Public Service Pensions and Judicial Offices Bill [HL]

Viscount Younger of Leckie Excerpts

2nd reading
Tuesday 7th September 2021 Lords Chamber

Moved by

[Viscount Younger of Leckie]

That the Bill be now read a second time.

[Viscount Younger of Leckie (Con)]

My Lords, the Public Service Pensions and Judicial Offices Bill consolidates and strengthens a common UK legal framework for pensions across all the main public services—that is, the NHS, the judiciary, the police, firefighters, the Armed Forces, teachers, local government and the Civil Service. The Bill ensures that those who deliver our valued public services continue to receive guaranteed benefits in retirement that are among the best available on a fair and equal basis. In addition, the Bill includes measures that will address resourcing challenges facing the judiciary, recognising the unique constitutional role of judges. The Bill will also lead to the creation of a new UK asset resolution public service pension scheme for the beneficiaries of the existing Bradford & Bingley and NRAM—that is, Northern Rock —pension schemes.

I will start with the measures that relate to ensuring fairness and equality across public sector pensions, but first I will set out the wider context for reform. As your Lordships will recall, in June 2010, supported by cross-party consensus on the need for the greater sustainability and transparency of public sector pensions, the coalition Government established an Independent Public Service Pensions Commission chaired by the noble Lord, Lord Hutton of Furness. The commission undertook a fundamental structural review of public service pensions. This review was underpinned by a set of principles against which the options for reform were judged. These principles were that the measures should be affordable and sustainable, adequate and fair, supportive of productivity, and transparent and simple. These principles are just as important today as they were then, and they highlight the need to achieve greater fairness between lower and higher earners and for the taxpayer, as well as the future sustainability and affordability of public sector pensions.

Following that review, the Government introduced a number of key changes. Pension benefits would no longer be based 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 specific to the police, firefighters and the Armed Forces. These changes achieved greater fairness for low earners by giving many a more generous pension. In addition, the reforms will save taxpayers an estimated £400 billion over the following 60 years.

Having provided this background, I will turn to the Bill’s specific measures on the remedy. Prior to the 2015 reforms, the Government agreed, following negotiations with trade unions, to protect the pensions of those closest to retirement. They did this by allowing those members within 10 years of retirement in most public service pension schemes to remain in the final salary schemes, instead of being moved to a career average scheme. This step was known as transitional protection. However, in 2018 the courts found that this step unlawfully discriminated against younger members. Although the legal challenge was specific to the judicial and fire schemes, the Government recognised the wider implications across all public service schemes. We therefore began a thorough programme of work to identify and implement a robust remedy. This Bill brings that remedy into effect and its measures follow public consultations in 2020 and government responses earlier this year.

For the remedy period—that is, from April 2015, when the reforms were implemented, to 31 March 2022—all eligible members will be given a choice between legacy and reformed scheme benefits. For the majority of members that choice will be made at retirement, when it will be clearer which scheme is most beneficial to each individual. This is known as a deferred choice and was the preferred option in the majority of consultation responses. The exception is the judicial schemes, where affected members will make their choice before retirement in a so-called options exercise.

The local government arrangements reflect that the remedy for the discrimination does not require member choice. Instead, protection will be granted to younger eligible members via the extension of the existing underpin, which gives protected local government pension scheme members a guarantee that their reformed scheme pension will be no lower than it was in the legacy scheme. The local government arrangements also reflect that in England and Wales the scheme reforms were implemented a year earlier than other public service pension schemes—from 1 April 2014. For those members who have already taken pension benefits in relation that period, a choice will be offered as soon as is practicable. This measure therefore remedies the differential treatment of younger members as a result of transition protection.

Although the Bill ensures retrospective fairness, it is also right that we ensure that all pension savers are treated equally in future—the so-called prospective remedy. Therefore, from 1 April 2022 all legacy schemes will be closed to future accrual and all those impacted will be placed in their 2015 reforms schemes or, in the case of the judiciary, moved to a new scheme. This measure guarantees that all members within each scheme will be put on an equal footing and underlines our recommitment to the principles of the 2015 reforms. Local government workers have already moved to career average arrangements and these schemes will continue after 31 March 2022.

