is tailored to fit each workforce’s individual requirements. The Government intend the Bill to reflect those differences, many of which are found in the detail of scheme regulations. Additional detail will therefore come before Parliament in the form of statutory instruments for further scrutiny. To demonstrate the approach to secondary legislation, policy statements have been deposited in the Library of the House for further scrutiny.
Let me now turn to the next element in the Bill, the package of reforms to help to address the resourcing challenges facing the judiciary. Our justice system is world renowned for its excellence, objectivity and impartiality. That is due in no small part to the expertise of our court and tribunal judges, our coroners and our magistrates. However, as the demands on our courts and tribunals have changed, so too has the need to recruit and retain judicial office holders. While we have recruited about 1,000 judicial office holders a year since 2018, we have not been able to attract the full number needed across all courts and tribunals, which has inevitably put pressure on the system. Raising the mandatory retirement age to 75 will, our modelling suggests, retain about 400 judges and 2,000 magistrates per year at a time when we face challenges in resourcing and recruitment.
It is vital that we continue to attract and retain high-calibre judges. The Bill therefore lays the foundation of a new, reformed pension scheme for judges, increases the mandatory retirement age of judicial office holders to 75, and extends the potential for sitting in retirement to the fee-paid as well as the salaried judiciary. It puts judicial allowances on a firmer legal footing, including those for reserved and excepted posts in Scotland and Northern Ireland. I assure the House that the UK Government will engage with the respective devolved Administrations before the introduction of such allowances.
Taken together, these measures will ensure that a judicial career is more attractive, that more of our experienced judicial office holders are retained for longer, and that additional flexibilities are offered. It is vital that we enable our world-class judiciary to meet the demands of today and tomorrow.
Sir Robert Neill (Bromley and Chislehurst) (Con)
I entirely support what the Minister says about judicial pensions reform, but, since he wears another hat in his capacity as Chief Secretary to the Treasury, may I raise a further issue that is sometimes an impediment to recruitment, namely the operation of the lifetime cap on pensions earnings? In particular, many who have earned well at the Bar and who might otherwise seek appointment to the High Court bench still encounter a disincentive because of the operation of the overall lifetime cap. At one point a carve-out was arranged to reflect that. Although this does not feature in the Bill, may I ask the Minister to take it away and perhaps speak to the Chancellor about it? It is the final bit of the jigsaw that could be sensibly introduced to encourage the very best people to seek appointment to the bench.
Mr Clarke
As Chair of the Justice Committee, my hon. Friend brings a huge amount of expertise to bear on this issue. I can make an absolute commitment that we will look at this, and I will always discuss plausible options to ensure that the judicial pension scheme supports recruitment rather than being in any way an impediment to it. That is very important, and it underpins our wider work on the new scheme for the judiciary. It will move from being tax-registered to being tax-unregistered, and a variety of consequential benefits will arise from that.
Richard Graham
If this were to be reviewed, it would be worth noting that a very similar issue applies to doctors, many of whom are inhibited from returning to work—following the appeal from the Health Secretary—by precisely the same lack of flexibility on the pensions and earnings issue.
Mr Clarke
I recognise my hon. Friend’s considerable expertise on this issue. I thank him for making that point, which is well worth our taking away. I will certainly commit myself to returning to him following any further discussions if that would be helpful.
Let me finally deal with the measures to establish new public pension schemes for the beneficiaries of the existing Bradford & Bingley and NRAM pension schemes. These pensions currently reside under UK Asset Resolution, the company that holds the Government’s remaining interests in Bradford & Bingley and Northern Rock. This is an important step in the Government’s careful long-term management of the financial sector assets acquired as a result of the financial crisis. I stress that all members, some of whom have worked for these organisations for around 30 years, will be protected. Their benefits will be at least as good as they are now under the new schemes and these measures will provide a secure, long-term home for members’ pensions.
My officials have worked closely and collaboratively with the devolved Administrations throughout the passage of the Bill. I am pleased to note that the Northern Ireland Executive have passed a legislative consent motion on the Bill and we are in discussions about a supplementary motion for the amendments that I have announced today. The Welsh Senedd is in the process of considering a motion and the Scottish Government are considering bringing a motion forward. I am grateful for their continued engagement on this issue.
Our public servants are the bedrock of our society. It is right that we reward them for what they do in a way that is fair, affordable and sustainable over the long term. The Bill’s measures seek to achieve all this while helping to address the specific recruitment and retention issues facing the judiciary. For those reasons, I commend the Bill to the House.
Public Service Pensions and Judicial Offices Bill [ Lords ] (First sitting) Debate
Full Debate: Read Full DebateDepartment: HM Treasury
Simon Clarke
Main Page: Simon Clarke (Conservative - Middlesbrough South and East Cleveland)Department Debates - View all Simon Clarke's debates with the HM Treasury
Public Service Pensions and Judicial Offices Bill [ Lords ] (First sitting)
Simon Clarke ExcerptsThursday 27th January 2022
(2 years, 9 months ago)
Public Bill CommitteesRead Full debate Public Service Pensions and Judicial Offices Act 2022 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 27 January 2022 - (27 Jan 2022)
The Chair
Copies of written evidence that the Committee receives will be made available in the Committee Room and will be circulated to Committee members by email.
We now begin line-by-line scrutiny of the Bill. The selection list for today’s sitting is available in the room. It shows how the selected amendments have been grouped together for debate. Amendments grouped together are generally on the same or a similar issue. Please note that decisions on amendments do not take place in the order they are debated, but in the order they appear on the amendment paper. The selection and grouping list shows the order of debate. Decisions on each amendment are taken when we come to the clause to which the amendment relates.
The Member who has put their name to the lead amendment is called first, or the Minister if clause stand part leads the group. Other Members are then free to catch my eye to speak on all or any of the amendments, clauses or new clauses within the group. A Member may speak more than once in a single debate. At the end of a debate on a group, I shall call the Member who opened the debate to wind up.
Clause 1
Meaning of “remediable service”
The Chief Secretary to the Treasury (Mr Simon Clarke)
I beg to move amendment 2, in clause 1, page 2, line 3, leave out subsection (4) and insert—
“(4) The second condition is that the service in question is—
(a) pensionable service under a Chapter 1 legacy scheme,
(b) pensionable service under a Chapter 1 new scheme that would have been pensionable service under a Chapter 1 legacy scheme but for the person’s failure to meet a condition relating to the person’s attainment of normal pension age, or another specified age, by a specified date, or
(c) excess teacher service.
The second condition is met if all of the service in question falls within paragraphs (a) to (c) (even if it does not all fall within only one of those paragraphs).”.
This amendment updates the second condition in clause 1 so that it catches “excess teacher service” (a definition of which is inserted into clause 98 by a separate amendment) and clarifies that service meets that condition even if it falls within more than one of paragraphs (a) to (c).
The Chair
With this it will be convenient to discuss the following:
Government amendments 3 and 4.
Clause stand part.
Government amendments 34, 36 and 38.
Mr Clarke
It is a pleasure to serve under your chairmanship, Mr Sharma. I thank colleagues on both sides and those in the other place for the constructive way in which we have proceeded with this Bill so far. I thank my officials, who have done an exemplary job on a complex piece of legislation.
At the heart of the Bill is fairness and equal treatment for the public servants on whom we all rely. To ensure we achieve that objective, the Bill is underpinned by the core principles of greater fairness between taxpayers, fairness for lower and higher earners, and the future sustainability and affordability of public sector pensions. I would like to take a moment to explain why the approach to bring forward a number of amendments at this stage has proved necessary—indeed, crucial—to provide a robust and effective remedy.
As I am sure Committee members will agree, this is a highly complex and technical matter. The Bill covers more than 40 schemes. Each, individually, has its own layers of detail and complexity. We are dealing with a somewhat unprecedented issue. Retrospective changes of this scale have not previously been required for occupational pension schemes. However, it is undoubtedly vital that we get it right. Since the Bill was introduced, the Government have continued to work with the individual schemes, stakeholders and Departments to check and recheck the Bill to ensure that it will deliver our commitments to remove the discrimination and offer a complete and effective remedy.
Clause 1 identifies periods of service that are in scope to be remedied under the Bill by placing a number of conditions that must be met. The first condition is that the service took place during the period that the discrimination arose. The second condition is that the service is pensionable under a public service scheme and would have been pensionable under a chapter 1 legacy scheme had the discrimination not occurred.
The third condition is that the person was, on or before 31 March 2012, a member of a legacy scheme or—in the case of certain schemes for firefighters—eligible to be a member of such a scheme. Members who first joined any public service pension scheme after that date were ineligible for transitional protection regardless of their age, and therefore were not subject to the discrimination identified by the court.
The fourth and final condition is that there is no disqualifying gap between the service to which the third condition relates and the period in question. For reference, a disqualifying break in service is defined as a period of more than five years, which reflects the rules of public service pension schemes but allows members who leave to subsequently rejoin when the gap between leaving and rejoining is five years or less.
Amendment 2 concerns an issue that is specific to the teachers’ pension scheme involving teachers with excess service. If a teacher with a full-time teaching contract has an additional part-time contract or contracts, the additional part-time contract constitutes the excess service. Excess service is pensionable in the new teachers’ pension scheme but not in the legacy scheme. However, where the relevant employer has an existing relationship with the local government pension scheme, the regulations of the LGPS provide that the excess service is pensionable in that scheme instead. The teacher will automatically be entitled to enrol into the LGPS in relation to their excess service, therefore providing a home for those accrued rights.
The amendment updates the second condition in chapter 1 to cover excess teacher service, meaning that excess teacher service is a remediable service and, therefore, subject to the provisions in clause 2(1). It will ensure that a member’s excess service can be rolled back to the appropriate scheme. Amendment 4 is consequential on amendment 2, and amendments 34 and 38 define excess teacher service.
Amendment 3 is designed to ensure that the remedy applies correctly to former local government staff who have compulsorily transferred from their employer as a result of outsourcing and were entitled to pensions protection. If such members subsequently became a member of a chapter 1 scheme, the amendment provides that the time they spent in a private sector pension scheme would not count towards the disqualifying gap in service when assessing their eligibility for remedy, which is consistent with the approach provided in respect of transfers and central Government fair deal arrangements.
Chris Stephens (Glasgow South West) (SNP)
I am speaking as someone who was a local government employee in Glasgow before I came to this place. Is the Minister saying that, as a consequence of this amendment, if an employee working for the local authority finds that their service is outsourced by a decision of the local authority, that employee would not have pension rights as a result of the service that they would have if they transferred to that outsourced company? Could he clarify that?
Mr Clarke
To reassure the hon. Gentleman, the amendment is designed to prevent that from occurring. In other words, the fact that their employment was outsourced during that period would not constitute a gap of longer than five years, which would put that out of the scope of remedy. It is designed precisely to ensure that they do have protection, rather than that they do not.
Finally, amendment 36 defines a local government contracting-out transfer for the purposes of what I was just alluding to.
Tulip Siddiq (Hampstead and Kilburn) (Lab)
It is a pleasure to serve under your chairmanship, Mr Sharma. I will start by talking about our public sector workforce and the service they give to this country. The pandemic has highlighted how much we depend on the NHS and on teachers, police and other frontline professionals who keep us and our loved ones safe. It is only right that the state ensures that our public servants are secure in retirement by providing a decent pension on a fair and equal basis.
Labour therefore welcomes the main provisions in clause 1, in particular the attempt to introduce a remedy for the discrimination of younger members in the new pension schemes established by the coalition Government between 2014 and 2016. I recognise that the remedy the Government have opted to include in the Bill—the deferred choice underpin, or DCU—was the preferred option of the overwhelming majority of respondents to the Government’s consultation, including Unison and GMB—my trade union. However, I want to draw the Minister’s attention to the fact that trade unions continue to have concerns about the lack of clarity on how the remedy, expected to cost around £17 billion, will impact the future value of members’ pension schemes.
On Second Reading on 5 January, the Under-Secretary of State for Justice, the hon. Member for South Suffolk (James Cartlidge) said
“liability…will fall on the Exchequer.”—[Official Report, 5 January 2022; Vol. 706, c. 112.]
That is an important commitment, but as Lord Davies of Brixton, a Member of the other place and one of the country’s foremost pension experts, has said, it does not address the question of whether the remedy will be included in the cost control mechanism at a later date. If this cost were to be included in a future cost control mechanism valuation, it would result in members receiving lower benefits and having to make higher contributions to their pension schemes. As the Public Accounts Committee has warned, this would, in effect, be unfairly penalising our public sector workforce for the Government’s economic incompetence by passing on some of the cost of the Treasury’s £17 billion mistake to members.
Can I ask the Minister to confirm, once and for all, whether the estimated £17 billion cost of the remedy will be included in future valuations of the pension schemes under the cost-control mechanism? If it is to be included, can he please set out how that will impact on the future value of members’ benefits and contribution rates? I think he will agree with me that our public servants deserve better than to be left in the dark, so I hope he will clarify this in detail.
Today, the Government have failed to address concerns about how pension scheme members will be protected from unscrupulous advisers. I know that Minsters have been reluctant to include pension scams in the draft Online Safety Bill, despite the spiralling costs of pension fraud and mis-selling. I would like the Minister to set out what steps he is taking to protect members from scammers, who may try to exploit the greater choice that this Bill provides by getting people to transfer out of the pension schemes in a way that is not in their best interest.
David Simmonds (Ruislip, Northwood and Pinner) (Con)
I want to put on the record my interest in the matter before us: I am a member in scope of one of the pension schemes, I am married to a member in scope of one of the others, and a former scheme board member of another of the schemes.
Mr Clarke
I thank all hon. Members for their contributions. It is important to clarify one of the misapprehensions about what has happened over the course of the passage of this legislation to the issue that we are working to address. The Government did not, as it has been described, make a mistake. We inserted transitional protections into the scheme after the recommendations of Lord Hutton, expressly at the request of the trade union movement. It is important to establish that the request for transitional protections to be inserted was a trade union-led request. That is what triggered the discrimination action against the Government, which we are now working to address. I would defend the Government’s record here quite strongly; this is not something that we have brought about. None the less, we are obviously working in good faith to seek to address it.
Peter Grant
It just will not wash for the Minister to blame the trade unions. If this Government were in the habit of paying a blind bit of attention to anything else the trade unions say, that might be credible. But the trade unions did not make the regulations that were proved to be unlawful; the Government made them. Why can the Minister not accept that the Government took the decision and got it wrong?
Mr Clarke
The Government obviously take responsibility for all of those things, but it is important to establish the full context. We inserted the changes at the request of the trade union movement, and they were found to be discriminatory in a way that could not have realistically been anticipated at the time that the legislation was brought forward. None the less, we are where we are, and I want to address some of the substantive concerns raised in particular about the cost of remedy. We will come back to this later as well in the course of the Committee, because it will arise again in the context of some of the other clauses.
It is really worth clarifying definitively that the Exchequer is responsible for paying out pensions due from unfunded public service pension schemes, to which this relates. This works in practice by current employer and member contribution incomes being used to meet the costs of paying current pensioners. Where contribution income does not match the cost of pensions in payments in any given year, the Treasury has to make the balancing payment. In this way, the Exchequer guarantees the benefit that members worked so hard to earn, as the hon. Member for Glenrothes rightly said, during their time in service.
Remedy increases the pension rights of eligible members over the period in question—2015 to 2022. As the hon. Member for Hampstead and Kilburn said, the estimated cost of this remedy for unfunded schemes is in the region of £17 billion, in terms of long-term liabilities for the Exchequer. The Exchequer will therefore pay out these increased pension benefits due to members over several decades as members retire. There should be no doubt that the ultimately liability sits with the Exchequer, rather than scheme members. It is worth noting that, overall, these reforms are estimated to save the Exchequer some £400 billion in long-term liabilities, which is important for the long-term sustainability of our public service pension schemes in an age of rising life expectancy.
On the question of remedy, which is really important in the cost control mechanism, I should be clear that member benefit levels and contribution rates are set out in individual scheme rules and can be adjusted through the cost control mechanism at scheme valuations. The cost control mechanism—again, I will expand on this later—is designed to both protect the value of schemes to members and to protect the Exchequer from unforeseen costs.
At each scheme valuation, the mechanism assesses the benefits that have accrued and are accruing to members to determine whether future benefit levels of member contribution rates need to be adjusted to manage the cost of the scheme. By increasing the pension rights of eligible members, the remedy we are talking about today increases the value of those schemes to members, which is why it is right that it is reflected in the cost control mechanism for the 2016 valuations.
However, because we are waiving the ceiling breaches while honouring floor breaches of the mechanism, it is vital that we establish now, for the avoidance of any doubt, that no member benefits will be cut and no member contribution rates will increase as a result of the 2016 valuations. Any benefit improvements due will be honoured, but no additional costs will be imposed. I reassure the hon. Lady, on her important question, that the costs of our remedy genuinely sit with the Exchequer, not scheme members.
I entirely agree with the hon. Lady’s important point regarding people not being caught up by pension fraud. Public service pensions schemes do not allow members to transfer to such arrangements, only to equivalent defined-benefit schemes, so there is a degree of protection against the most egregious fraud, but we are always happy to work with individual schemes and the industry to try to promote best practice and make sure that people do not fall victim to any form of mis-selling.
As I set out, this is a highly complex and technical Bill. The amendments in this group, and some we will come on to discuss, are crucial to ensuring that a robust remedy is in place—in this particular instance, for teachers with excess service and those who have a period of service that was subject to a local government contracting-out transfer. On the point that the hon. Member for Glenrothes raised, it is important to note that many of these amendments result from close discussion with individual schemes and stakeholders right up until this moment, not because we had not anticipated many of these questions but because, in truth, how best to resolve them—there are sometimes multiple ways—has been a matter for close discussion. We are confident that the remedies we are bringing forward and the amendments that fall within the scope of today’s proceedings are the optimal way of making sure that we have a new system that is fair and, crucially, provides the most robust possible remedy to the concerns being raised.
Amendment 2 agreed to.
Amendments made: 3, in clause 1, page 2, line 37, at end insert
“, or
(c) is, as a result of a local government contracting-out transfer, pensionable service under a pension scheme that offers pension arrangements that are broadly comparable with those offered to the person before the transfer.”.
This amendment amends the definition of “disqualifying gap in service” so that it includes a period during which the person was transferred to a private sector employer under local government contracting out arrangements.
Amendment 4, in clause 1, page 3, line 3, after “scheme” insert “or excess teacher service”.—(Mr Clarke.)
This amendment is consequential on the amendment of the second condition in this clause made by separate government amendment.
Clause 1, as amended, ordered to stand part of the Bill.
Clause 2
Remediable service treated as pensionable under Chapter 1 legacy schemes
Question proposed, That the clause stand part of the Bill.
Mr Clarke
Clause 2 is a crucial provision that implements the retrospective remedy. It provides that any period of remediable service that was under a new scheme is treated as being, and always having been, service under a legacy scheme instead. That ensures that a person with remediable service is placed, with retrospective effect, in the legacy pension scheme that they would have been eligible to be a member of had they not been moved to a new scheme in or after 2015.
Clause 3 provides that where benefits have been paid they are to be treated as having been paid from the appropriate legacy scheme instead, being the scheme that the person is, and always was, a member of, by virtue of Clause 2. The clause itself does not affect the value or amounts of the benefits already paid. It simply ensures that payments are aligned with the appropriate scheme. Any correction to benefits, as a result of a member choosing to receive legacy benefits instead of the new scheme benefits already paid, is dealt with later in the Bill.
Question put and agreed to.
Clause 2 accordingly ordered to stand part of the Bill.
Clause 3 ordered to stand part of the Bill.
Clause 4
Meaning of “the relevant Chapter 1 legacy scheme” etc
Mr Clarke
I beg to move amendment 5, in clause 4, page 5, line 4, at end insert—
“(3A) In a case in which any of the person’s remediable service in the employment or office in question is excess teacher service, “the relevant Chapter 1 legacy scheme”, in relation to so much of the person’s remediable service as is excess teacher service, means the local government new scheme mentioned in section 98(2).”.
This amendment updates the definition of “the relevant Chapter 1 legacy scheme” for a case in which a teacher has excess teacher service. A definition of “excess teacher service” is inserted into clause 98 by a separate government amendment.
The amendment concerns only the interaction between the Teachers’ Pension Scheme and the Local Government Pension Scheme and covers the complex issue of future pension service. It updates the definition of the relevant Chapter 1 legacy scheme for a case in which a teacher has excess teacher service and specifies that that is the Local Government Pension Scheme—the LGPS. That allows the member’s excess service to be rolled back to the LGPS, where the member would have been eligible to join the LGPS had they not been moved to the reformed scheme. This ensures that the member’s excess service is rolled back to the correct scheme.
Tulip Siddiq
We very much support the clause.
Amendment 5 agreed to.
Question proposed, That the clause, as amended, stand part of the Bill.
Mr Clarke
Clause 4 ensures that members are returned to the appropriate legacy scheme, which is the scheme that they would have been entitled to be a member of if they had not been moved to a new scheme on or after 1 April 2015. The apparently complex drafting does nothing more than that. The clause simply reflects that some legacy schemes contain different eligibility provisions.
Question put and agreed to.
Clause 4, as amended, accordingly ordered to stand part of the Bill.
Clause 5
Election for retrospective provision to apply to opted-out service
Question proposed, That the clause stand part of the Bill.
Mr Clarke
Clause 5 requires scheme regulations to make provision to allow a member who opted out in relation to a period between 1 April 2015 and 31 March 2022 to elect for that service to be reinstated as though they had not opted out, if they satisfy conditions that may be specified in the regulations. This ensures that the member can be put back in the position that they would have been in had they not chosen to opt-out as a result of the discrimination.
Peter Grant
Can I raise with the Minister the concern that I raised on Second Reading but did not get an answer to? I welcome the vast majority of clause 5, because it is right that if a member of a pension scheme took a decision about opting in or out based on circumstances that have now changed beyond their control they should be given the opportunity to reconsider that decision. That is absolutely correct. And there has to be some kind of provision as to the conditions about when that right is put in place; I do not have a problem with that.
However, paragraphs (5)(c) and (6)(a) refer to conditions potentially being applied that would require the applicant to submit certain information before the application could be accepted? The House of Commons Library has suggested that one type of information that could be asked for would be for the individual to demonstrate that the reason that they took action was because of what we now know to have been unlawful discrimination built into the scheme.
My question to the Minister is this: is it reasonable to expect somebody to be able to demonstrate that? What standard of proof will be required? I need to remind the Minister that the Windrush scandal happened because the Government retrospectively decided to demand that citizens produce certain information in order to have their rights of citizens respected and they made completely unreasonable expectations on people to have retained information.
Okay, we are talking now about something five or seven years ago instead of 30, 40, 50 years ago, but the principle is still the same. Is it reasonable to assume that people will have kept documentation to demonstrate that they acted on the basis of information at the time and not for some other reason? Can we have an assurance that any regulations will not put an unreasonable burden of proof on people who may well have acted for the reasons set out in the clause, because the chance of them having kept any evidence to prove it five or 10 years later is pretty slim?
Mr Clarke
I can provide the hon. Gentleman with that reassurance. It is simply the case, under the operation of these provisions, that we want people to be able to make a decision at the point of retirement as to which scheme they wish they had been in for the purposes of this seven-year period. There will not be an onerous standard of proof; it will simply be for them to make that determination. I can reassure him that there is nothing that will be, if you like, in any way a high bar for people to satisfy. It is simply for people to make the decision based on their own circumstances and the advice they get at retirement about which scheme would have been best for them.
Clause 5 accordingly ordered to stand part of the Bill.
Clause 6
Immediate choice to receive new scheme benefits
Question proposed, That the clause stand part of the Bill.
Mr Clarke
Clause 6 provides that scheme regulations must make provision for pensioner members and beneficiaries of deceased members to make an immediate choice: whether to elect to receive new scheme benefits in relation to the member’s remediable service, or to receive the default of legacy scheme benefits instead.
Clause 7 provides that an election under clause 6 must be made within one year of the member—or, if the member is deceased, their personal representatives—being provided with details about the benefits available to them in relation to their remediable service, or such longer time as the scheme manager considers appropriate.
Clause 8 provides power for scheme regulations to make provision about situations where a member or their beneficiary fail to communicate to the scheme whether they wish to receive legacy or new scheme benefits in relation to remediable service.
Clause 9 provides that where a person has remediable service in an employment or office that is pensionable under more than one legacy scheme, an election under clause 6 applies in all of those schemes.
Peter Grant
Again, I have a question that I put on Second Reading that was not truly answered then.
In the background papers for the Bill, the Government suggested that clause 6(7) would apply to a fairly small number of people—I think that was how they described them. These are the people who would have a better deal if they were able to mix and match some provisions from one scheme and some from another, and they are now being told that they can opt for entirely one scheme or the other.
I understand the Government’s position, which is that these are people who have been given a benefit that they would not have had if there had not been unlawful discrimination, so they can have no reasonable objection if it is taken away. I suspect that the people who will lose that benefit will take a different view.
However, my real question was this: how many people are potentially affected? The information I have seen—this is the figure I quoted on Second Reading—is that we could be looking at somewhere up to 245,000 people. That is a small percentage of the total number of pensioners affected by this legislation, but a quarter of a million people cannot be described as a small number. Will the Minister confirm how many people he expects to be affected particularly by the restriction in clause 6(7)?
Mr Clarke
I can commit to write to the hon. Member with our best estimate, although it may be that my officials can provide me with such an estimate. In that case, I will relay it to him in a later answer as we make progress on the Bill.
Question put and agreed to.
Clause 6 accordingly ordered to stand part of the Bill.
Clauses 7 to 9 ordered to stand part of the Bill.
Clause 10
Deferred choice to receive new scheme benefits
Question proposed, That the clause stand part of the Bill.
Mr Clarke
Clause 10 delivers the Government’s commitment to provide a deferred choice to receive legacy or new scheme benefits in relation to active and deferred members’ remediable service. Having had their remediable service returned to the legacy schemes by virtue of clause 2, once that provision comes into force, clause 10 requires scheme regulations to provide that an election to receive new scheme benefits may subsequently be made in relation to the remediable service of active and deferred members.
Clause 11 provides that scheme regulations must specify a deadline by which an election must be made. That deadline must be no earlier than one year before the day on which the member is reasonably expected to become entitled to a pension in accordance with an election. That is why this is referred to as a deferred choice.
Clause 12 replicates the power in clause 8, but is for active and deferred members, rather than pensioner or deceased members. The power is for scheme regulations to make provision about situations where a member or their beneficiary fails to communicate to the scheme whether they wish to receive legacy or new scheme benefits in relation to the remediable service.
Clause 13 provides that where a person has remediable service in an employment or office that is pensionable under more than one legacy scheme, an election under clause 10 applies in all of those schemes.
Question put and agreed to.
Clause 10 accordingly ordered to stand part of the Bill.
Clauses 11 to 13 ordered to stand part of the Bill.
Clause 14
Pension benefits and lump sum benefits: pensioner and deceased members
Question proposed, That the clause stand part of the Bill.
Mr Clarke
Clause 14 requires any overpayment or underpayment of pension benefits or lump-sum benefits in relation to a pensioner or a deceased member to be corrected, and sets out how and when that will be done.
Clause 15 applies to pensioner and deceased members to align any member contributions payable in relation to their remediable service with the benefits, legacy or new scheme that are ultimately taken.
Clause 16 provides that any difference between the member contributions paid during the member’s remediable service and those that would have been paid had they always paid legacy scheme member contributions is corrected, on the coming into force of clause 2. Where the member is deceased, their personal representatives will be responsible. Clause 17 provides for member contributions in relation to a deferred or active member’s remediable service to be aligned with the decision under clause 10—that is, the deferred choice—as to which benefits are ultimately paid.
Clause 18 provides a power to allow scheme regulations to make provision to reduce or waive that member’s liability where a member owes overpaid pension or lump-sum benefits to a scheme. It also makes further provision to allow overpaid or underpaid contributions owed by or to a scheme to be reduced to reflect tax relief. That is simply to ensure that the member is returned in the correct position net of tax.
Finally, clause 18 allows amounts in relation to overpaid contributions owed to a member under clause 16 to be reduced or waived by agreement. That is simply to allow members who expect to elect to receive new scheme benefits when they retire to avoid paying legacy scheme contributions in relation to their remediable service during the intervening period.
Question put and agreed to.
Clause 14 accordingly ordered to stand part of the Bill.
Clauses 15 to 18 ordered to stand part of the Bill.
Clause 19
Pension credit members
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Clauses 20 and 21 stand part.
Government amendments 6 to 12.
Clause 22 stand part.
Government amendment 37.
Mr Clarke
The amendments in this group deal with various specific scenarios which may apply to members with remediable service. Clause 19 provides that scheme regulations may make provision in relation to a member who has divorced or dissolved a civil partnership, and, where a pension sharing order is in place, to enable their pension to be shared with their former spouse or civil partner. Clause 20 provides for scheme regulations to make provision in relation to additional voluntary contributions paid during a member’s remediable service.
Clause 21 ensures that, where a member transfers their pension rights from one public service pension scheme to another, they still receive a deferred choice in respect of any remediable service that was subject to the transfer. Clause 22 provides that scheme regulations may make further provision about special cases. The provision that may be made under this clause, or under clauses 19, 20 or 21, includes provision corresponding to any provision in chapter 1 of the Bill or applying any provision of this chapter to persons specified in the regulations.
Clause 22(2) sets out a number of areas where provision may be needed in scheme regulations. These include matters such as the benefits payable to members who had tapered protection, which is termed “mixed service” here, and to members who had a right to buy out an actuarial reduction in relation to early payment of benefits in respect of their remediable service in a new scheme. The amendments that I am about to explain add four areas to ensure that schemes have the necessary powers to deal with specific cases in relation to children’s pensions, partnership pension accounts, redundancy and teachers’ excess service.
Amendment 6 delivers the commitment in the Government’s consultation and consultation response. It set out that where a member has died and a child pension is already in payment, which would otherwise be impacted by a decision taken by someone outside the child’s household, that pension will be protected. The amendment confers power to enable provisions to be made in scheme regulations about the benefits payable where a member dies in respect of surviving children who do not live in the same household as a surviving adult. Amendments 10 and 11 provide clarification by defining “adult survivor” and “child” respectively.
Amendment 7 extends the power to make provision about special cases in clause 22 to enable provision to be made in scheme regulations about excess teacher service. These amendments will allow the teachers’ pension scheme to process excess service cases using existing provisions of the Bill, such as clauses 14 to 17, to correct contributions and benefits whether the service is pensionable in the local government pension scheme or not. Amendment 37 defines “teacher”.
Amendment 8 concerns partnership pension accounts. The Bill already provides for members of the civil service who opted to have a partnership pension account to be reinstated to the appropriate legacy scheme where they so wish. However, there may be cases where that is not possible—for example where the member has died. The amendment therefore provides schemes with powers to make provision to take a different approach where needed to provide a remedy in such cases.
Finally, amendment 9 further amends clause 22 to permit scheme regulations to make provision for cases in which a person who has remediable service is made redundant. This will ensure that schemes are able to make provision for a member to make their deferred choice to receive new scheme benefits at the time their employment ends. This approach will be needed in cases where the member’s redundancy payment is calculated by reference to the pension scheme in which they have remediable service, which is the case, for example, in the armed forces. Amendment 12 inserts a definition of “made redundant”. I beg to move.
Tulip Siddiq
I understand that clause 22 permits changes to the existing and traditional pension scheme and allows for the deregistering of these schemes for tax purposes so that a lifetime allowance tax charge does not apply on the basis that judges are an exceptional case. In making that exception, is the Minister confident that it will not open the door to legal action from other professionals, such as senior doctors, perhaps, who may argue that they want similar treatment?
Mr Clarke
Yes, I can provide the hon. Lady with that reassurance. There is obviously the question whether what we are putting in place for judges is replicable for other professions, and we are confident it is not. That is due to the unique career path of judges, many of whom leave lengthy careers in the private sector to enter public service at the culmination of their careers, and where there is an expectation that, after having served as a judge, there can be no return to private practice. That is precluded uniquely for judges. Once they have made their decision to go to the bench, they cannot then return to practice. That distinction accounts for their very particular career path and very particular constrained options, which means there is a strong case that judges are a unique group for these purposes and therefore there is not discrimination for other professions.
Question put and agreed to.
Clause 19 accordingly ordered to stand part of the Bill.
Clauses 20 and 21 ordered to stand part of the Bill.
Clause 22
Further powers to make provision about special cases
Amendments made: 6, in clause 22, page 19, line 20, at end insert—
“(da) provision about the benefits payable in respect of a child of a deceased member where—
(i) the member has remediable service in an employment or office, and
(ii) the child is not living in the same household as an adult survivor of the member;”
This amendment confers power to enable provision to be made about the benefits payable, where a member dies, in respect of surviving children who do not live in the same household as a surviving adult.
Government amendment 7, in clause 22, page 19, line 20, at end insert—
“(db) provision about cases in which a person has remediable service in an employment or office any of which is excess teacher service;
(dc) provision about cases in which a person has remediable service in an employment or office and also has service in an employment or office as a teacher which—
(i) takes place in the period beginning with the day after the closing date and ending with 31 March 2022,
(ii) is pensionable service under a Chapter 1 new scheme, and
(iii) is not remediable service;”
This amendment enables provision to be made where a teacher has excess teacher service or has service which takes place in the remedy period, is pensionable under a Chapter 1 new scheme, but would not have been pensionable under a Chapter 1 legacy scheme, or under a local government new scheme, if the unlawful discrimination rectified by the Bill had not taken place.
Government amendment 8, in clause 22, page 19, line 20, at end insert—
“(dd) provision about cases in which a person has a partnership pension account;”
This amendment confers power to enable further provision to be made about cases in which a person has a partnership pension account.
Government amendment 9, in clause 22, page 19, line 20, at end insert—
“(de) provision about cases in which a person is made redundant;”
This amendment confers power to enable further provision to be made about cases in which a person is made redundant.