As your Lordships may recall, the Independent Public Service Pensions Commission also recommended that the new public service pension schemes should include a cost ceiling to protect the taxpayer from unforeseen increases in scheme costs. However, the Government chose to go a step further and establish a symmetrical cost control mechanism that also maintains the value of pensions to members when costs fall. The mechanism was designed in such a way that, if the cost of a scheme rises above or falls below specified margins, the scheme rules must set out a process for agreeing how costs can be brought back to target. So, where costs rise above a certain level, benefits are reduced, or where costs fall below a certain level, benefits are improved.

It is right that the additional benefits that members will receive as part of the remedy are considered by this mechanism as a cost, by giving members a choice of benefits. The value of schemes to members will increase and therefore costs will rise. This assessment of the costs of member benefits is precisely what the mechanism was established to do. However, to ensure that no members’ benefits are reduced as a result of this assessment, the Bill contains a measure to waive any results that might lead to benefit reductions. This should mean that no member will be worse off. In addition, the Government have committed that, where benefit improvements are due, these will be delivered.

As I have outlined, the Bill builds on the Public Service Pensions Act 2013 to create an overarching legislative framework for all public service pension schemes. While this piece of legislation is comprehensive, I am sure your Lordships would acknowledge that pension schemes are extremely complex and must be tailored to fit each workforce’s individual requirements. As a Government, we intend that our legislation accounts for those differences, many of which are found in scheme regulations. Therefore, given the level of detail involved, these measures will come before Parliament as statutory instruments for further scrutiny. Furthermore, to demonstrate the approach to secondary legislation, I pledge to deposit policy statements in the House Library in the coming weeks for further scrutiny.

Allow me now to turn to the Bill’s next element: the package of reforms to help address the resourcing challenges facing the judiciary, recognising the unique role that judges fulfil in our constitution. The UK justice system is known across the world for its excellence, objectivity and impartiality. This is due in no small part to the exceptional expertise of our courts, our tribunal judges, our coroners and our valued magistrates.

However, as the structure and operation of our courts and tribunals have developed, so has the resourcing needs of the judiciary. The frequency and volume of judicial recruitment has increased considerably in recent years and, despite recruiting about 1,000 judges and tribunal members per annum since 2018, we have not been able to recruit the full number of judicial officeholders needed across all courts and tribunals, putting considerable pressure on judges and the justice system.

I am sure your Lordships will agree that it is vital that we continue to attract and retain high-calibre judges to secure the proper functioning of our justice system. This Bill brings forward bespoke measures to address some of the current recruitment and retention challenges facing the judiciary. It enables the provision of a new, reformed career-average judicial pension scheme. It increases the mandatory retirement age of judicial officeholders to 75, extends the potential for sitting in retirement to the fee-paid judiciary and puts judicial allowances on a firmer legal footing. Taken together, those measures represent significant steps that will allow us to continue to support our world-class judiciary, for which we are so rightly renowned, to meet the demands of the present day and the future.

I now move to the measures to establish new UK asset resolution public service pension schemes for the beneficiaries of the existing Bradford & Bingley and Northern Rock asset management pension schemes—so-called NRAM. These two schemes cover the pension schemes of the former staff members of both bodies, some of whom worked for in the region of 30 years for each company respectively. These measures are an important step in the Government’s careful long-term management of the financial assets acquired as a result of the 2007-08 financial crisis. The new schemes will provide former Bradford & Bingley and Northern Rock staff members with the assurance that their pensions are secure over the long term. Let me stress that members’ pensions and pension promises will be unaffected by this change. In addition, this measure will ensure better value for the taxpayer through the creation of a more efficient structure for the Government to meet their liabilities towards those two schemes.

There is no doubt that the Bill before the House is complex legislation. It is therefore crucial that all technical changes are robust and legally operable across all schemes. As I mentioned, we are committed to getting the detail right and to giving in-depth consideration to each scheme’s specific circumstances. Therefore, to ensure a comprehensive and effective remedy with consistent application of measures across all relevant schemes, it is expected that some technical amendments will be required during the Bill’s passage. In addition, I am pleased that the Welsh, Scottish and Northern Irish Governments are considering legislative consent Motions to aim to ensure parity across the UK for the areas where legislative competence is devolved.

Our public servants provide vital services on which we all rely. Their unwavering commitment has been particularly vital during the pandemic. We have an obligation to continue to provide guaranteed pension benefits to reward those workers for their dedicated service, but we must do so on a fairer basis, in a way that ensures that pensions are affordable and sustainable in future.