Government amendment 10, in clause 22, page 20, line 17, at end insert—
““adult survivor”, in relation to a member of a Chapter 1 scheme who has remediable service, means a surviving spouse, civil partner or other adult who is entitled under the scheme to a pension determined (to any extent) by reference to the member’s remediable service;”
This amendment contains a definition required for the amendment of this clause that confers power to enable provision to be made about the benefits payable, where a member dies, in respect of surviving children who do not live in the same household as a surviving adult.
Government amendment 11, in clause 22, page 20, line 19, at end insert—
““child”, in relation to a member of a Chapter 1 scheme, means any individual who—
(a) is entitled to receive benefits under the scheme in their capacity as a child of the member, or
(b) would have been entitled to receive benefits under the scheme in that capacity on the assumption that any election under this Chapter was, or was not, made in respect of the member;”
This amendment contains a definition required for the amendment of this clause that confers power to enable provision to be made about the benefits payable, where a member dies, in respect of surviving children who do not live in the same household as a surviving adult.
Government amendment 12, in clause 22, page 20, line 19, at end insert—
““made redundant”: a reference to a person being “made redundant” includes, in relation to a member of the armed forces, a person becoming entitled to a redundancy payment under—
(a) Part 2 of the Armed Forces (Redundancy, Resettlement and Gratuity Earnings Schemes) (No 2) Order 2010 (S.I. 2010/832),
(b) the Armed Forces Redundancy Scheme Order 2006 (S.I. 2006/55), or
(c) the Armed Forces Redundancy Scheme Order 2020 (S.I. 2020/1298);”—(Mr Clarke.)
This amendment ensures that the power to make provision about cases in which a person is made redundant covers any case in which a member of the armed forces becomes entitled to a redundancy payment under the instruments listed.
Clause 22, as amended, ordered to stand part of the Bill.
Clause 23
Power to pay compensation
Question proposed, That the clause stand part of the Bill.
Mr Clarke
Clauses 23 to 25 are concerned with ensuring that schemes have further powers to remedy the discrimination that arose. Clause 23 provides a power for scheme managers to pay compensation in respect of any compensatable losses incurred by members as a result of the discrimination suffered. Clause 24 provides a power for scheme regulations to award a member additional benefits where a member has suffered a tax loss because of the discrimination. Finally, clause 25 provides that scheme regulations for a chapter 1 legacy scheme may make provision to give members with remediable service the facility to enter into new arrangements to pay voluntary contributions, to further address the discrimination.
Peter Grant
I have some similar questions to the one that I asked on clause 10, although the wording here is much more specific. I am looking at clause 25(3), where, again, there is a requirement that if someone wants to pay the additional voluntary contributions that they would have paid earlier but for the change in the scheme regulations, they can do so
“only if the scheme manager is satisfied that it is more likely than not”
that they would have chosen to pay them had they known that the change was coming.
I have a few questions for the Minister. First, how do we ensure consistency of treatment if we have scheme members applying to different scheme managers? Perhaps more importantly, what is the route of redress if someone is unhappy with the decision of the scheme manager? Do the Government plan to legislate in order to set out clearly what the redress is in those circumstances, or do members have to fall back on the grievance and dispute procedures that are built into their terms of employment or the terms of individual schemes? That could mean that we get inconsistency when people in similar circumstances put in similar applications, so that one is approved under the rules of one scheme, and one is not approved under the rules of another. That does not deliver the equality of treatment that the Bill is intended to deliver.
Mr Clarke
I thank the hon. Gentleman for his questions. The short answer is that we will use Treasury directions, which involve technical advice to scheme managers, so that we can ensure that the inconsistency to which he alludes is not broken.
Question put and agreed to.
Clause 23 accordingly ordered to stand part of the Bill.
Clauses 24 and 25 ordered to stand part of the Bill.
Clause 26
Interest and process
Question proposed, That the clause stand part of the Bill.
Mr Clarke
I beg to move amendment 13, in clause 27, page 24, line 20, leave out “given by the Treasury”.
This amendment ensures that the consultation requirement in subsection (4) of this clause applies to directions given under the clause by the Department of Finance in Northern Ireland.
Mr Clarke
Clause 27 provides that scheme regulations under clauses 18 to 26 must be exercised in accordance with Treasury directions. Where the Northern Ireland Executive have devolved competence for public service pension schemes, directions for those schemes will be issued by the Department for Finance. That ensures that, where Ministers who are responsible for overall policy on public service pensions consider that a consistent approach is necessary, the relevant Department may give directions to schemes about how these powers are exercised in their scheme regulations, further to my point a moment ago.
Amendments 13 and 14 clarify that the Department of Finance in Northern Ireland must consult the Government Actuary before issuing directions concerning the calculation and payment of interest. The change simply ensures consistency with directions given by the Treasury in respect of Great Britain.
Amendment 13 agreed to.
Amendment made: 14, in clause 27, page 24, line 22, leave out “the Treasury has consulted” and insert “consultation with”.—(Mr Clarke.)
This amendment ensures that the consultation requirement in subsection (4) of this clause applies to directions given under the clause by the Department of Finance in Northern Ireland.
Clause 27, as amended, ordered to stand part of the Bill.
Clause 28
Scheme rules that prohibit unauthorised payments
Question proposed, That the clause stand part of the Bill.
Mr Clarke
The purpose of the clause is to override any scheme rules that prevent an unauthorised payment being made where such a payment is permitted or required by the Bill. Treasury directions will specify the type of payments permitted or required.
Question put and agreed to.
Clause 28 accordingly ordered to stand part of the Bill.
Clause 29
Remediable service statements
Question proposed, That the clause stand part of the Bill.
Mr Clarke
The clause requires schemes to provide members with information about their rights in relation to their remediable service, in the form of a remediable service statement. It is this information that will inform member decisions about whether to elect to receive new scheme benefits or to retain legacy benefits instead, whether to opt for service to be reinstated under clause 5 and whether to opt into remediable arrangements to pay voluntary contributions to a legacy scheme under clause 25. The clause sets out to whom remediable service statements should be provided, what they must include, what they may include and when they must be provided.
Question put and agreed to.
Clause 29 accordingly ordered to stand part of the Bill.
Clause 30
Section 61 of the Equality Act 2010 etc
Question proposed, That the clause stand part of the Bill.
Mr Clarke
The purpose of the clause is to prevent any inconsistency in interpretation or application between section 61 of the Equality Act 2010 and its equivalent in Northern Ireland and the provisions contained in or made under this Bill. The clause ensures that the Bill, rather than section 61 of the 2010 Act, provides a remedy for persons affected by the discrimination. Section 61 ceases to have effect immediately before clause 2(1) of the Bill comes into force.
Question put and agreed to.
Clause 30 accordingly ordered to stand part of the Bill.
Clause 31
Application of Chapter to immediate detriment cases
Question proposed, That the clause stand part of the Bill.
Mr Clarke
The clause concerns the application of the Bill to so-called immediate detriment cases. The clause ensures that chapter 1 does not automatically apply where an immediate detriment remedy has been obtained. That prevents duplication of compensation, ensures that the Bill does not override any previous court or tribunal orders and provides powers for the scheme regulations to make provision to correct or top up any aspects of the remedy already provided to ensure consistent and fair treatment.
Clause 32 defines where an immediate detriment remedy has been obtained in relation to a person’s remediable service. Persons who meet this definition will have received either a full or a partial remedy for the discrimination identified by a court or a tribunal prior to the Bill and the scheme regulations coming into force in relation to that scheme.
Question put and agreed to.
Clause 31 accordingly ordered to stand part of the Bill.
Clause 32 ordered to stand part of the Bill.
Clause 33
Meaning of “Chapter 1 scheme” etc
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Clauses 34 to 37 stand part.
Government amendments 15 to 17.
Clause 38 stand part.
Government amendments 33 and 35.
Mr Clarke
I begin by briefly explaining the clauses that are being amended. Clause 33 defines terms such as “Chapter 1 scheme”, “Chapter 1 new scheme” and “Chapter 1 legacy scheme”, to ensure a consistent understanding and application by all readers.
Clause 34 defines “new scheme benefits”. Where a member has remediable service and they elect to received new scheme benefits, they are entitled to receive benefits that are the same as those that would have been payable in relation to that service had they been a member of the new scheme. Further, if a member elects to receive new scheme benefits, they will be paid from the legacy scheme.
Clause 35 defines “legacy scheme contributions” and “new scheme contributions”. Those terms are defined in relation to a member’s remediable service, and are relevant to clauses 15 to 17, which are concerned with the correction of overpaid and underpaid contributions.
Clause 36 defines “opted-out service”. An opted-out service is a service that would have been a remediable service under clause 1 but for the fact that the member chose to opt out of it being a pensionable service. The definition of “opted-out service” includes a service that would have been a remediable service but for the fact that the member opted to participate in a partnership pension account instead.
Clause 37 defines “scheme regulations”, and provides that it has the same meaning as set out in the Public Service Pensions Act 2013 and the Public Service Pensions Act (Northern Ireland) 2014.
Clause 38 sets out further definitions for various terms used in chapter 1.
The amendment in this group are principally minor technical changes to move certain definitions to chapter 4 so that they can have effect on the whole of part 1 of the Bill, and can therefore apply to all public service pension schemes. The changes are consequential to the introduction of several amendments relating to the remedy in local government, which I will describe further under chapter 3.
Question put and agreed to.
Clause 33 accordingly ordered to stand part of the Bill.
Clauses 34 to 37 ordered to stand part of the Bill.
Clause 38
Interpretation of Chapter
Amendments made: 15, in clause 38, page 30, leave out lines 28 to 33.
This amendment moves a definition from this clause to clause 98 so that it applies for the purposes of the whole Part.
16, in clause 38, page 30, line 44, leave out from beginning to end of line 11 on page 31.
This amendment moves some definitions from this clause to clause 98 so that they apply for the purposes of the whole Part.
17, in clause 38, page 31, line 48, leave out “Part” and insert “Chapter”.—(Mr Clarke.)
This amendment confines the scope of the interpretation provision in subsection (2) of clause 38 so that it applies only for the purposes of the Chapter.
Clause 38, as amended, ordered to stand part of the Bill.
Clause 39
Meaning of “remediable service”
The Chair
With this it will be convenient to discuss the following:
Government amendment 19.
Clause stand part.
Mr Clarke
Clause 39 sets out the conditions that members of a judicial scheme must satisfy to be within scope of the remedy and have their pensionable service considered remediable service.
The two minor amendments to clause 39 are simply clarificatory changes to ensure that a service in scope of the remedy is correctly identified. That ensures that all members within the remedy’s scope can be accurately captured.
Amendment 18 agreed to.
Amendment made: 19, in clause 39, page 32, line 17, at end insert—
“The second condition is met if all of the service in question falls within paragraphs (a) and (b) (even if it does not all fall within only one of those paragraphs).”—(Mr Clarke.)
This amendment clarifies that service meets the second condition in clause 39 even if it falls within more than one of the paragraphs contained in the condition.
Clause 39, as amended, ordered to stand part of the Bill.
Clause 40
Legacy scheme elections
Question proposed, That the clause stand part of the Bill.
Mr Clarke
Clauses 40 to 46 relate to the judicial options exercise, where judges will elect whether to receive legacy scheme benefits or 2015 scheme benefits for the relevant service. The clauses set out the conditions for making an election, who may make an election, and the effect of making an election. They also make specific provision for judges who have contributed to a partnership pension account.
Question put and agreed to.
Clause 40 accordingly ordered to stand part of the Bill.
Clauses 41 to 46 ordered to stand part of the Bill.
Clause 47
Cases in which 2015 scheme election treated as made
Question proposed, That the clause stand part of the Bill.
Mr Clarke
Clauses 47 to 50 deal further with the effects of a judge’s choice of pension scheme, including where pension benefits have already been paid from, or contributions paid to, a different scheme from the one chosen. They also address the entitlement of child pension benefits and provide for a default in certain circumstances where an election is not made.
Question put and agreed to.
Clause 47 accordingly ordered to stand part of the Bill.
Clauses 48 to 50 ordered to stand part of the Bill.
Clause 51
Pension benefits and lump sums benefits
Question proposed, That the clause stand part of the Bill.
Mr Clarke
Clauses 51 to 56 allow for corrections to be made where pension benefits, including lump sums, and contributions have already been paid and as a result a judge owes money to the scheme or is owed money by the scheme. They also make specific provision where certain sums need to be repaid to the judge or the pension scheme, and provide powers to make provision for a judge’s liability to be reduced, waived or recovered by way of reduction in pension benefits.
Question put and agreed to.
Clause 51 accordingly ordered to stand part of the Bill.
Clauses 52 to 56 ordered to stand part of the Bill.
Clause 57
Pension credit members
Question proposed, That the clause stand part of the Bill.
Mr Clarke
Clauses 57 and 58 provide the Ministry of Justice with the power to make provision in relation to pension credit members in the case of divorce, as well as special cases. These clauses are the judicial scheme equivalents of clauses 19 and 22 in chapter 1 of the Bill.
Clause 57 accordingly ordered to stand part of the Bill.
Clause 58 ordered to stand part of the Bill.
Clause 59
Power to pay compensation
Question proposed, That the clause stand part of the Bill.
Mr Clarke
Clauses 59 and 60 address the matter of compensation, enabling a scheme manager to compensate members for losses they may have incurred as a result of the discrimination. They also provide powers to provide that members may now make voluntary contributions to judicial schemes where they would have done so but for the discrimination.
Question put and agreed to.
Clause 59 accordingly ordered to stand part of the Bill.
Clause 60 ordered to stand part of the Bill.
Clause 61
Interest and process
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss:
Government amendments 20 and 21.
Clause 62 stand part.
Mr Clarke
Clauses 61 and 62 allow for judicial schemes to apply interest to amounts owed either to or by members as a result of the remedy. They also address the process for making payments that are owed to the scheme. Amendments 20 and 21 will ensure that the consultation requirement in clause 62(4) applies to directions given under the clause by the Department of Finance in Northern Ireland. This requires the Department of Finance in Northern Ireland to consult the Government Actuary before issuing directions concerning the calculation and payment of interest. The change ensures consistency with directions given by the Treasury in respect of Great Britain.
Clause 61 accordingly ordered to stand part of the Bill.
Clause 62
Treasury directions
Amendments made: 20, in clause 62, page 50, line 47, leave out “given by the Treasury”.
This amendment ensures that the consultation requirement in subsection (4) of this clause applies to directions given under the clause by the Department of Finance in Northern Ireland.
Amendment 21, in clause 62, page 51, line 1, leave out “the Treasury has consulted” and insert “consultation with”.—(Mr Clarke.)
This amendment ensures that the consultation requirement in subsection (4) of this clause applies to directions given under the clause by the Department of Finance in Northern Ireland.
Clause 62, as amended, ordered to stand part of the Bill.
Clause 63
Scheme rules that prohibit unauthorised payments
Question proposed, That the clause stand part of the Bill.
Mr Clarke
Clauses 63 to 66 make similar miscellaneous provision as in clauses 28 to 30 in chapter 1. They also ensure that members with remediable service are able to make an informed decision before making their election and enable appropriate delegation to ensure efficient implementation of the options exercise.
Question put and agreed to.
Clause 63 accordingly ordered to stand part of the Bill.
Clauses 64 to 66 ordered to stand part of the Bill.
Clause 67
Application of Chapter to immediate detriment cases
Question proposed, That the clause stand part of the Bill.
Mr Clarke
Clauses 67 and 68 relate to judges who have already had their remedy determined by a court or tribunal or by agreement with the scheme manager. The default position is that these judges are not covered by previous clauses of the Bill. Clauses 67 and 68 therefore provide the power to make provisions mirroring previous clauses in respect of these judges. That is to ensure that they are returned to the position they would have been in had the discrimination not occurred.
Question put and agreed to.
Clause 67 accordingly ordered to stand part of the Bill.
Clause 68 ordered to stand part of the Bill.
Clause 69
Meaning of “the election period”
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss:
Clauses 70 to 74 stand part.
Government amendment 22.
Clauses 75 and 76 stand part.
Mr Clarke
Clauses 69 to 73 define the meanings of various terms used in chapter 2 relating to the judicial schemes. Amendment 22 simply moves a definition from clause 75 to clause 98 so that it applies for the purposes of the whole of part 1 of the Bill.
Question put and agreed to.
Clause 69 accordingly ordered to stand part of the Bill.
Clauses 70 to 74 ordered to stand part of the Bill.
Clause 75
Interpretation of Chapter
Amendment made: 22, in clause 75, page 55, leave out lines 34 to 39.—(Mr Clarke.)
This amendment moves a definition from this clause to clause 98 so that it applies for the purposes of the whole Part.
Clause 75, as amended, ordered to stand part of the Bill.
Clause 76 ordered to stand part of the Bill.
Clause 77
Meaning of “remediable service”
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss:
Clauses 78 and 79 stand part.
Government new clause 3—Meaning of “remediable service”.
Government new clause 4—Power to pay final salary benefits.
Government new clause 5—Section (Power to pay final salary benefits): transitional provision.
Government new clause 6—Pension credit members.
Government new clause 7—Further powers to make provision about special cases.
Government new clause 8—Power to pay compensation.
Government new clause 9—Indirect compensation.
Government new clause 10—Interest and process.
Government new clause 11—Treasury directions.
Government new clause 12—Interpretation of Chapter.
Mr Clarke
This group of amendments relates to chapter 3, concerning the remedy to the discrimination for local government workers. Let me begin by setting out why there are separate provisions in the Bill relating to local government schemes.
In line with the reform processes applied in other parts of the public sector, local government schemes were reformed by the Government following the review undertaken by the Independent Public Service Pensions Commission. In the local government schemes, however, trade unions, employers and the Government agreed to implement transitional protections for members nearing retirement in a different way. Under that approach, all local government scheme members moved to the new and reformed career average schemes from 1 April 2014 in England and Wales and from 1 April 2015 in Scotland and Northern Ireland. That differed from the approach in other public service pension schemes, where protected members stayed in their legacy schemes.
In their reformed schemes, protected local government workers were given the benefit of underpin protection, providing them the value of their legacy final salary pension if that would have been higher than their reformed scheme pension. Following the Court of Appeal’s judgment, which held that transitional protection unlawfully discriminated against younger workers in the judicial and fire schemes, the Government accepted the wider implications that the judgment had for all schemes, including local government.
Policy consultations were undertaken for local government in 2020. Chapter 3 of the Bill provides the necessary powers to address the discrimination in those schemes, which will be done by extending the statutory underpin to younger members who did not originally have protection. The new clauses in this grouping are designed to ensure that a comprehensive remedy is in place for local government workers. The changes include replacements for clauses 77 and 78, which set out the main principles of the remedy as it will apply in local government.
As many of the new clauses are of a technical nature, I will not explain each in detail, but I hope that the Committee will find it helpful if I explain their themes. I will of course be happy to turn to specific new clauses if members of the Committee have any questions. The first theme is to ensure that, where appropriate, there is a consistent approach with other public service pension schemes. The new clauses will therefore provide equivalent powers to those that already exist in respect of the other public service pensions schemes covered in chapter 1. The new clauses cover technical matters, including compensation, special cases and interest payments. They are necessary to ensure that the complexities arising can be addressed robustly across all workforces.
New clause 3, which is a replacement for the existing clause 77, makes an important change to broaden the scope of eligibility for remedy in local government to align it with all other public service schemes. Under the amended approach, members who were in pensionable service on, before or after 31 March 2012 would be in scope of remedy if they leave local government and return within five years, as well as meeting qualifying criteria. The change ensures that, for example, women are not disadvantaged by their increased likelihood of having breaks in employment, which may be due to childcare.
The second theme is to ensure that the powers reflect the particular circumstances of the local government schemes and the differences in how remedy works there. New clause 4, which is a replacement for the existing clause 78, permits scheme regulations to require that separate periods of pensionable service are aggregated or joined up for underpin protection to apply. That is an important principle in the local government pension scheme, which is locally administered. In England and Wales alone, there are 86 administering authorities. To avoid administrative complexity, established policy is that where scheme members have multiple periods of pensionable service, those are each treated separately unless they are aggregated together. Allowing scheme regulations to require aggregation will ensure that underpin protection can be provided in line with that policy, and that substantial administrative complications in the coming decades are avoided.
New clause 3 also ensures that scheme regulations can reflect another aspect of remedy that is unique to local government schemes. When transitional protections were originally negotiated in the sector, it was agreed that the period of protection should cease when a member reaches their legacy scheme normal pension age, usually 65. In line with the Government’s 2020 consultation proposals, it is proposed that that approach is retained, subject to an overall requirement that underpin protection must cease for all members by 31 March 2022. That is crucial to ensure that, going forward, all LGPS members accrue pension on the same career average basis. The amended clause 77 would ensure that underpin protection reflects this policy intent.
The new clauses also make amendments to ensure that the remedy applies correctly to local government staff who were compulsorily transferred from their employer as a result of outsourcing and were entitled to pension protection. That change is consistent with that made in chapter 1, as we discussed earlier. For those members, the time they spent in a private sector pension scheme will not count towards a “disqualifying gap in service”, which we discussed earlier, when assessing their eligibility for the remedy.
Turning to the final theme, some clarifying changes have been made to ensure that the Bill works as intended. In particular, new clause 5 sets out transitional arrangements making it clear that existing scheme regulations providing for underpin protection are to be treated as being made under the powers in the Bill. That change ensures that it is clear that the same legislative framework applies to the members originally protected and those who have been subject to the discrimination found by the courts. It means that scheme regulations can fully remove the differences between the two groups.
Finally, clause 79 provides important definitions for the terms “local government new scheme” and “local government legacy scheme” as they are used in chapter 3. They are important to the meaning and effective application of the clauses in the chapter, so I recommend that that clause stands part of the Bill. I hope that my explanations regarding the new clauses, which ensure a full and robust remedy for the local government workforce, have been helpful to the Committee.
Tulip Siddiq
I am grateful for the explanation given by the Minister. We support the changes to the local government pension scheme and the other technical amendments, in particular those that aim to broaden the scope of members’ eligibility for the proposed remedy.
Matt Rodda
I am grateful to the Minister for expanding on those points. I reiterate the importance of listening to the views of women workers in the public sector. They are obviously a large proportion of workers in the public sector, as he well knows. In particular, with this group of new clauses on the local government pension scheme, it is important for the Government to get that right. I urge him to continue to talk and listen carefully to the relevant unions. I should declare an interest as a member of the GMB, which is one of the relevant unions. I believe there is a great deal of knowledge in the local government profession and in the unions on such matters. Please will the Minister consult widely and listen on the fine detail, to ensure that we get it right for the many workers in local government? It is perhaps worth adding that there are a number of other issues with women’s pensions as a whole and a wider context of ensuring that pensions for women are protected and funded properly.
Mr Clarke
I thank the hon. Gentleman for what he said. As a former Minister for Local Government, I absolutely agree with everything he says about the value of local government workers and that women form a disproportionately substantial part of the local government workforce. They make up more than 70% of the scheme’s membership, so it is vital that their voice is listened to, and I commit that it will be.
Question put and negatived.
Clause 77 accordingly disagreed to.
Clause 78 disagreed to.
Clause 79 ordered to stand part of the Bill.
Clause 80
Restriction of existing schemes
Question proposed, That the clause stand part of the Bill.
Mr Clarke
Clauses 80 to 83 implement the prospective remedy. First, they close the main unfunded legacy pension schemes to future accrual and ensure that all members who continue in service will do so as members of the reformed schemes from 1 April 2022. Secondly, they close all other existing judicial pension schemes and one scheme for the intelligence agencies from the same date. Finally, they ensure that no new arrangements to pay voluntary contributions to a legacy scheme may be entered into after 31 March 2022.
Question put and agreed to.
Clause 80 accordingly ordered to stand part of the Bill.
Clauses 81 to 83 ordered to stand part of the Bill.
Clause 84
Amendments relating to scheme regulations
Mr Clarke
I beg to move amendment 25, in clause 84, page 62, line 20, at end insert—
“(6A) In section 8 of PSPA 2013 (types of scheme), after subsection (4) insert—
(4A) The extent to which a scheme under section 1 is a career average revalued earnings scheme is not affected by provision contained in scheme regulations that is made under section (Power to pay final salary benefits)of PSPJOA 2022 (local government schemes: power to pay final salary benefits).”
This amendment clarifies that the status of local government new schemes as career average revalued earnings schemes is unaffected by provision made under NC4.
The Chair
With this it will be convenient to discuss the following:
Government amendment 26.
Clause stand part.
Mr Clarke
The clause allows scheme regulations to be made to make consequential, supplementary, incidental or transitional provision in relation to any provision of part 1 of the Bill. It clarifies the procedural requirements that apply to scheme regulations. Subsections (5) and (6) remove an exception to the requirement for Treasury consent in the making of scheme regulations by a responsible authority related to scheme regulations of the Welsh Ministers for fire and rescue workers. The clause also introduces a delegated power for the Treasury to make future amendments to the exceptions set out in section 3(6) of the Public Service Pensions Act 2013.
Amendment 25 is a technical amendment to section 8 of the Public Service Pensions Act 2013 to ensure it is clear that the remedy for local government schemes provided by the Bill does not affect the local government pension scheme’s status as a career average revalued earnings scheme. Amendment 26 contains an equivalent amendment to the Public Service Pensions Act (Northern Ireland) 2014 regarding the local government pension scheme in Northern Ireland.
Amendment 25 agreed to.
Amendment made: 26, in clause 84, page 63, line 18, at end insert—
“(13A) In section 8 of PSPA(NI) 2014 (types of scheme), after subsection (4) insert—
(4A) The extent to which a scheme under section 1 is a career average revalued earnings scheme is not affected by provision contained in scheme regulations that is made under section (Power to pay final salary benefits)of PSPJOA 2022 (local government schemes: power to pay final salary benefits).”—(Mr Clarke.)
This amendment clarifies that the status of local government new schemes as career average revalued earnings schemes is unaffected by provision made under NC4.
Question put and agreed to.
Clause 84, as amended, accordingly ordered to stand part of the Bill.
Clause 85
Amendments relating to the establishment or restriction of schemes
Question proposed, That the clause stand part of the Bill.
Mr Clarke
Clause 85 contains technical provisions relating to the establishment and closure of schemes made under the Public Service Pensions Act 2013 and the Public Service Pensions Act (Northern Ireland) 2014. The clause ensures that the governance and valuation frameworks for public service pension schemes operate correctly when schemes are closed and new ones established.
Question put and agreed to.
Clause 85 accordingly ordered to stand part of the Bill.
Clause 86
Amendments relating to employer cost cap
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss:
Government new clause 1—Amendments relating to employer cost cap.
Government new clause 2—Operation of employer cost cap in relation to 2016/17 valuation.
Mr Clarke
The cost control mechanism is designed to ensure a fair balance of risk between public service pension scheme members and taxpayers with respect to the costs of those schemes. Clause 86 would ensure that there are no cuts to member benefits or increases to member contributions as a result of the cost control mechanism at the 2016 valuations. New clauses 1 and 2 are designed to replace and supplement the clause while preserving its existing effect. That goes to the point that I was discussing with the hon. Member for Hampstead and Kilburn at the outset of this morning’s proceedings.
The cost control mechanism was introduced following the recommendations of the Independent Public Service Pensions Commission in 2011. Although the commission recommended a mechanism to protect the Exchequer from increased costs, the Government went a step further and introduced a mechanism that is symmetrical, so also maintains the value of pensions to members when costs fall. At each scheme valuation, the mechanism assesses scheme costs against a base level. If those costs move beyond a certain amount compared with the base level, member benefits or contribution rates must be adjusted to bring costs back to target. All the main reformed public service pension schemes are subject to the cost control mechanism.
The intention was for the mechanism to be triggered only by unforeseen and unpredictable events. In 2018, the Government Actuary was asked to review the mechanism after the provisional results of the 2016 valuations suggested that the mechanism was too volatile and not operating in line with its objectives. The review commenced in 2020 and his final report was published in June 2021. It contained several recommendations on how to improve the mechanism. Following a full public consultation process, the Government confirmed in October last year that it would take forward three reforms to the mechanism in time for the next scheme valuations. All three reforms are recommendations by the Government Actuary.
New clause 1 sets the legislative framework for the implementation of two of those reforms: the reformed scheme only design and the economic check. A reformed scheme only design means that costs associated with the old legacy schemes are excluded from the mechanism. That will make it more stable and reduce intergenerational unfairness, because comparatively younger members’ benefits or contributions will not change based on the cost of legacy schemes to which they had little, or no, access. That transfers the risk associated with legacy scheme costs to the Exchequer, but ensures consistency between the set of benefits being assessed and the set of benefits potentially being adjusted.
The economic check will ensure consistency between member benefit or contribution changes and changes in the wider economic outlook of the country. There will be a higher bar for benefit reductions or contribution increases if the country’s long-term economic outlook has improved. That will equally apply to benefit increases or contribution reductions if the long-term economic outlook has worsened. The economic check will therefore operate symmetrically for the benefit of both members and taxpayers. It will operate in a transparent way and be linked to an objective and independent measure of expected long-term earnings and GDP growth from the Office for Budget Responsibility. Given that the economic check can only offset or prevent breaches, not cause them, the likelihood of changes to member benefits or contributions will decline.
As some members of the Committee will know, the Government also consulted on a third proposal to widen what is called the cost corridor, which will be implemented through secondary legislation in due course. That, again, is designed to reduce volatility. All three proposals will make the mechanism more stable and allow it to operate more in line with its objectives, giving members greater certainty with respect to their retirement incomes. The changes also reproduce, with technical changes, some subsections of the clause as it stands.
New clause 2 replaces clause 86 as it stands in the Bill. The change will ensure that there will be no cuts to member benefits or increases to member contribution rates as a result of the 2016 valuations. Again, that goes to the important point that we discussed at the outset—members will not lose out. However, any benefit improvements that are due will be implemented.
Tulip Siddiq
We welcome the proposal in new clause 1 for a reformed scheme only design, which means that the cost of the legacy schemes will no longer be included in the cost control mechanism, but will the Minister provide clarity on a number of points? As he has said, it is a very technical Bill, so please bear with me.
On Second Reading, the Chief Secretary to the Treasury stated the Government’s intention to introduce secondary legislation in due course to widen the margin of the cost corridor from 2% to 3% of pensionable pay. Labour broadly supports that, and I recognise that it aims to provide greater certainty for members and the taxpayer, but, were the cost corridor to be widened to 3%, any upward breach of the CCM might potentially have a larger impact on members, as I am sure he recognises. Will he be willing to commit to publishing impact assessments of the proposed changes to the cost corridor for each public service scheme, to evaluate how members would be affected? Additionally, will the Minister confirm what mechanisms are to be put in place to monitor potential breaches of the cost corridor in the scheme, to ensure that members are given advance notice of possible changes in the value of their benefits?
We have far more serious concerns about new clause 2, which introduces a symmetrical economic check to the cost control mechanism. We object to such a scheme being introduced at such a late stage. It appears as if Ministers are making last-minute amendments to steamroller controversial elements of the Bill through without proper scrutiny. I want reassurance from the Minister that that is definitely not the case.
Matt Rodda
I rise to support my hon. Friend the Member for Hampstead and Kilburn. She is making an excellent point, and I am glad that she will press for a vote. The issue here relates to the need for transparency and trust, and the Government must reassure worried public servants, who have worked hard and have every right to expect a decent pension and retirement, that there is no sleight of hand here.
One of the three issues the Minister mentioned is to be dealt with in regulations, and the other two are on the face of the Bill. I would like him to reassure the Committee about the nature of those regulations, how they will be dealt with by the House and when they will be brought forward. I also remind him of the views of the independent Public Accounts Committee, which urged the Government to take the matter seriously, saying that the Government should
“quickly resolve the challenges presented by the McCloud judgment and cost control mechanism”
and that that was important to rebuild trust. I hope the Minister will consider the PAC’s thoughtful advice on this matter.
Mr Clarke
I thank all Members for their contributions, which I will take in turn. I hope to provide significant reassurance.
On the point that the hon. Member for Hampstead and Kilburn made about the widening of the cost corridor, the Government published a full impact evaluation as part of the consultation response on 4 October 2021, so that detail is available and is modelled.
To the point of the hon. Member for Reading East just now, the cost corridor is being addressed in regulations because the current 2% corridor exists under current powers, so we are simply amending 2% to 3% and do not need to introduce anything new.
As for the 25-year guarantee and the assurances given when the pension reforms were first introduced, the Government do not believe that the reforms breach that guarantee. The elements protected by the guarantee are set out in legislation and the cost control mechanism is not included among them. The Government are making these changes following an independent and thorough review of the mechanism by the Government Actuary’s Department and a full and open consultation process. As the GAD’s report makes clear, it does not seem possible for the mechanism to protect the taxpayer unless it considers the wider economic outlook, and the symmetrical operation of the economic check acts to protect members as well as the taxpayer.
The reforms will fundamentally lead to a more stable mechanism, with both benefit reductions and improvements becoming less likely. That aligns with the spirit of the guarantee which, as the hon. Member for Hampstead and Kilburn quite rightly said, is all about certainty. There is absolute conviction that that is in everyone’s interest including, most importantly, scheme members.
As for how the situation is assessed and to the point of the hon. Member for Glenrothes about how we manage the long-term GDP expectation, the check will be linked to the Office for Budget Responsibility’s independent and objective measure of expected long-term GDP growth and the long-term earnings assumptions. The check will operate purely mechanically with no scope for interference from individuals or groups from within Government or outside. It will be an independent, objectively assessed measure by the OBR. There is no sense in which any Minister from whatever party is in government at whatever time would have the ability to intervene in that process. I hope that provides reassurance on all those points.
Tulip Siddiq
I thank the Minister for that explanation. Is there an impact assessment for each scheme?