In conclusion, I believe that the package of measures contained in the Bill will bring about long-term sustainable changes that are in keeping with the original principles of the 2015 reforms and provide fairness for members, employers and taxpayers. I hope noble Lords will recognise the Bill as a clear sign of the Government’s responsible approach to public service pension provision, as well as responding to the specific resourcing challenges facing the judiciary. It is for those reasons that I commend the Bill to the House.

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[Viscount Younger of Leckie (Con)]

My Lords, this has been a somewhat short debate but, as always, the experience and knowledge in this Chamber has been extremely insightful on what I think we all agree is a pretty complex subject. I thank all noble Lords for their contributions, not least acknowledging the specific experience of the noble Lord, Lord Davies. I have also counted that out of the 11 or so speakers in this debate, there were no less than five noble and learned Lords—so no pressure there. I will give proportionately a little more time to touching on judiciary matters, because I think it is fair to say that the mood, tone and indeed content of the debate was more steered towards that direction. That is not to say that there are not a number of other questions that need to be answered, which I will attempt to do. There have been some technical and specific issues raised, and I will endeavour to answer as many questions as I can, but it may be that a letter—maybe a longer one than normal—is required to follow up on the technical issues.

I start by answering probably the first question raised by the noble Lord, Lord Davies, on the timetabling for the Bill. To reassure the House, we aim for the Bill to have Royal Assent in early 2022, so that Chapter 4 can come into force on 1 April 2022, as set out in Clause 113, on commencement. However, noble Lords may recall that the Government set out in their consultation response in February this year that schemes would have until 1 October 2023 to introduce retrospective changes, in order to balance bringing the discrimination identified by the courts to an end as soon as possible with giving schemes and administrators the time needed to establish systems to deliver the necessary changes. Clause 113 therefore provides that Chapter 1 will enter into force on 1 October 2023, or earlier if specified in regulations. I hope that goes a little way to answering the question raised by the noble Lord, Lord Ponsonby.

Before I address the themes and questions raised, I wanted to use this occasion to give a little more background to what we are trying to do in the Bill; in particular, this might help to address some of the concerns the noble Baroness, Lady Kramer, expressed about the 2015 reforms. By 2010, the cost of providing public sector pension schemes had increased significantly over the previous decades, with most of this increase falling to the taxpayer. At the same time, occupational pension provision in the private sector had changed significantly; employers were increasingly moving away from offering defined benefit pension schemes.

The commission set up in 2010 found that the existing structure had been unable to respond flexibly to workforce and demographic changes that had occurred over the previous few decades, and that this had led to rising value of benefits due to increasing longevity, the unequal treatment of members within the same profession, the unfair sharing of costs between members, employers and taxpayers, and barriers being put up to increasing the range of providers of public services. The final salary design of schemes was criticised for creating unequal treatment of members within the same employment. The commission’s final report, in March 2011, therefore recommended moving public service scheme members to reformed schemes with benefits calculated on CARE—the House will know that this is career average revalued earnings—rather than based upon final salary.

To control against the risk of rising longevity—which we know is there—the commission recommended increasing the normal pension age to 60 for the Armed Forces, police and firefighters, and to state pension age for all other schemes. In line with wider changes to the use of price indexation in government, changes were also made to the measure of inflation used to uprate pensions, from the retail prices index to the CPI—the consumer prices index. Member contribution rates were also increased across the schemes, other than that relating to the Armed Forces, by an average of 3.2% of pay. The House may well know this, but I think it is helpful to produce this rather complex background as to why we are where we are today.

Overall, the reform schemes were designed to ensure that members would have good pensions which, at a minimum, met the target levels identified by the pension commission of the noble Lord, Lord Turner, for the income needed in retirement. The reform designs should provide many low and middle earners working a full career with pension benefits at least as good as, if not better than, those under the previous arrangements.

I will move on to some of the issues that were raised. The first was the so-called differential treatment of judges. This was raised particularly by the noble Lord, Lord Davies, and touched on by the noble and learned Lord, Lord Hope. In addressing the point, I will highlight the difference in the recruitment and retaining of judges in particular, which distinguishes them from other public servants. Judges follow a unique career path. They often have long careers in the private sector and take up judicial office at a later stage in life. Many take a pay cut when joining the Bench. Therefore, appointment as a salaried judge in the UK is seen as the culmination of a barrister’s or solicitor’s career, rather than a career path in and of itself. This contrasts with the position in countries such as France, Germany and Italy, which all have career judiciaries, and where the judicial profession is separate from practising as a lawyer. The House may not know that salaried judges in this country may not return to private practice as a barrister or a solicitor.