Peter Grant
Will the Minister clarify something about the other part of my question? Who will decide whether the appropriate measure to use is the growth in the economy of the entire UK, the growth of the economy of one sector, or the growth in the economy of one nation or region? Is that decision within the remit of the OBR?
Mr Clarke
Clause 87 amends the Public Service Pensions Act 2013 to reflect that the secret intelligence service and security service pension schemes have a closing date of 31 March 2016, rather than 2015, as in the other schemes. It also amends the 2013 Act to provide that the schemes are public service pension schemes, not public body pension schemes, and are therefore subject to the provisions of the Bill.
Question put and agreed to.
Clause 87 accordingly ordered to stand part of the Bill.
Clause 88
Amendments relating to the judiciary
Question proposed, That the clause stand part of the Bill.
Mr Clarke
The clause concerns the addition of judicial offices to the judicial pension scheme. It allows the Secretary of State for Scotland or the Lord Chancellor, as appropriate, to add a devolved judicial office holder to the new, reformed judicial pension scheme in response to a request from Scottish Ministers or the Department of Justice. It also enables past service to be taken into account when new offices are added to the scheme.
Question put and agreed to.
Clause 88 accordingly ordered to stand part of the Bill.
Clause 89
Amendments relating to non-scheme benefits
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss Government new clause 13—Amendments relating to pension schemes for members of the Senedd.
Mr Clarke
New clause 13 relates to pension schemes for Members of the Senedd. It removes the requirement for Treasury consent to be obtained before a new scheme can be provided or an existing scheme can be modified. It also removes the requirements of the Public Service Pensions Act 2013 concerning scheme valuations and an employer cost cap from the Senedd scheme. The change is made to reflect the fact that pensions for Members of the Senedd is now a devolved matter for Wales.
The purpose of clause 89 is to clarify existing legislation with regards to eligibility rules of non-scheme benefits. It is an important policy objective that a responsible authority may not pay non-scheme benefits to persons who fall outside the description of eligible persons without prior Treasury consent.
Question put and agreed to.
Clause 89 accordingly ordered to stand part of the Bill.
Clause 90
Power of Treasury to make scheme for compensation
Mr Clarke
I beg to move amendment 27, in clause 90, page 72, line 16, at end insert—
“, or
(c) a compensatable loss for the purposes of section (Power to pay compensation) (power to pay compensation under Chapter 3).”
This amendment ensures that the Treasury’s power to make a compensation scheme under clause 91 covers compensation payable in respect of local government schemes.
The Chair
With this it will be convenient to discuss the following:
Government amendments 28 and 29.
Clause stand part.
Government amendments 30 to 32.
Clause 91 stand part.
Mr Clarke
Clause 90 allows the Government to make regulations to create a compensation scheme in relation to any compensatable losses incurred by relevant members. Clause 85 provides equivalent powers to the Department of Finance in Northern Ireland. Clause 91 provides powers for the Department of Finance in Northern Ireland to create a compensation scheme to make payments under clauses 23 or 59. The provision is equivalent to that made in clause 84.
The amendments in this group are technical and ensure that the powers to create compensation schemes in clauses 90 and 91 could extend to the local government schemes, if considered necessary or desirable to do so.
Amendment 27 agreed to.
Amendments made: 28, in clause 90, page 72, line 22, at end insert—
‘, or
(c) a member of a local government new scheme within section79(2)(a) who has remediable service that is pensionable service under the scheme.’
This amendment ensures that the Treasury’s power to make a compensation scheme under clause 90 covers compensation payable in respect of local government schemes.
Amendment 29, in clause 90, page 72, line 27, at end insert—
‘(c) in paragraph (c), “local government new scheme” and “remediable service” have the same meaning as in Chapter 3.’—(Mr Clarke.)
This amendment ensures that the Treasury’s power to make a compensation scheme under clause 90 covers compensation payable in respect of local government schemes.
Clause 90, as amended, ordered to stand part of the Bill.
Mr Clarke
Clause 92 provides the power for scheme regulations to make provisions in relation to certain fee-paid judges who are not McCloud judges but whom it is accepted should have service in the legacy schemes from April 2015. To return them to the position that they should have been in, the provisions will mirror, where possible, the provision for the retrospective judicial remedy in part 1, chapter 2 of the Bill.
Question put and agreed to.
Clause 92 accordingly ordered to stand part of the Bill.
Clause 93
HMRC information-sharing and other functions relating to compensation etc
Question proposed, That the clause stand part of the Bill.
Mr Clarke
The purpose of clause 93 is to provide a new function enabling HMRC, or anyone acting on its behalf, to exchange information with a relevant person for the purpose of facilitating the exercise of any compensation function, or to do anything else that HMRC thinks necessary or expedient for that purpose. It also extends the criminal offence of wrongful disclosure that applies to confidential taxpayer information to any such information that HMRC provides under the clause.
Question put and agreed to.
Clause 93 accordingly ordered to stand part of the Bill.
Clause 94
Section 91 of Pensions Act 1995 and section 356 of Armed Forces Act 2006
Question proposed, That the clause stand part of the Bill.
Mr Clarke
Clause 94 disapplies section 91 of the Pensions Act 1995 and article 89 of the Pensions (Northern Ireland) Order 1995 to ensure that benefits in relation to a partnership pension may be surrendered where a member makes an election under clauses 5 or 41. It also clarifies that section 356 of the Armed Forces Act 2006 does not apply to anything done under this part of the Bill.
Question put and agreed to.
Clause 94 accordingly ordered to stand part of the Bill.
Clause 95
Minor amendment
Question proposed, That the clause stand part of the Bill.
Mr Clarke
Clause 95 corrects a minor error in a section of the Judicial Pensions and Retirement Act 1993 pertaining to ill-health retirement benefits.
Question put and agreed to.
Clause 95 accordingly ordered to stand part of the Bill.
Clause 96
Power to make consequential provision
Question proposed, That the clause stand part of the Bill.
Mr Clarke
Clause 96 provides Treasury ministers with the power to make regulations that amend, repeal, revoke or modify other statutes where the need to do so is consequential on provision made by the Bill. Where such regulations affect primary legislation, including devolved legislation, they will be subject to the affirmative procedure. Any amendments to or repeals or revocations of secondary legislation are subject to the negative procedure.
Question put and agreed to.
Clause 96 accordingly ordered to stand part of the Bill.
Clause 97
Meaning of “member” etc
Question proposed, That the clause stand part of the Bill.
Mr Clarke
Clause 97 defines the terms “member”, “active member”, “pensioner member” and deferred member” in part 1 of the Bill.
Clause 98, entitled “Interpretation of Part”, provides definitions for terms used in the Bill.
Question put and agreed to.
Clause 97 accordingly ordered to stand part of the Bill.
Clause 98
Interpretation of Part
Amendments made: 33, in clause 98, page 77, line 15, at end insert—
“‘connected’ means—
(a) connected within the meaning of PSPA 2013 (see section 4(6) and (7) of that Act), or
(b) connected within the meaning of PSPA(NI) 2014 (see section 4(6) and (7) of that Act);”
This amendment defines “connected” for the purposes of the whole of Part 1 of the Bill.
Amendment 34, in clause 98, page 77, line 48, at end insert—
“‘excess teacher service’ has the meaning given by subsection (2)”
This amendment refers to the definition of “excess teacher service” inserted into subsection (2) of this clause by separate government amendment.
Amendment 35, in clause 98, page 77, line 49, at end insert—
“‘Fair Deal scheme’ means—
(a) a pension scheme that, in accordance with the Fair Deal Statement of Practice, has been certified by the Government Actuary’s Department as offering, to persons who have been subject to a Fair Deal transfer, pension arrangements that are broadly comparable with those offered to them before the transfer, or
(b) a pension scheme in relation to which the obligation to give such a certificate has been waived in accordance with that statement of practice;
‘Fair Deal Statement of Practice’ means the statement of practice entitled “Staff Transfers in the Public Sector” issued by the Cabinet Office in January 2000, as supplemented and modified from time to time;
‘Fair Deal transfer’ means a transfer of a person’s employment from a public sector employer to a private sector employer in accordance with the Fair Deal Statement of Practice;”
This amendment moves some definitions from clause 38 to this clause so that they apply for the purposes of the whole Part.
Amendment 36, in clause 98, page 78, line 7, at end insert—
“‘local government contracting-out transfer‘ means a transfer of a person’s employment that was required to be conducted—
(a) in accordance with directions given, and having regard to guidance issued, for the purposes of section 101(1) of the Local Government Act 2003 (contracting out: staff transfer matters), or
(b) having regard to guidance issued for the purposes of section 52 of the Local Government in Scotland Act 2003 (asp 1) (guidance on contractual matters);”
This amendment defines “local government contracting-out transfer”. This is an expression used in government amendments of clause 1 and NC3.
Amendment 37, in clause 98, page 79, line 14, at end insert—
“‘teacher’ means teacher within the meaning of PSPA 2013 (see paragraph 4 of Schedule 1 to that Act) or PSPA(NI) 2014 (see paragraph 4 of Schedule 1 to that Act);”
This amendment defines “teacher” for the purposes of Part 1. This is required for other government amendments.
Amendment 38, in clause 98, page 79, line 21, at end insert—
“(2) In this Part ‘excess teacher service’ means a person’s service in an employment or office as a teacher where (disregarding section 2(1))—
(a) the service is pensionable service under a local government new scheme, or
(b) the service—
(i) is pensionable service under a Chapter 1 new scheme for teachers, and
(ii) would have been pensionable service under a local government new scheme but for the person’s failure to meet a condition relating to the person’s attainment of normal pension age, or another specified age, by a specified date.
Service in an employment or office is ‘excess teacher service’ if all of the service falls within paragraphs (a) and (b) (even if it does not all fall within only one of those paragraphs).
(3) In subsection (2)—
‘Chapter 1 new scheme’ has the same meaning as in Chapter 1;
‘local government new scheme’ has the same meaning as in Chapter 3.”—(Mr Clarke.)
This amendment defines “excess teacher service”. This is service as a teacher which is in excess of the maximum that could be accrued under the teachers’ Chapter 1 legacy scheme, but where the service is (or, in certain circumstances would have been) pensionable under a local government new scheme.
Clause 98, as amended, ordered to stand part of the Bill.
Public Service Pensions and Judicial Offices Bill [ Lords ] (Second sitting) Debate
Full Debate: Read Full DebateDepartment: HM Treasury
Simon Clarke
Main Page: Simon Clarke (Conservative - Middlesbrough South and East Cleveland)Department Debates - View all Simon Clarke's debates with the HM Treasury
Public Service Pensions and Judicial Offices Bill [ Lords ] (Second sitting)
Simon Clarke ExcerptsThursday 27th January 2022
(2 years, 9 months ago)
Public Bill CommitteesRead Full debate Public Service Pensions and Judicial Offices Act 2022 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 27 January 2022 - (27 Jan 2022)
The Chief Secretary to the Treasury (Mr Simon Clarke)
It will be helpful if I can preface my remarks on clause 99 onwards by returning briefly to clause 5 in relation to the question asked by the hon. Member for Glenrothes, because I can now provide some further information about opting into the remedy. The purpose of clause 5 is to rectify any discrimination that may have resulted in members opting out of relevant pension schemes. It is very important that schemes are permitted to require information to be provided by members to establish why they opted out of the relevant pension scheme, as there may be reasons other than discrimination why members have opted out. It is appropriate that schemes have the power, so that they can ensure that the remedy applies for appropriately affected members. The power allows schemes to set conditions in scheme regulations, as schemes will be best able to assess what it is reasonable to expect a member to provide. The consequences of opting back into the pension schemes are very significant for members’ pension rights and therefore it is important that schemes can take decisions under clause 5 while in possession of relevant information. To help to ensure consistency, scheme regulations are generally subject to Treasury consent, which will ensure fairness.
Clauses 99 to 103 will allow the Treasury to make regulations that establish new public pension schemes for the members of the Bradford & Bingley staff and NRAM pension schemes. Those schemes currently reside under UK Asset Resolution, the holding company responsible for the Government’s remaining interests in those companies. The provisions also include protections that will ensure that members’ rights to pensions and other benefits are at least as good following their transfer to the new public schemes, and set out requirements to ensure that members are protected in the event of future changes to the scheme rules. These clauses will further allow the Treasury to make regulations transferring the assets and liabilities of the current schemes to a nominee of the Treasury, or a company established by the Treasury, for their disposal.
Establishing the new schemes will accelerate the timeline for UKAR to be wound up, helping to relieve the taxpayer of the cost of UKAR’s ongoing operations, and create a more efficient structure for the Government to meet their liabilities towards the scheme members.
Tulip Siddiq (Hampstead and Kilburn) (Lab)
The Government have yet to set out the estimated costs of the provisions for Bradford & Bingley and Northern Rock and whether those costs are in addition to the £17 billion budgeted for the McCloud response or are part of the same overall costs. I would be grateful if the Minister could provide some clarity on that matter.
Mr Clarke
To be clear, the measures affecting Bradford & Bingley and NRAM are net cost savings, so this is a net benefit for the Exchequer; it actually reduces costs.
Question put and agreed to.
Clause 99 accordingly ordered to stand part of the Bill.
Clauses 100 to 103 ordered to stand part of the Bill.
Clause 104
Transfer of other pensions and benefits
The Chair
With this it will be convenient to discuss the following:
Government amendment 40.
Clause stand part.
Clause 105 stand part.
Government amendments 41 and 42.
Clauses 106 to 108 stand part.
Mr Clarke
The amendments in this group will ensure that the Bill reflects the conversion of Bradford & Bingley from a public limited company to a private limited company in October 2021, after the introduction of the Bill. Following the nationalisation in 2008, the Government have gradually been divesting their assets in Bradford & Bingley, and confirmed the return of the company to private ownership on 2 November 2021. Prior to the sale, Bradford & Bingley, which was then registered as a public limited company, was re-registered at Companies House as Bradford & Bingley Limited. These amendments will reflect that change, by changing references to Bradford & Bingley plc in the Bill to Bradford & Bingley Limited.
The amendments will allow the Government to transfer pension liabilities residing under Bradford & Bingley to the Treasury. They will also allow information to be shared between the Treasury, UK Asset Resolution Ltd and Bradford & Bingley for the purpose of facilitating those transfers.
Clauses 104 to 108 will make a number of additional provisions, including those giving the Treasury the power to transfer other relevant pension liabilities related to individuals’ past employment at Bradford & Bingley or Northern Rock to the Treasury; conferring powers on the Treasury to vary the way in which taxes apply to persons in scope of part 2, with the intention that this part of the Bill will be tax neutral; conferring powers on the Treasury to obtain the information needed to establish and administer the new public schemes, and to administer the other relevant pension liabilities; and requiring the Treasury to consult the trustees of the current schemes before making regulations concerning the new public schemes.
Amendment 39 agreed to.
Amendment made: 40, in clause 104, page 83, line 11, leave out first “Plc” and insert “Limited”—(Mr Clarke.)
This is one of a number of amendments reflecting the conversion of Bradford & Bingley from a public company to a private company.
Clause 104, as amended, accordingly ordered to stand part of the Bill.
Clause 105 ordered to stand part of the Bill.
Clause 106
Information
Amendments made: 41, in clause 106, page 86, line 6, leave out “Plc” and insert “Limited”.
This is one of a number of amendments reflecting the conversion of Bradford & Bingley from a public company to a private company.
Amendment 42, in clause 106, page 86, line 14, leave out “Plc” and insert “Limited”—(Mr Clarke.)
This is one of a number of amendments reflecting the conversion of Bradford & Bingley from a public company to a private company.
Clause 106, as amended, ordered to stand part of the Bill.
Clauses 107 and 108 ordered to stand part of the Bill.
Clause 109
Retirement date for holders of judicial offices etc
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Government amendment 48.
That schedule 1 be the First schedule to the Bill.
Mr Clarke
Amendment 48 very simply corrects a cross-referencing error in schedule 1. It references the power described in paragraph 44(2) in schedule 1, which confers upon the Lord Chancellor the power to reinstate retired magistrates, rather than referencing sub-paragraph (3), as currently drafted.
Clause 109, together with schedule 1, will increase the judicial mandatory retirement age to 75. Schedule 1 also gives the Lord Chancellor powers, with the concurrence of the Lord Chief Justice, to reinstate retired magistrates below the new mandatory retirement age where there is business need.
Tulip Siddiq
We support the clause, which raises the retirement age of judges to 75, as we recognise the need to deal with the backlog in the judicial system. However, I wanted to make the point to the Minister that measures to deal with the backlog should not distract from efforts to improve the diversity of the judiciary. Shockingly, according to Government data—this will not come as a surprise to the Minister—only 1% of judges were black, and only 4% of senior court appointments came from ethnic minority backgrounds. I want some reassurance from the Minister that the Government will take steps to ensure that this provision does not hinder efforts, in any way, to bringing a more diverse workforce to the bench.
Mr Clarke
I thank the hon. Lady for her point, which was well made. Obviously, judicial diversity is very important. That is something that we place a firm emphasis on as we look to the future of the judiciary. As she rightly says, we must ensure that we can deal with the backlog in our courts, which has accrued due to the pandemic, and also deal with the genuine challenges of ensuring that we have enough people in the medium term.