Reflecting this difference with other public sector workers is important. When we return judges to a tax-unregistered scheme—which is the position that they were in prior to 2015—without these changes there would be continued issues with recruiting judges, threatening the effective functioning of our justice system and its reputation. While the scheme will be unregistered, it is important to note that other aspects of the scheme will be consistent with the principles of the 2015 pension reforms, to ensure its long-term affordability and fairness to the taxpayer.

This matter was raised by the noble Baroness, Lady Kramer, who asked why this could not be extended to other groups. I hope that I have helped to put our view on that. The noble Baroness raised the matter of military generals and touched on doctors, but I stress, on that point, that the manifesto committed to addressing recruitment and retention issues for doctors through the pensions tax system. At the Budget in 2020, the Government spent £2.175 billion on increasing the annual allowance taper threshold and adjusted income limit. These measures apply to all individuals across the UK and are a significant step in resolving this issue. These changes mean that any public servant whose sole income after deducting pension contributions is less than £200,000 has been taken out of scope altogether. We estimate that these changes have taken up to 90% of GPs and up to 98% of NHS consultants outside the scope of the tapered annual allowance. I am sure that there is more that I can say on that, but I hope that it provides some explanation to the noble Baroness, and to the noble Lord, Lord Davies, who raised the same point.

Moving on to the subject of what might rather loosely be termed judicial diversity, there was quite an interesting debate on this. Many noble Lords touched on diversity, linking it to the mandatory retirement age. I will perhaps give a more expansive response to this. I was pleased to hear the initial debate raised by the noble and learned Lords, Lord Woolf and Lord Brown, and my noble and learned friend Lord Mackay. I was particularly interested that he was the one who originally lowered the age from 75 to 70 and that he is now behind our move to raise it again to 75—that was a very interesting reflection from my noble and learned friend.

To give a little background on this, the Government are absolutely clear on the importance of judicial diversity and of having a judiciary that is representative of society. That is why the Ministry of Justice, as a member of the Judicial Diversity Forum and of the magistrates’ recruitment and attraction steering group, is committed to continuing the work to improve diversity across the judiciary and the recruitment pipeline.

I recognise that concerns have been expressed over the impact on judicial diversity of a higher retirement age. Let me start by saying that we acknowledge that the retention of older officeholders could have an impact on the flow of new appointees to judicial office, which may impact on the rate of diversity change. However, as some noble Lords have recognised, there is another side to the story. As many judicial officeholders do not continue to sit until 70 now, we do not expect that all will wish to continue in office until 75. For that reason, and because of the ongoing demands on our courts and tribunals, we will continue to recruit a high number of new judges and magistrates for some time, so we expect that the overall diversity will continue to improve, reflecting the greater diversity of new appointments. The Government also believe that there will be positive diversity impacts from mandatory retirement at 75, and we expect it to encourage applications from a more diverse range of candidates, including those who may have had extended career breaks to balance professional and family responsibilities, or from lawyers who feel ready to apply to the judiciary later in their career.

I should have mentioned the noble and learned Lord, Lord Etherton, and I noted, particularly from him, that he declared that he was—how should I put it?—less than impressed with the decision that we have taken and has asked us to think again. That came also from the noble Baroness, Lady Kramer. However, I do not believe that we will be doing that, and I hope that this explanation will help.

I will move on to the consultation, which was also raised by a few Peers, including the noble Baroness, Lady Kramer, and the noble Lord, Lord Ponsonby. I reassure the House that the decision to raise the mandatory retirement age to 75 was taken after careful consideration. The consultation in 2020 received over 1,000 responses and—as was raised this afternoon—84% supported an increase. I acknowledge that there were mixed views on the age at which it should be set: 67% supported an MRA of 75, recognising that the limited diversity impact was outweighed by the retention benefits and the flexibility afforded to judicial officeholders to sit longer. The Government are confident that an MRA of 75 will provide the right balance—and it is a balance—between protecting the need to have a mandatory retirement age and the benefits to the justice system from retaining such valuable expertise for longer and attracting a wider range of applicants. However, as I said in the briefing yesterday, I have pledged to write, particularly to the noble Baroness, Lady Kramer, and I will do so to all noble Lords who have taken part in the debate today, with some further detail on the feedback from the consultation, particularly in relation to feedback from women, which was raised by the noble Baroness, and from the black community, as raised by the noble Lord, Lord Ponsonby.

Another important subject is the cost control mechanism—the so-called CCM—which was raised by the noble Lord, Lord Davies, and the noble Baroness, Lady Janke; the noble Lord, Lord Ponsonby, also touched on this. As was mentioned, the Government’s consultation on changes to the cost control mechanism closed on 19 August. The Government are considering all responses received and will publish their conclusions shortly. The aim is to implement any changes in time for the 2020 valuations, and the Government will legislate for any changes once they have responded to the consultation and when parliamentary time allows. However, I want to give a little more detail on this, because it is an important subject—particularly the 2016 valuations.

The cost control element of the 2016 valuation process was paused, as we know, in light of the McCloud judgment regarding transitional protection. The potentially significant and uncertain impact arising from the court’s judgment made it impossible to assess with any certainty the value of schemes to members. In July 2020, the Government announced that this pause would be lifted and the 2016 valuations completed. HMT will, when possible, set out in directions the technical detail of how the restarted 2016 valuations will operate. Outcomes for individual schemes will not be known until the results have been finalised. The noble Lord may not find this answer satisfactory, but I am afraid that it is the only answer I can give this afternoon.

The related issue of member cost was raised, not least by the noble Lords, Lord Davies and Lord Ponsonby. The Government have announced that the legislative remedy should be taken into account when completing the cost control element of the 2016 valuations. This is because, when the cost control mechanism was established, it was agreed that it would consider only costs that affect the value of schemes to members. Addressing the discrimination, giving members a choice of scheme benefits for the remedy period, involves increasing the value of schemes to members. The usual way these costs are managed is through the cost control mechanism. However, as I mentioned in my opening speech, this Bill will waive the impact of any ceiling breaches that may occur, so that no member will see a reduction in benefits as a result of the 2016 valuations—although any floor breaches will be honoured.

I move on to another important subject, the Police Superintendents’ Association, which was raised by a number of Peers, including the noble Lords, Lord Hendy and Lord Davies, the noble Baroness, Lady Janke, and the noble Lord, Lord Mackenzie. As the House might expect, I cannot comment too much on the specifics of any live, ongoing litigation. However, I confirm that this Bill will ensure that all eligible public service workers have access to high-quality defined benefit schemes on a fair and equal basis. From 1 April 2022, all those who continue in service in the main underfunded schemes will do so as members of the reformed schemes, regardless of age. Legacy schemes will close to future accrual, which means that from this point onwards all members will be treated equally in terms of which pension scheme they are a member of. I noted very strongly the points raised in particular by the noble Lord, Lord Mackenzie, and, while I cannot comment too much, I shall pledge to pass his comments on.

I want to say a little more on this point. The Government consulted on proposals to remedy the discrimination identified by the courts in July 2020. Officials met with the scheme advisory boards for the public service schemes, including the scheme advisory board for the police pension scheme. The Government published the response in February this year, and officials have arranged a further meeting tomorrow to discuss the Bill with stakeholders, including the Police Superintendents’ Association. The Home Office will undertake further consultation with employee representatives of the police pension scheme in relation to the scheme regulations, which will set out the detailed changes to the scheme. I hope that gives some comfort that some progress has been made.

I have not really managed to answer properly some of the questions raised by the noble Baroness, Lady Janke. Can I say something about trust? She raises a very important point—that trust between the Government and all the public service sector workers and the operators of the scheme is incredibly important. She made the point that perhaps the trust is not there and, okay, I have noted that and will pass it on. Perhaps we need to work hard on that, but it may be linked to the fact that these matters are extremely technical; there are a number of matters that we need to sort out, as she knows. She herself mentioned that this Bill and this area are quite complicated.

In the same breath, may I answer a point raised by the noble Baroness and by the noble and learned Lord, Lord Hope, about giving information to members to inform them on decisions that they might care to make as a result of the transitional period decisions? As I said at the beginning, statements will be provided so that individuals can weigh up the choices. By the way, that is the case for the judiciary as well, just to reassure the noble and learned Lord on that.

I shall check Hansard, as there were probably a number of other questions, but I hope that I have covered the main themes from this important debate. I finish by thanking all noble Lords for their contributions. It is very important to say that we must ensure that those who deliver our valued public services continue to receive guaranteed benefits on retirement on a fair and equal basis and in a way that ensures that pensions are affordable and sustainable. I commend the Bill to the House.

Bill read a second time and committed to a Grand Committee.