The measures that we are taking will retain around 2,000 extra magistrates and 400 extra judges annually, when compared with retaining a mandatory retirement age of 70. We therefore believe that that is the right thing to do. We absolutely remain committed—as does the Ministry of Justice, more importantly—to the wider principle that we must do everything within our power to ensure that the bench better reflects modern society.
Question put and agreed to.
Clause 109 accordingly ordered to stand part of the Bill.
Schedule 1
Retirement date for holders of judicial offices etc
Amendment made: 48, in schedule 1, page 105, line 35, leave out “(3)” and insert “(2)”—(Mr Clarke.)
This amendment corrects an error in the cross-reference in paragraph 44(6) of Schedule 1.
Schedule 1, as amended, agreed to.
Clause 110
Allowances for judicial office holders
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss that schedule 2 be the Second schedule to the Bill.
Mr Clarke
Clause 110 and schedule 2 will provide the Lord Chancellor with the power to pay allowances to judicial officeholders where that power does not currently exist.
Question put and agreed to.
Clause 110 accordingly ordered to stand part of the Bill.
Schedule 2 agreed to.
Clause 111
Sitting in retirement offices
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss that schedule 3 be the Third schedule to the Bill.
Mr Clarke
Clause 111, by reference to schedule 3, creates new sitting in retirement offices. Schedule 3 lists the existing judicial offices, referred to in the Bill as original offices, in respect of which sitting in retirement offices are to be created.
Question put and agreed to.
Clause 111 accordingly ordered to stand part of the Bill.
Schedule 3 agreed to.
Clause 112
Appointment to sitting in retirement offices
Question proposed, That the clause stand part of the Bill.
Mr Clarke
Clause 112 creates the appointing power for the new sitting in retirement offices, as well as a secondary power for regulations to be made by the Lord Chancellor, the Department of Justice in Northern Ireland or Welsh Ministers, as appropriate, to determine eligibility to apply to these offices.
Clauses 113 and 114 make further provision in connection with sitting in retirement appointments, including matters such as remuneration, retirement age and judicial discipline.
Question put and agreed to.
Clause 112 accordingly ordered to stand part of the Bill.
Clauses 113 and 114 ordered to stand part of the Bill.
Clause 115
Power to add new offices
Question proposed, That the clause stand part of the Bill.
Mr Clarke
Clause 115 creates a new power to add new judicial offices to schedule 3, which in turn will create the sitting in retirement equivalent of that office. This power is given to the Department of Justice in Northern Ireland, Welsh Ministers or the Lord Chancellor, as appropriate.
Question put and agreed to.
Clause 115 accordingly ordered to stand part of the Bill.
Clause 116
Consequential etc provision
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss that schedule 4 be the Fourth schedule to the Bill.
Mr Clarke
Clause 116 introduces schedule 4, which makes technical changes to existing legislation to give effect to the new sitting in retirement policy. In some circumstances, schedule 4 also repeals existing legislation.
Clause 116 also creates a new regulation, making power exercisable by the Department of Justice in Northern Ireland, Welsh Ministers or the Lord Chancellor, as is appropriate by context. This power allows additional consequential amendments to be made in connection with part 3 of the Bill, to ensure the new sitting in retirement policies operate as intended.
Question put and agreed to.
Clause 116 accordingly ordered to stand part of the Bill.
Schedule 4 agreed to.
Clause 117
Regulations and directions
Mr Clarke
I beg to move Government amendment 43, in clause 117, page 93, line 22, at end insert—
“(ba) scheme regulations for a local government scheme (within the meaning of Chapter 3 of Part 1), or”
This amendment disapplies the subsections (1) to (7) of clause 117 in relation to scheme regulations for a local government scheme.
Mr Clarke
Clause 117 defines the terms “affirmative procedure” and “negative procedure”, in order that regulations made under the Bill follow the appropriate parliamentary process. Amendment 43 is a clarifying amendment to make clear that the provisions described in clause 117 do not apply to regulations under chapter 3 concerning the local government schemes.
Regulations under chapter 3 have been made under the Public Service Pensions Act 2013 or the Public Service Pensions Act (Northern Ireland) 2014, rather than under this Bill. The 2013 and 2014 Acts contain the relevant provisions for regulations made under those Acts.
Amendment agreed to.
Clause 117, as amended, ordered to stand part of the Bill.
Clause 118
Extent
Question proposed, That the clause stand part of the Bill.
Mr Clarke
The clause sets out that the Act extends to England and Wales, Scotland and Northern Ireland. The devolved Administrations are currently considering providing legislative consent motions where the Bill makes provision in respect of areas of devolved competence.
Question put and agreed to.
Clause 118 accordingly ordered to stand part of the Bill.
Clause 119
Commencement
Mr Clarke
I beg to move amendment 44, in clause 119, page 94, line 10, leave out paragraph (d) and insert—
“(d) Chapter 3, and sections 97 and 98 so far as they apply for the purposes of that Chapter, come into force in relation to a local government scheme within section79(2)(a) or (3)(a) on—
(i) 1 October 2023, or
(ii) such earlier day as the Treasury may by regulations appoint;
(da) Chapter 3, and sections 97 and 98 so far as they apply for the purposes of that Chapter, come into force in relation to a local government scheme within section79(2)(b) or (3)(b) on—
(i) 1 October 2023, or
(ii) such earlier day as the Department of Finance in Northern Ireland may by order appoint;”.
This amendment ensures that Chapter 3 of Part 1 (local government) comes into force, at the latest, on 1 October 2023, and confers power on the Treasury (or, in Northern Ireland, the Department of Finance) to bring the Chapter into force earlier.
The Chair
With this it will be convenient to discuss the following:
Government amendments 45 and 46.
Clause stand part.
Mr Clarke
The clause provides when and how the provisions of the Bill are to come into force, including powers for certain provisions to be brought into force by commencement regulations. The amendments in the group relate to local government schemes and align the coming into force of the Bill with that provided for in respect of the chapter 1 schemes. The amendments provide that chapter 3 of the Bill, to the extent that it has not come into force already, should come into force on 1 October 2023, unless regulations issued by HM Treasury or the Department of Finance in Northern Ireland provide for an earlier date. This change ensures consistency across the public service pension schemes and allows time for local administrators to make detailed preparations for the implementation of the remedy.
Amendment 44 agreed to.
Amendments made: 45, in clause 119, page 94, line 41, at end insert “, or
(b) Chapter 3, or sections 97 and 98 so far as they apply for the purposes of that Chapter, in relation to a local government scheme within section79(2)(b) or (3)(b).”.
This amendment is consequential on Amendment 44.
Amendment 46, in clause 119, page 94, line 46, after “(2)(b)” insert “, (2)(da)”.—(Mr Clarke.)
This amendment is consequential on Amendment 44.
Clause 119, as amended, ordered to stand part of the Bill.
Clause 120
Short title
Mr Clarke
The purpose and effect of clause 120 is to confirm that the short title of the Bill is the Public Service Pensions and Judicial Offices Act 2022. Amendment 47 is a procedural amendment to remove the privilege amendment from the other place.
Amendment 47 agreed to.
Clause 120, as amended, ordered to stand part of the Bill.
New Clause 1
Amendments relating to employer cost cap
“(1) Section 12 of PSPA 2013 (employer cost cap) is amended in accordance with subsections (2) to (9).
(2) After subsection (1) insert—
“(1A) Subsection (1) must be complied with before the end of the period of one year beginning with the day on which the scheme’s first valuation under section 11 is completed.”
(3) For subsection (2) substitute—
“(2) A reference in this section to “the employer cost cap” of a scheme under section 1 is a reference to the rate set by virtue of subsection (1) in relation to the scheme.”
(4) In subsection (3)—
(a) after “cap” insert “of a scheme under section 1”;
(b) after “set” insert “, and the changes in the cost of such a scheme are to be measured,”.
(5) In subsection (4)—
(a) in paragraph (a), for “the cap” substitute “the employer cost cap of the scheme”;
(b) in paragraph (b)—
(i) for “subsequent valuations” insert “the second or any subsequent valuation”;
(ii) for “the cap” substitute “the employer cost cap of the scheme”;
(c) in paragraph (c)—
(i) for “the extent to which” substitute “whether and if so to what extent”;
(ii) for “of this section” substitute “mentioned in paragraph (b)”;
(d) after paragraph (c) insert—
“(d) that the data, methodologies and assumptions that are to be used for the purposes mentioned in paragraph (b) are to relate, to any extent, to—
(i) the growth in the economy, or any sector of the economy, of the United Kingdom or any part of the United Kingdom,
(ii) the growth in earnings of any group of persons over any period, or
(iii) the rate of inflation (however measured) over any period.”
(6) After subsection (4) insert—
“(4A) The power to give directions by virtue of subsection (4)(d) is not affected by any statement made before 27 May 2021 by the Treasury, or any Minister of the Crown, relating to the data, methodologies and assumptions that are, or are not, to be used for the purposes mentioned in subsection (4)(b).”
(7) In subsection (5)(a) for “(and any connected scheme)” substitute “(determined, if and so far as provided for by virtue of subsection (4)(c), taking into account the costs of any connected scheme)”.
(8) In subsection (6), in the opening words—
(a) for “the scheme” substitute “a scheme under section 1”;
(b) for “the margins” substitute “either of the margins specified under subsection (5)(a)”.
(9) After subsection (7) insert—
“(7A) Treasury directions may specify the time at which any increase or decrease of members’ benefits or contributions that is provided for under subsection (6) is to take effect.
(7B) Treasury directions may require that provision contained in scheme regulations under subsection (6) permits steps to be—
(a) agreed by virtue of paragraph (a) of that subsection, or
(b) determined by virtue of paragraph (b) of that subsection,
only after the scheme actuary has certified that the steps would, if taken, achieve the target cost for the scheme.
(7C) Treasury directions under subsection (7B) may specify—
(a) the costs or changes in costs that are to be taken into account, or
(b) the data, methodologies and assumptions that are to be used,
for the purposes of determining whether any steps would, if taken, achieve the target cost for the scheme.
(7D) In subsection (7B) “the scheme actuary”, in relation to a scheme under section 1, means the actuary who carried out, or is for the time being exercising actuarial functions in relation to, the valuation under section 11 by reference to which it has been determined that the costs of the scheme have gone, or may go, beyond either of the margins specified under subsection (5)(a).”
(10) Section 12 of PSPA(NI) 2014 (employer cost cap) is amended in accordance with subsections (11) to (19).
(11) After subsection (1) insert—
“(1A) Subsection (1) must be complied with before the end of the period of one year beginning with the day on which the scheme’s first valuation under section 11 is completed.”
(12) For subsection (2) substitute—
“(2) A reference in this section to “the employer cost cap” of a scheme under section 1 is a reference to the rate set by virtue of subsection (1) in relation to the scheme.”
(13) In subsection (3)—
(a) after “cap” insert “of a scheme under section 1”;
(b) after “set” insert “, and the changes in the cost of such a scheme are to be measured,”.
(14) In subsection (4)—
(a) in paragraph (a), for “the cap” substitute “the employer cost cap of the scheme ”;
(b) in paragraph (b)—
(i) for “subsequent valuations” insert “the second or any subsequent valuation”;
(ii) for “the cap” substitute “the employer cost cap of the scheme”;
(c) in paragraph (c)—
(i) for “the extent to which” substitute “whether and if so to what extent”;
(ii) for “of this section” substitute “mentioned in paragraph (b)”;
(d) after paragraph (c) insert—
“(d) that the data, methodologies and assumptions that are to be used for the purposes mentioned in paragraph (b) are to relate, to any extent, to—
(i) the growth in the economy, or any sector of the economy, of the United Kingdom or any part of the United Kingdom,
(ii) the growth in earnings of any group of persons over any period, or
(iii) the rate of inflation (however measured) over any period.”
(15) After subsection (4) insert—
“(4A) The power to give directions by virtue of subsection (4)(d) is not affected by any statement made before 27 May 2021 by the Department of Finance, or any other department, relating to the data, methodologies and assumptions that are, or are not, to be used for the purposes mentioned in subsection (4)(b).”
(16) In subsection (5)(a), for “(and any connected scheme)” substitute “(determined, if and so far as provided for by virtue of subsection (4)(c), taking into account the costs of any connected scheme)”.
(17) In subsection (6), in the opening words—
(a) for “the scheme” substitute “a scheme under section 1”;
(b) for “the margins” substitute “either of the margins specified under subsection (5)(a)”.
(18) After subsection (7) insert—
“(7A) Directions given by the Department of Finance may specify the time at which any increase or decrease of members’ benefits or contributions that is provided for under subsection (6) is to take effect.
(7B) Directions given by the Department of Finance may require that provision contained in scheme regulations under subsection (6) permits steps to be—
(a) agreed by virtue of paragraph (a) of that subsection, or
(b) determined by virtue of paragraph (b) of that subsection,
only after the scheme actuary has certified that the steps would, if taken, achieve the target cost for the scheme.
(7C) Directions under subsection (7B) may specify—
(a) the costs or changes in costs that are to be taken into account, or
(b) the data, methodologies and assumptions that are to be used,
for the purposes of determining whether any steps would, if taken, achieve the target cost for the scheme.
(7D) In subsection (7B) “the scheme actuary”, in relation to a scheme under section 1, means the actuary who carried out, or is for the time being exercising actuarial functions in relation to, the valuation under section 11 by reference to which it has been determined that the costs of the scheme have gone, or may go, beyond either of the margins specified under subsection (5)(a).”
(19) In subsections (3), (4), (5), (8), (9) and (10) omit “and Personnel”.”.—(Mr Clarke.)
This new clause reproduces, with technical changes, the effect of subsections (2), (3), (6) and (7) of clause 86 as it currently stands in the Bill. It also adds provision for the changes to the operation of the cost cap regime that are to be introduced for the 2020 and subsequent valuations - in particular the economic check and the reformed scheme only design.
Brought up, read the First and Second time, and added to the Bill.
New Clause 2
Operation of employer cost cap in relation to 2016/17 valuation
“(1) The requirement in provision made under section 12(5)(a) of PSPA 2013 that the cost of a section 1 scheme must remain within a margin above the employer cost cap of the scheme does not apply, and is treated as never having applied, in relation to the cost of the scheme that is calculated by reference to the scheme’s 2016/17 valuation.
(2) Accordingly, provision made under section 12(6) of that Act does not apply, and is treated as never having applied, in relation to a case in which the cost of a section 1 scheme that is calculated by reference to the scheme’s 2016/17 valuation goes beyond a margin above the employer cost cap of the scheme.
(3) In subsections (1) and (2) and this subsection—
(a) “section 1 scheme” means a scheme under section 1 of PSPA 2013;
(b) “the employer cost cap”, in relation to a section 1 scheme, has the same meaning as in section 12 of PSPA 2013;
(c) a reference to a section 1 scheme’s “2016/17 valuation” is to the scheme’s valuation under section 11 of PSPA 2013 the effective date of which is a date in 2016 or 2017.
(4) The requirement in provision made under section 12(5)(a) of PSPA(NI) 2014 that the cost of a section 1 scheme must remain within a margin above the employer cost cap of the scheme does not apply, and is treated as never having applied, in relation to the cost of the scheme that is calculated by reference to the scheme’s 2016/17 valuation.
(5) Accordingly, provision made under section 12(6) of that Act does not apply, and is treated as never having applied, in relation to a case in which the cost of a section 1 scheme that is calculated by reference to the scheme’s 2016/17 valuation goes beyond a margin above the employer cost cap of the scheme.
(6) In subsections (4) and (5) and this subsection—
(a) “section 1 scheme” means a scheme under section 1 of PSPA(NI) 2014;
(b) “the employer cost cap”, in relation to a section 1 scheme, has the same meaning as in section 12 of PSPA(NI) 2014;
(c) a reference to a section 1 scheme’s “2016/17 valuation” is to the scheme’s valuation under section 11 of PSPA(NI) 2014 the effective date of which is a date in 2016 or 2017.
(7) The actuarial valuation with an effective date of 31 March 2016 that was signed on 18 December 2018 under regulation 123 of the Local Government Pension Scheme Regulations (Northern Ireland) 2014 (S.R. (N.I.) 2014 No. 188) is of no effect.”— (Mr Clarke.)
This new clause reproduces, with technical changes, the effect of subsections (4), (8) and (9) of clause 86 as it currently stands in the Bill.
Brought up, read the First time.
Question put, That the clause be read a Second time.
Tulip Siddiq
I beg to move, That the clause be read a Second time.
I intend to press new clause 14, which I tabled on behalf of the Opposition Front Bench, to a vote. It would require the Government to review how losses arising from the pension trap can be compensated and to report on the review within two months of the passage of this legislation. We are concerned that the Bill does not take into account the so-called pension trap, which means that some members may lose benefits due to a higher retirement age brought in under the new pension schemes. This has come about because police and fire service pensions operate differently from other public sector schemes in that they are based on a 30-year service record rather than a specific retirement age.