Public Service Pensions and Judicial Offices Bill

Viscount Younger of Leckie Excerpts

Committee stage
Monday 11th October 2021 Grand Committee

[Viscount Younger of Leckie (Con)]

My Lords, I thank the few noble Lords who have spoken for their contributions to this first debate in Committee: the noble Lord, Lord Ponsonby, and the noble Baroness, Lady Janke. I also thank the noble Lord, Lord Davies, who I believe was originally intending to speak.

Before I address the points raised, and as we are commencing Committee, I will set out briefly the core principles which underpin this Bill; in my view, this will provide a nice bridge between Second Reading and Committee. At the core of the Bill are fairness and equal treatment. The Bill ensures that those who deliver our valued public services continue to receive guaranteed benefits in retirement that are among the best available, on a fair and equal basis. This core objective is underpinned by the principles of greater fairness between lower and higher earners, fairness for the taxpayer, future sustainability and affordability of public sector pensions.

I thank noble Lords for continuing to work with me to ensure that these important objectives are achieved through this Bill in support of the vital public services on which we all rely. I also draw noble Lords’ attention to the policy statements covering various key elements of this Bill, which were deposited in the House Libraries on 4 October. I trust that noble Lords will have seen these despite the tight timetable; I am aware that many noble Lords will have only just returned from recess.

These amendments are intended to ensure that a comprehensive remedy is delivered for all members by requiring, rather than enabling, regulations to be made under Clauses 16 and 19. I take the point made by the noble Lord, Lord Ponsonby, that these are probing amendments, but I would like to give a full response and hope that I can answer the five or six questions that he asked. If not, I will certainly write to the noble Lord and, indeed, copy in other noble Lords who have spoken.

Before considering the specifics of noble Lords’ amendments, I thought it would be helpful to remind this Committee about the practical effects of stating that regulations “must” be made as opposed to “may” be made. When an Act states that regulations may be made for a particular purpose, it grants whoever is responsible for making those regulations a power to make them. In all likelihood, they will make those regulations but, if it is not necessary or appropriate, they can choose not to. Where an Act states that the regulations must be made, it imposes a duty on that person to make those regulations. If they do not, they are breaking the law even if those regulations are not necessary or not the most appropriate course of action in a particular set of circumstances. Accordingly, it is appropriate to exercise caution about occasions when a duty to do something is imposed since otherwise it could lead to unintended consequences and possibly to unmeritorious litigation about whether a particular duty has been complied with.

Amendments 1, 2 and 3 proposed by the noble Lord, Lord Ponsonby, would require, rather than allow, pension scheme regulations to make provision for a liability owed by a person to a scheme to be reduced or waived. The amendments put forward by the noble Lord, Lord Davies, would amend the Bill so it requires, rather than allows, pension scheme regulations to make provision for transfers into and out of a scheme in relation to remediable service.

As a general point, there are 17 new public service pension schemes in scope of Chapter 1 of the Bill. For each of those schemes there are also connected legacy schemes. Pension provision for these workforces has evolved considerably over several decades. In view of the complex landscape—which the noble Baroness, Lady Janke, referred to earlier—that has resulted from this, it is particularly important that schemes have flexibility to deal with some of the more specific circumstances in which members may find themselves. Therefore, the Bill enables rather than requires regulations to be made in Clauses 16 and 19.

As set out in the consultation response published in February 2021, the Government are committed to taking a proportionate approach to the recoupment of overpaid benefits. The powers provided by Clause 16 allow the Government to uphold this promise. Put simply, when a member owes overpaid pension or lump-sum benefits to a scheme, Clause 16 provides a power to allow scheme regulations to make provision to reduce or waive that member’s liability.

The reasons for the inclusion of Clause 16 should be spelt out, and they are threefold. First, the clause provides that contributions owed by or to a member may be reduced to reflect tax relief that was paid or due on those contributions. The purpose of this is to ensure the member is placed in the correct position net of tax. Secondly, it provides that contributions owed by the scheme to a person under Clause 14 may by agreement be waived. This is to ensure that members who become legacy scheme members under Clause 2(1) and owe contributions as a result, can have that liability waived until they make a choice under Clause 9 whether to receive legacy benefits or instead elect to receive new scheme benefits. Where a member knows they want to receive new scheme benefits, this will allow them to avoid having to pay legacy contributions in the interim period. Corresponding provision is also made for amounts owed by the scheme to the member to be reduced or waived with the member’s consent. Finally, the clause allows schemes to reduce or waive amounts owed by members where that arises other than by choice of the member and requiring the payment would cause undue hardship or prejudice. This is for a small group of members who had tapered protection and will be placed in a worse position regardless of whether they choose legacy scheme benefits or new scheme benefits in relation to their remediable service.

Clause 16 is part of a package of measures intended to mitigate such circumstances. Therefore, it is expected that the responsible authorities and scheme managers will consider using this power in conjunction with the power in Clause 21 to pay compensation and the power in Clause 23 which permits responsible authorities to make regulations setting out the process by which relevant amounts may be paid such as, for example, in instalments.

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[Lord Davies of Brixton (Lab)]

My Lords, effectively these issues have been presented by my noble friend Lord Ponsonby and I have the great advantage, of course, of having the Minister’s reply to the questions that I have not yet asked. In a sense, I am happy to take them as read.

I do not have an interest to declare but it would be helpful to the Committee if I declared a non-interest: I did have a declarable interest up to the end of August, in that I was a paid adviser to various trade unions on this very issue. Clearly, there would have been a conflict, but I ceased to hold that role at the end of August. The declaration will appear in the register of interests for a year but is no longer valid. I think that covers me for the whole of the Committee stage and that I do not need to say that again.

It might be helpful for the Committee if I say a little more than that, in that I have been a close observer and participant in the process of the reform of public service pensions, it seems, for the whole of the 21st century so far. Although we had the report of the noble Lord, Lord Hutton, in 2011, the process actually started earlier than that in 2005 with what was known as the Warwick accord between the then Labour Government and public service unions. I was involved at that stage, and in the discussions before and after the presentation of the Hutton report. Indeed, if I had to nominate my specialist subject in “Mastermind”, a strong possibility would be public service pensions reform in the 21st century.

These are not exactly random thoughts, but I thought that it might be helpful if I just set out three relevant and little-known facts about public service pension reform. As I mentioned, it did not start with the Hutton report but with the Warwick accord, going back to 2005 and the subsequent public service forum agreement of that year. Major changes took place in public service pensions at that time.

Just to clarify, the reforms were carried out in accordance with the heads of agreement of 15 December 2011 with the then coalition Government. Although it is described as a heads of agreement, it was not a total agreement but, effectively, a decision by the Government that was accepted by some, but not all, trades unions. A background point but an important one is that the new schemes were not worse for everybody. A non-trivial proportion of the public service workforce will gain from the reformed schemes, so the situation is not as simple as it is sometimes presented.

Turning to Amendments 10, 11 and 12, the issue here is that if people had had what they were entitled to following the Supreme Court decision, they might have made different decisions from those which they made at the time. Clause 19 refers to transfers. If you were in the old scheme you decided to make a transfer, but had you been in the new scheme, you might have decided not to, and vice versa. These issues are therefore important. To be honest, I do not envy the job of administering this process, but it is there and the Government are obliged to pursue it.

I listened to what the Minister had to say on the issue of “may” or “must”. I should add that I did some research, along with my noble friend, and we are grateful to the Police Superintendents’ Association for having drawn these issues to our attention. We have with us a magnificent set of legal talent, and perhaps at some stage we might have a definitive view on the difference between “may” and “must”. The problem here is that from the viewpoint of the Police Superintendents’ Association and other members of public service pension schemes, there is a level of mistrust. The issue is not some semantic definition of whether “may” or “must” works; they see “may” and they think, “Maybe the Government are not going to do what they’ve promised.” Saying “We’re going to do it anyway” does not totally answer the question that is put before you by having to choose “may” or “must”, because it invites the rejoinder, “Well, if you’re going to do it anyway, let’s have ‘must’ in there, and everyone can feel comfortable.”

There is no doubt that these issues are going to have to be dealt with in the process of implementing the court judgments, and from the perspective of the scheme member, “must” seems to work. My noble friend and I heard what the Minister had to say, and we will read with interest the precise wording. I take it that the Minister will not be writing separately on the issue, but the statement as set out in Hansard will be the definitive government position and we and the scheme members will study that, come to a view and, if necessary, return to the issue on Report.

I do not know whether I should do this now, but I happily indicate my intention not to push my amendments to Clause 19.