The Police Superintendents Association, the Police Federation, the Fire Brigades Union and others have raised fears that individual members could lose out in their pension schemes because of the way that the affected years, between 2015 and 2022, are being treated by the legislation. It cannot be right that pension scheme members in the police and fire service, who have given so much service to the country, will see the overall value of their pensions decline even as they continue to work and to pay contributions, so I ask the Minister whether he will commit the Government to entering discussions with the relevant unions and membership bodies to bring forward a fair solution to the pension trap, as it is called. To demonstrate the Government’s commitment to reviewing the issue and finding a fair solution, he should support the new clause.
Mr Clarke
I thank the hon. Lady for tabling the new clause, which would require the Chancellor to lay a report before Parliament within two months of the passing of the Act setting out how the Government could compensate scheme members who had reached the required number of years to retire with full benefits under the legacy scheme but who would need to continue to work if they wished to retire with full benefits under the reformed scheme. The intention of the new clause appears to be to require the Chancellor to devise a way to compensate scheme members with remediable service for any reduction of future pension benefits resulting from the prospective McCloud remedy legislated for in clause 8, and the difference in pension ages between the legacy and reformed schemes.
The Government received representations made by police staff associations regarding members of the 1987 and 2015 police pension schemes who reached 30 years of service in the legacy pension scheme before reaching minimum pension age in the reformed scheme. Lord Davies of Brixton proposed amendments regarding that issue during the Bill’s passage through the other place; however, by referring to full benefits in the reformed pension scheme, the new clause appears to go considerably beyond the police staff associations’ representations and proposals, effectively requiring compensation for those below normal pension age, not minimum pension age, in the reformed scheme.
Under the Bill, all members in active service will be moved into the reformed schemes in respect of service from 1 April this year onward—that is what is known as the prospective remedy—to ensure that all active members are treated equally from that date onward. For the avoidance of doubt, no legacy scheme member will be unable to access the full value of their accrued benefits in their legacy scheme once they reach the required age or length of service. The vast majority of scheme members will be able to access their benefits in reformed schemes at this point, with a fair actuarial reduction for taking scheme benefits below their normal pension age.
Chris Stephens (Glasgow South West) (SNP)
There is obviously a serious issue here, on which the Government have had representations. Can the Minister assure the Committee that discussions will continue between trade unions and other associations and the Government to try to fix this problem?
Mr Clarke
I thank the hon. Gentleman for the spirit in which he asks his question. We always want to discuss these issues as fully as possible with a view to finding viable options where they exist. As I said, the Home Office has consulted on detailed regulations to implement the prospective McCloud remedy for the police pension scheme, and it will bring forward the outcome of that consultation in due course.
The Government must not take action that inadvertently creates a new form of the very discrimination that this legislation is designed to address. The Government must also safeguard the purpose of the reforms proposed by Lord Hutton and ensure that public service pension schemes are put on a sustainable fiscal footing. As the Independent Public Service Pensions Commission put it,
“Allowing current members to continue to accrue further benefits in the present schemes for many decades would be unfair and inequitable to the new members coming behind them.”
The reformed public service pension schemes remain among the most generous schemes available in the United Kingdom. Based on the Office for National Statistics’ most recent assessment, 6.3 million public sector workers participate in these valuable schemes, while only 0.7 million workers in the private sector have access to defined-benefit schemes that are open to new members.
I am concerned that the new clause ultimately seeks to oblige the Chancellor to devise measures that would contradict these crucial aims of the prospective McCloud remedy. Compensating members with remediable service for the difference in pension age between their legacy and reformed schemes would, effectively, leave a protected class of public service pension scheme members beyond 31 March 2022, which could perpetuate the discrimination identified by the courts, or give rise to new discrimination. It would also severely weaken the efficacy of the prospective remedy for many years to come, at very considerable cost to the taxpayer.
To summarise, I genuinely thank the hon. Member for Hampstead and Kilburn for bringing attention to this issue, and reassure her that the Government have been considering the position of these members. However, careful consideration must be given to the need to avoid perpetuating the discrimination identified by the courts, or introducing new discrimination against other pension scheme members, or inadvertently undoing much of the policy aims of this Bill, and this new clause asks the Chancellor to propose a means of doing just that. I therefore, respectfully, ask the hon. Lady to withdraw the new clause.
Peter Grant (Glenrothes) (SNP)
The Minister started off by suggesting his main concern was that the new clause seeks to go further than has been requested by the Police Superintendents Association. If that was the case, then the Minister could have easily tabled an amendment that came closer, in his view, to delivering what the PSA was asking for without going significantly further. He has not done that, so we have to wonder if he had any intention of addressing the issue had the new clause not been tabled.
We are asking the Chancellor to table a report and present it to Parliament. There is nothing in the new clause that would require the Chancellor to commit a single penny of additional spending. It does not tell the Chancellor what his or her conclusions have to be at the end of that. It is perfectly in line with the wording of the new clause for the Chancellor to produce a report to say, “We could remedy the situation by doing a, b, c, x, y and z, but I cannot recommend doing that because that would introduce unfair discrimination that would be contrary to the purpose of the Act.”
The Minister is trying to make it seem as if the new clause is about forcing the Government to incur additional expenditure. My reading of it is that it is deliberately worded to avoid asking for a commitment at this stage, but it seeks to force the Government to recognise that there might still be a massive weakness in the Bill and to force the Chancellor to come forward with a solution that might address that weakness. If the solution proves to be unworkable or to be unfair in other ways, Parliament has the option to reject it.
Surely, it is wrong, at this stage, that a potentially serious unfairness should be left sitting in the Bill just because we are not sure we can find a way of fixing it. That is not a fair response to give, either to the hon. Member for Hampstead and Kilburn, who moved the new clause, or to those officers who are likely to be affected by it.
Liz Twist (Blaydon) (Lab)
I rise briefly to echo the points made by my friend the hon. Member for Glenrothes. The new clause calls for a review to consider the issues further. In responding, can the Minister say what steps he will be taking to resolve those outstanding issues and through what form the discussions will take place?
Mr Clarke
I thank the hon. Members for their comments and questions. I entirely echo what the hon. Member for Reading East said about the debt we owe to our police and fire services. Collectively, they are perform enormous public service and we are all in their debt.
We have concerns about the wording of the new clause, particularly where it says that a loss “could be compensated,” implying that compensation should be paid. We are concerned that that creates an expectation on Government.
The Home Office, as the responsible Department, is leading a genuine consultation process about the police pensions services. It will bring forward the outcome of that consultation in due course. To address the issue at this point would fall outside my remit and the remit of this Bill.
Tulip Siddiq
First, I want to say that my new clause is supported by the Police Superintendents Association. I checked it with the association before I tabled it.
I listened to what the Minister had to say, but the new clause does not really propose a solution, which is the Government’s job. We were pushing for a review of the issue, which we know is important to the Police Superintendents Association, the Police Federation and the Fire Brigades Union. I am disappointed that the Minister does not seem to recognise what a concern the pension trap is to those organisations. I wish to push the new clause to a vote, Sir Graham.
Question put, That the clause be read a Second time.
Mr Clarke
I thank you, Sir Graham, the Clerks and the officials for all their work on the Bill, and colleagues throughout the House and in the other place for their contributions. I repeat what I said at the outset about the debt I owe to my team for the hard work that has gone into the Bill, which I really do appreciate. It is very impressive.
As I set out in my opening remarks, the Bill’s underlying intent—that public servants should be provided with high-quality pensions on a fair and equal basis—is shared throughout the House. I listened closely to Members’ comments today and am grateful for them. I hope I have provided reassurance where it was sought and that we can continue to work together on the Bill. I look forward to further consideration on Report.
Public Service Pensions and Judicial Offices Bill [Lords] Debate
Full Debate: Read Full DebateDepartment: HM Treasury
Simon Clarke
Main Page: Simon Clarke (Conservative - Middlesbrough South and East Cleveland)Department Debates - View all Simon Clarke's debates with the HM Treasury
Public Service Pensions and Judicial Offices Bill [Lords]
Simon Clarke ExcerptsTuesday 22nd February 2022
(2 years, 9 months ago)
Commons ChamberRead Full debate Public Service Pensions and Judicial Offices Act 2022 Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: Consideration of Bill Amendments as at 22 February 2022 - large print - (22 Feb 2022)
The Chief Secretary to the Treasury (Mr Simon Clarke)
I beg to move, That the clause be read a Second time.
Madam Deputy Speaker (Dame Rosie Winterton)
With this it will be convenient to discuss the following:
New clause 1—Guidance to public service pension scheme managers on investment decisions—
“(1) The Public Service Pensions Act 2013 is amended in accordance with subsection (2).
(2) In schedule 3, paragraph 12(a), at end insert ‘including guidance or directions on investment decisions which it is not proper for the scheme manager to make in light of UK foreign and defence policy’.”
This new clause would enable the Secretary of State to issue guidance to those authorities that administer public sector pension schemes, including the local government pension scheme, that they may not make investment decisions that conflict with the UK’s foreign and defence policy.
New clause 2—Investment decisions in funded schemes—
“(1) Section 3 of the Public Service Pensions Act 2013 is amended in accordance with subsection (2).
(2) After sub-paragraph (3) insert—
‘(3A) Scheme regulations must require an authority’s investment strategy to ensure that investment decisions are consistent with the Glasgow Climate Pact 2021.’”
This new clause would require public sector pensions schemes to ensure future investments are consistent with the climate science, ambitions and timeframes agreed at the COP26 UN Climate Summit.
New clause 3—Investment decisions in funded schemes: fossil fuel assets—
“(1) Section 3 of the Public Service Pensions Act 2013 is amended in accordance with subsection (2).
(2) After sub-paragraph (3) insert—
‘(3A) Scheme regulations must require the fund to have removed all investment in fossil fuel assets by 2030.’”
This new clause would require public sector pensions schemes to disinvest from fossil fuels by 2030, by removing fossil fuel assets from their investment portfolios, securities transactions and balance sheets.
New clause 4—Review of the impact of this Act on fairness—
“(1) The Chancellor of the Exchequer must commission a review of the impact of this Act on fairness to members in receipt of pensions to which this Part applies.
(2) The Chancellor of the Exchequer must prepare and publish a report on this review within six months of the passage of this Act and must lay a copy of the report before Parliament.
(3) The review under subsection (1) must include an assessment of the impact of the provisions of this Act on women.
(4) The review under subsection (1) must make recommendations as to whether further legislation should be brought forward by the Government to close the public service pensions gap between men and women.”
This new clause would require the Government to report on the impact of this Part on fairness, especially with regards to women.
New clause 5—Guidance—
“(1) Within six months of the passage of this Act the Chancellor of the Exchequer must lay before Parliament a copy of guidance to members of pension schemes affected by this Part.
(2) The purpose of the guidance under subsection (1) is to ensure members are able to make informed choices about their pensions.
(3) The Government must provide a free helpline or online service which members can use to receive further guidance about their pension.
(4) Within six months of the day on which the guidance is published the Government must lay before Parliament a report on its effectiveness in achieving the purpose in subsection (2).”
This new clause would require the Government to publish guidance to members of pension schemes affected by this Part and allows for provision of a helpline or online service to offer further assistance.
New clause 6—Impact on the recruitment of new holders of judicial offices—
“(1) Within 12 months of the passage of this Act the Government must commission an evaluation of the impact of this Act on recruitment of new holders of judicial offices and on the diversity of the judiciary.
(2) The Chancellor of the Exchequer must prepare and publish a report on this evaluation and must lay a copy of the report before Parliament.”
This new clause would require the Government to publish an annual update on progress on recruiting new members to the judiciary and increasing diversity.
New clause 8—Compensation of losses incurred by closure of legacy schemes—
“(1) The Chancellor of the Exchequer must review how a loss incurred by a member with remediable service who is transferred to the new scheme under section 80 and—
(a) reaches the required number of years of pensionable service to retire with full benefits under the legacy scheme, and
(b) is unable to access the full value of those benefits because they must continue to work to retire with full benefits under the new scheme
could be compensated.
(2) The Chancellor of the Exchequer must prepare and publish a report on this review within two months of the passage of this Act and must lay a copy of the report before Parliament.”
This new clause would require the Government to review how losses arising from the “pension trap” could be compensated, and to report on the review within two months of the passage of the Act.
New clause 9—Equality impact analysis of provisions of this Act—
“(1) The Chancellor of the Exchequer must review the equality impact of the provisions of this Act in accordance with this section and lay a report of that review before the House of Commons within six months of the passage of this Act.
(2) A review under this section must consider the impact of those provisions on—
(a) people with protected characteristics (within the meaning of the Equality Act 2010), and
(b) the Government’s compliance with the public sector equality duty under section 149 of the Equality Act 2010.
(3) A review under this section must include a separate analysis of each separate measure in the Act, and must also consider the cumulative impact of the Act as a whole.”
This new clause would require the Government to review the equality impact of the provisions of this Act, and to report on the review within six months of the passage of the Act.
New clause 10—Report on losses incurred by closure of legacy schemes—
“The Chancellor of the Exchequer must consult with the relevant trade unions and other bodies representing pension scheme members and report within 6 months of the passage of this Act on the options available for addressing in a non-discriminatory manner any loss incurred by a member with remediable service who is transferred to the new scheme under section 80 and—
(a) reaches the required number of years of pensionable service to retire with full benefits under the legacy scheme, but
(b) is unable to access the full value of those benefits because they must continue to work to retire with full benefits under the new scheme.”
This new clause would require the Government to consult with the trade unions and other bodies representing members of the pension schemes who are affected by the “pensions trap” and to report on the options available to address this issue without causing discrimination.
Government amendments 1 to 17.
Amendment 24, in clause 92, page 67, line 39, leave out paragraph (c) and insert—
“(c) leave out paragraph (c).”
This amendment removes from the calculation of the employer cost cap the effect of changes in the cost of connected schemes, including the cost of rectifying the unlawful discrimination.
Amendment 22, page 67, line 39, leave out paragraphs (c) and (d).
This amendment removes from the Bill the amendment to Section 12 of the Public Service Pensions Act 2013 that would allow Treasury directions to determine whether the cost control mechanism would operate.
Amendment 23, page 70, line 27, leave out clause 93.
Government amendments 18 to 21.
Mr Clarke
It is a pleasure to open this debate. I wish briefly to remind Members why this is such an important piece of legislation that we must ensure we get right. Our public servants provide vital services on which we all rely and their unwavering commitment has been particularly vital during the covid pandemic. We have an obligation to continue to provide guaranteed pension benefits to reward those workers for their dedicated service, and must do so on a fairer basis and in a way that ensures that pensions are affordable and sustainable in future.
Let me turn to the amendments that I have tabled, which are largely technical ones to ensure the Bill works smoothly. New clause 7 makes it possible for the judicial pension scheme 2022 regulations to be subject to the made affirmative procedure rather than the draft affirmative procedure, which is the usual process for judicial scheme regulations. The Bill closes all current judicial pension schemes to future accrual on 31 March this year, so the change is necessary to ensure that the new pension scheme is in place for all judges on 1 April. There will therefore be no gap in judicial pension arrangements.
The provision in the new clause is an exceptional use of the made affirmative procedure in respect of judges’ pensions. It is limited to scheme regulations for the judiciary that are made within 28 days of Royal Assent, so it will be used only to make the judicial pension scheme 2022 regulations. It will not apply to any other public service pension schemes, which are generally made under the negative procedure, nor will it apply to any future amendments to judicial pension schemes.
The remainder of the amendments that I have tabled are minor and technical, with the aim of ensuring that the Bill is applied effectively and consistently. Amendment 19 relates to the commencement provision and simply ensures that different provisions in the Bill can come into force at the appropriate time.
Amendments 1 to 14 simply clarify the wording in various clauses in chapter 1. Together, the amendments give schemes the flexibility to implement the prospective and retrospective remedy in the way that is most efficient for their members.
Amendment 16 ensures that the remedy applies correctly to local government scheme members who were formerly members of other public service pension schemes. In particular, it makes sure that former members of other schemes are not disadvantaged because they previously participated in a scheme with a lower normal pension age.
Amendment 17 provides that the power under clause 81 for local government new scheme regulations to make provision regarding special cases must be exercised in accordance with Treasury directions issued by either Her Majesty’s Treasury or the Department of Finance in Northern Ireland.
On judicial offices, amendment 18 changes the extent of schedule 3 to ensure that if Welsh Ministers or the Department of Justice in Northern Ireland make subsequent changes to the list of devolved offices in schedule 3 using the power conferred on them by clause 125(1), incorrect text will not remain in statute in other parts of the United Kingdom.
Amendments 20 and 21 change a reference to the Special Educational Needs Tribunal for Wales to its new title, the Education Tribunal for Wales, thereby ensuring that a relevant sitting in retirement office is created in the Education Tribunal for Wales.
Tulip Siddiq (Hampstead and Kilburn) (Lab)
The pandemic has underlined the contribution made by the public sector workforce to this country. Public sector workers do so much to keep us all safe. Our brave doctors and nurses and those in the police, fire service and other public service professions deserve security and a high standard of living in retirement, so it is so important that the Government provide decent pensions on a fair and equal basis.
As the Minister knows, we welcome the Bill’s main provisions, and particularly the attempt to bring in a remedy in respect of the discrimination against younger members of the new pension schemes established by the coalition Government between 2014 and 2016. We also strongly support the introduction of reformed scheme-only design, which will mean that the cost of the legacy schemes will no longer be included in the cost control mechanism, along with the Government’s proposal to widen the margin of the cost corridor from 2% to 3% of pensionable pay. Those changes will provide greater certainty for members and for the taxpayer.
However, the Minister will not be surprised to hear that we have a number of concerns about the Bill. It is wide ranging and several Members have tabled amendments. I have a limited amount of time, so I will focus on the Opposition Front-Bench team’s primary concerns about the Bill and speak to the amendments that I have tabled on the Opposition’s behalf to address them.
First, I wish to highlight the concerns of public sector employees and trade unions about the lack of clarity on how the remedy, which I remind the House is estimated to cost around £17 billion, will impact the future value of members’ pension schemes. In the Committee debate on 27 January, the Minister stated that
“no member benefits will be cut and no member contribution rates will increase as a result of the 2016 valuations.”––[Official Report, Public Service Pensions and Judicial Offices Public Bill Committee, 27 January 2022; c. 10.]
That commitment is welcome but, as the TUC and others have said, it does not address the question of whether the remedy will be included in future valuations of the cost control mechanism.
Were the cost to be included at a later date, members could see their benefits cut and their contribution rates increase. I remind the House that the Public Accounts Committee warned that such an outcome would be fundamentally unjust as some of the cost of the Treasury’s £17 billion mistake would be passed on to members. Will the Minister please clarify whether the estimated £17 billion cost of the remedy will be included in the valuations of pension schemes under the cost control mechanism at some later date?
Secondly, I wish to discuss the Government’s proposal to introduce a so-called symmetrical economic check to the cost control mechanism. As the Minister will be aware, many public sector workers and their representative organisations believe that the proposals break the Treasury’s 25-year guarantee that no further fundamental reforms would be made to public service pensions following the 2011 settlement with trade unions. The Minister told us in Committee that
“the Government do not believe that the reforms breach that guarantee.”––[Official Report, Public Service Pensions and Judicial Offices Public Bill Committee, 27 January 2022; c. 36.]
However, I found a press statement issued by the Treasury on 20 December 2011 that makes it clear that the guarantee covered significant reform to the cost control mechanism, and the Paymaster General in the Conservative Government at the time said that it represented a “settlement for a generation”.
Does the Minister recognise that his Government’s proposal for an economic check risks undermining the Bill’s purported aim of restoring public service workers’ faith in their pension schemes? The National Education Union, the TUC and PRS have all warned that the proposals unfairly penalise pension scheme members for public sector pay constraint and lower-than-expected life expectancy. In practice, this will likely mean that any downwards breach of the cap will trigger the economic check. It seems the economic check is unfair, so will the Minister now accept that the Government must go back to the drawing board and rethink their proposals? I will be grateful if he addresses that issue.
Chris Stephens
I will be brief, having been on the Bill Committee. First, I should probably declare that I am a member of the Scottish local government pension scheme. I have always taken the view that a pension is deferred pay. In the past few weeks, university lecturers have taken industrial action because of the threats to their pension schemes; I have been very proud to visit their picket lines and offer my solidarity and support.
I wish to raise a couple of issues. I view new clause 1 as a Trojan horse. The main points that I want to raise are my support for the amendments tabled by my good friend the right hon. Member for Hayes and Harlington (John McDonnell), and the effects on employees and workers. In Committee, the Chief Secretary assured me that discussions were ongoing with trade unions to fix the issues. I hope that he will update the House on any discussions that have taken place since then and on the progress of those talks.
A basic principle that has been identified in relation to many of the amendments is that workers should not be penalised financially for mistakes that have been made in calculations by the Government or employers. It is a clear principle for many of us on the Opposition Benches that no worker should be penalised for such mistakes and that their pensions should not be affected. I therefore support the Opposition amendments in that regard.
Mr Simon Clarke
I thank all right hon. and hon. Members who have spoken today. I appreciate the constructive way in which all Opposition parties have handled the Bill. Today’s debate has focused on several important themes, which I will address in turn.
One central theme was the clarification requested by the hon. Member for Hampstead and Kilburn (Tulip Siddiq) and other Members about whether the estimated £17 billion cost of remedy will be included in future valuations of the cost control mechanism for unfunded schemes. The answer, definitively, is that it will not. The Government will reform the cost control mechanism to a reform scheme-only design for future valuations. I hope that that reassures the House.
Mr Clarke
Very briefly, but I am conscious of the need to make progress.
John McDonnell
I just need the Minister to say that it will be an employer cost, not a member cost.
Mr Clarke
The cost of remedy sits with the employer, namely the Exchequer.
John McDonnell
Let us be absolutely explicit. With regard to the cost control mechanism, is it the case that this will be not a member cost but an employer cost? Just nod, Minister: that is all you have to do.
Mr Clarke
I will ensure that it is on the record.
My right hon. Friend the Member for Newark (Robert Jenrick) raised the important issue of guidance for the local government pension scheme which will, in effect, prevent bodies from engaging in boycotts, divestment and sanctions activities. In our manifesto, we committed ourselves to stopping public bodies running their own direct or indirect boycotts, and the wider BDS movement. I am grateful to my right hon. Friend for the all the hard work that he has done to draw the House’s attention to this important issue. I also pay tribute to Lord Pickles for his work.
Mr Clarke
I am sorry, but I must make progress.
The Government have been paying particular attention to the arguments that my right hon. Friend has put forward, and I assure him that we take this issue very seriously.
The BDS movement has nothing to do with pensions and everything to do with politics. It has had the chilling effect of legitimising antisemitism among the hard left, leading to kosher food being taken from supermarket shelves, Jewish films being censored, and the disgusting spectacle of Jewish university student societies being threatened with bans.
Paula Barker
I thank the Minister. He has been very generous. Can he confirm that new clause 1 has nothing to do with BDS, a point to which you alluded, Madam Deputy Speaker?
Mr Clarke
On the contrary, it has everything to do with BDS, because, rather than promoting co-existence, debate and dialogue, it sows hatred and alienation. There is evidence of divisive BDS campaigns in public bodies, including too many Labour-led local authorities attempting to declare boycotts. Only this week we saw concerning, but sadly unsurprising, reports of a councillor in Wirral leading demands for Wirral’s pension committee to pass a BDS motion. Even under the leadership of the new Leader of the Opposition, Labour politicians continue to endorse the Palestine Solidarity Campaign and call for boycotts of Israel.
Andrew Percy
I thank the Minister for confirming that the new clause does indeed have everything to do with BDS—as it should, because it is an important contribution to making Jewish people in this country feel safe. I am afraid that we heard some embarrassing comments from Opposition Members earlier, featuring the false narrative of “Everything good is always on the left, and everything bad is always on the right.” As the Minister says, we see Labour activists and Labour councillors endorsing what is a fundamentally antisemitic campaign. I thank him for his words today, and I hope the Government will accept the new clause, because it is so important to fighting the scourge of antisemitism.
Mr Clarke
I thank my hon. Friend for what he has said, and I can confirm that we will be accepting the new clause. It will have the Government’s support this afternoon.
The hon. Member for Edinburgh West (Christine Jardine) raised a number of important points, but I will deal first with her new clause 4, which relates to fairness for members of public service pension schemes. This is also relevant to the point raised by the hon. Member for Hampstead and Kilburn.
Let me begin by reassuring the hon. Member for Edinburgh West that equal treatment and fairness for all members, including those with protected characteristics, remains a central tenet of the Bill. The Government have conducted a full equalities impact assessment of the Bill, which was published when it was introduced. In addition, when making the necessary changes in the scheme rules to deliver remedy, bodies will carry out any appropriate equalities analysis for their specific schemes, in compliance with the Equality Act 2010. Indeed, many schemes are currently concluding public consultations on the changes in scheme regulations to implement the prospective remedy. The Government intend that a similar exercise will take place when it comes to schemes making further changes in their scheme regulations to implement the retrospective remedy, prior to 1 October 2023.
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, or CARE, benefits. CARE schemes offer fairer outcomes to those who experience lower salary progression over the course of their careers. A number of women and those with other protected characteristics are likely to be better off under CARE schemes, on average. Moving on to guidance for members, I wholly agree that clear, accessible and accurate guidance—
Tulip Siddiq
I am grateful that the Minister is answering all the questions that I posed in my speech, but I want to go back to the question that my right hon. Friend the Member for Hayes and Harlington (John McDonnell) asked. The Minister has said that he will write to us. Can he write both to me and to my right hon. Friend, and can he be explicit that this will be not a member cost but an employer cost? Can he confirm that he will be explicit when he writes to us on that particular point?
Mr Clarke
The cost sits with both members and employers, but the liability rests with the Exchequer in relation to the £17 billion cost of remedy. That is how this sits. I will indeed commit to writing to clarify all these points, and I will write to the hon. Lady and the right hon. Gentleman.
Judicial diversity and recruitment were the next issues raised by the hon. Member for Edinburgh West. I emphasise that this is an important measure for ensuring that we deal with the covid backlog in our courts, which is why we need to look at raising the mandatory retirement age. We are conscious of the need to consider the wider issues around judicial diversity and to ensure that we have a judiciary that is truly representative of the public that it serves. The Ministry of Justice publishes annual official statistics on this issue that provide a detailed annual picture.
I would like to assure members that the potential impact of what is being done is small. Compared with retaining the current mandatory retirement age of 70, a higher retirement age is projected to result in a 1% to 3% decrease in diversity growth in the medium to long term. I emphasise the word “growth” there. Overall, judicial diversity is still forecast to improve, and this measure would not reduce diversity overall. There would be only a slight reduction in the trend growth, which is going in a positive direction. We remain committed to increasing judicial diversity, and we have just launched an ambitious new magistrates recruitment plan to bring in younger and more diverse candidates. The MOJ plans to recruit 1,000 judges a year over the next few years, and 4,000 magistrates over that period. There will be a lot of change to the make-up of the judiciary.
The so-called pensions trap—the losses incurred by public service pension scheme members due to the closure of the legacy schemes—has been discussed at length throughout the passage of the Bill. The new clauses tabled by the hon. Member for Hampstead and Kilburn (Tulip Siddiq) and the right hon. Member for Hayes and Harlington appear to be intended to require the Chancellor to devise a way to compensate scheme members with remediable service for any reduction in future pension benefits resulting from the prospective McCloud remedy legislated for in clause 80. As I have noted, it is important to stress that the Government must not take action that would be contrary to the intention of the Bill to remove the discrimination identified by the courts and to ensure that all members are treated equally from 1 April this year by accruing service regardless of their age.
The Government must also safeguard the purpose of the reforms proposed by Lord Hutton and ensure that public service pension schemes are put on a sustainable fiscal footing. The Independent Public Service Pensions Commission stated that
“allowing current members to continue to accrue further benefits in the present schemes for many decades would be unfair and inequitable to the new members coming behind them.”
Compensating or carving out members with remediable service for the difference in pension age between their legacy and reformed schemes would effectively leave a protected class of public service pension scheme members beyond 31 March 2022, which could perpetuate the discrimination identified by the courts or give rise to new discrimination. It is worth noting that the Home Office is looking at this issue as we speak and will respond to its full consultation, in which the issue has been considered at greater length. I look forward to seeing the results of its work.
I turn to the contribution from the right hon. Member for Hayes and Harlington on the reforms to the cost control mechanism. The cost control mechanism is designed to ensure a fair balance of risk between public service pension scheme members and taxpayers with respect to the costs of the schemes. These reforms resulted from recommendations by the Government Actuary, and the Government are seeking to implement them following a full public consultation process. They are the reformed scheme-only design and the economic check. The economic check is essential to ensure stability and consistency across the scheme. It is also important to improve the higher bar for benefit reductions or contribution increases if the country’s economic outlook changes.
On the point about the 25-year guarantee, the Government do not believe that these reforms breach that guarantee. The elements protected by the 25-year guarantee were set out in legislation, and the cost control mechanism is not included there. The Government are making these changes following a detailed review of the mechanism by the Government Actuary and a full and open consultation process.
Amendments 22 to 24, tabled by the right hon. Member for Hayes and Harlington and the hon. Member for Hampstead and Kilburn, seek to reverse two decisions. The first reflects the cost of remedies in the mechanism of the 2016 valuation, and the second prevents the waiving of any ceiling breaches of the 2016 valuations that may occur. As I have already noted, the cost control mechanism is designed both to protect the value of schemes to members and to protect the Exchequer from unforeseen costs. At each scheme valuation, the mechanism assesses the benefits that have accrued and are accruing to members, to determine whether future benefit levels or member contribution rates need to be adjusted to meet the costs of the scheme.
The Government are clear that the remedy, by giving eligible members a choice between two sets of benefits, will increase the value of schemes to members, and this increase in value has therefore rightly been included in the mechanism for the 2016 valuations. The Government have decided that it would be inappropriate to reduce member benefits based on a mechanism that may not be working as intended, and clause 93 will therefore ensure that no member’s benefits will be cut or contribution rates increased as a result of the 2016 valuations.
Amendment 23, which would delete clause 93, would therefore reverse a decision that will protect members and would lead to significant cuts to member benefits for any schemes that breach the ceiling of the 2016 valuations. It is therefore important that clause 93 is preserved.
I am grateful to all hon. and right hon. Member for their contributions. With the exception of new clause 1, I hope I have demonstrated the reasons why I cannot accept these new clauses and amendments, and I hope hon. and right hon. Members will agree not to press them to a vote.
Question put and agreed to.
New clause 7 accordingly read a Second time, and added to the Bill.
New Clause 1
Guidance to public service pension scheme managers on investment decisions
‘(1) The Public Service Pensions Act 2013 is amended in accordance with subsection (2).
(2) In schedule 3, paragraph 12(a), at end insert “including guidance or directions on investment decisions which it is not proper for the scheme manager to make in light of UK foreign and defence policy”.’—(Robert Jenrick.)
This new clause would enable the Secretary of State to issue guidance to those authorities that administer public sector pension schemes, including the local government pension scheme, that they may not make investment decisions that conflict with the UK’s foreign and defence policy.
Brought up, and read the First time.
Question put, That the clause be read a Second time.
Mr Simon Clarke
I beg to move, That the Bill be now read the Third time.
I would like to make a short statement about our involvement with the devolved Administrations. Officials worked closely and collaboratively with the devolved Administrations throughout the Bill’s passage, and I am pleased to report that the Scottish Government, the Welsh Senedd and the Northern Ireland Assembly have each passed a legislative consent motion. I am grateful for their continued engagement.
It has been a great pleasure to lead on the Bill’s progression through the House. I extend my thanks to hon. Members across the House for their engagement, particularly of course the members of the Public Bill Committee. This is an important Bill that consolidates and strengthens the legal framework for pensions across all our main public services—the NHS, the judiciary, the police, firefighters, the armed forces, teachers, local government and the civil service. The Bill will ensure that those who deliver our public services continue to receive guaranteed retirement benefits that are among the best available on a fair and equal basis.
The Bill also addresses the resourcing challenges facing the judiciary, recognising the unique constitutional role of judges. It is clear that we are agreed across the House about the principles of fairness and equal treatment for public servants. Furthermore, a number of important amendments have been made, most notably to the provisions that cater for local government workers, which I am pleased have enjoyed cross-party support.
I extend my thanks in particular to my right hon. Friend the Member for Newark (Robert Jenrick), my right hon. and learned Friend the Member for South Swindon (Sir Robert Buckland), my hon. Friend the Member for Bromley and Chislehurst (Sir Robert Neill), the hon. Member for Hampstead and Kilburn (Tulip Siddiq), the right hon. Member for Hayes and Harlington (John McDonnell) and the hon. Member for Glenrothes (Peter Grant) for their detailed engagement throughout the Bill’s passage. I also convey my gratitude to the noble Lords in the other place, whose excellent contributions have helped ensure the Bill is as robust as possible.
Finally, I thank the Bill team, the Office of the Parliamentary Counsel, officials across Her Majesty’s Treasury, the Ministry of Justice, the Department for Levelling Up, Housing and Communities, all Government Departments with responsibilities for public service pension schemes, and the devolved Administrations for their extensive support. There is a lot of technical detail in the Bill, and the team’s guidance and expertise has been exemplary.
Sir Robert Buckland (South Swindon) (Con)
Will my right hon. Friend give way?
Sir Robert Buckland
On a point of technical detail, I do not wish to put my right hon. Friend on the spot, but can he assure me that early commencement provisions will be brought into effect with regard to the judicial retirement age matters? It is a matter of real public importance that we bring those measures into force as soon as possible, rather than waiting for the usual two-month gap between Royal Assent and them coming into effect? Can he give me that assurance?
Mr Clarke
Further to my opening speech, I can confirm that that is the case.
In conclusion, this Bill recommits to the principle of greater fairness between lower and higher earners and for the taxpayer, as well as the future sustainability and affordability of public service pensions. I am pleased to see the Bill reach Third Reading, and I am grateful to all Members for their contributions today.