[Viscount Younger of Leckie (Con)]

My Lords, it might be helpful—

[The Deputy Chairman of Committees (Baroness Garden of Frognal) (LD)]

I am so sorry—I am getting slightly muddled. In the interests of clarity, I point out that the amendment proposed is:

“Page 15, line 31, leave out ‘may’ and insert ‘must’”.


I do apologise to the Minister.

[Viscount Younger of Leckie (Con)]

Just for my own clarity, I thank the noble Lord, Lord Davies of Brixton, for his comments, but he might like to speak to the amendments in this group, which are 4, 5, 6, 7, 8 and 9.

[Lord Davies of Brixton (Lab)]

Essentially the same background applies: this is the position in which we find ourselves following the Supreme Court judgment. It is a dog’s dinner really. We would never choose to be here but, now that we are here, we have to sort it out—but it is a mess. One of the most complicated issues which will need to be resolved is about people who paid ADCs in one scheme and would not have paid them in the other scheme or did not pay ADCs in the scheme they were in but would have done so if they had been in the other scheme. Some sort of assessment of some alternative reality has to be made, so the issue is complicated.

These amendments repeat “must” and “may” issue—and I have dealt with that—but they also deal with how the issue is resolved. There is a problem with additional voluntary contributions, which people pay voluntarily to secure additional benefits. It clearly is a decision determined by the scheme in which they will accrue benefits. If they misunderstood which scheme they were in, they may well have taken a different decision. The Bill gives the scheme administrator the decision about how that matter is resolved. Amendment 8 would place the decision about how the issue is resolved directly in the hands of the member rather than, as the Bill stands, leaving in the hands of the scheme administrator. It is an issue of the hypothetical: if a member had been in a particular scheme they would have paid contributions. As I understand it—and I would be grateful for the Minister’s clarification—the Bill as it stands deals only with how the contributions that the member has made are handled, but there is also the issue of the additional voluntary contributions that the member did not make but would have made. Finally, Amendment 9 seeks to make it clear, when a refund of contributions is decided on, the contributions that were made will be repaid with interest included in the sum. That covers the issues and I will be grateful for the Minister’s comments. I beg to move.

[Viscount Younger of Leckie (Con)]

My Lords, here we address six amendments that have been brought forward on Clause 18 by the noble Lord, Lord Davies of Brixton. I note again his declared interests that he pointed out at Second Reading and his expertise in this area, and I very much look forward to his appearance on “Mastermind” on his specialist subject.

Clause 18 provides for scheme regulations to make provision in relation to additional voluntary contributions paid during a member’s remediable service. As the noble Lord, Lord Davies, said, the first two amendments would require, rather than allow, scheme regulations to make provision about these matters. I hope that I can reassure the noble Lord that this is not necessary. I want to give a full response, although not quite as full as on the first group—but it is a full response on some of the important issues that the noble Lord has raised.

The reason this clause is enabling rather than directive is that not all additional benefits purchased during a member’s remediable service will need to be revised as a consequence of the Bill. For example, some legacy schemes provide that members may purchase additional pension by way of a lump-sum payment or periodic additional contributions, so the Government have agreed that members may complete the payment for these benefits when they have already commenced. The resulting benefits will not be changed, regardless of a member’s choice of whether to receive legacy or new scheme benefits. However, making Clause 18 directive would require schemes to vary the benefits, contrary to what schemes and members have asked for and government has agreed to.

The third amendment brought by the noble Lord would extend Clause 18 to require scheme regulations to provide members who were moved to the new schemes but did not make additional contributions with the option to purchase additional legacy scheme benefits, where they can show that they would have done so had they been able. I once again thank the noble Lord for tabling this helpful amendment. The Government will consider the principles underlying it and will take this away before returning with a thorough explanation of how the matter may be addressed in due course. The drafting of this amendment, at present, does not achieve the overall intention here, since Clause 18(1) provides that this applies only to cases where a person has paid voluntary contributions.

The fourth and fifth amendments are concerned with members who did make additional contributions to a new scheme. They would require scheme regulations to provide members with the options available under the Bill—to alternative or equivalent benefits in a legacy scheme, or to compensation for the contributions made. This provision is permissive rather than directive, because not all three options are intended to be used in every case. Alternative benefits are an approach whereby the benefits awarded in the legacy scheme are effectively recreated as though the member’s additional contributions had always been made there. Equivalent benefits are for situations where an appropriate alternative does not exist in the legacy scheme. In such circumstances, a member would instead be offered a benefit in the legacy scheme that is of directly equivalent value. So in both cases, the policy is that the member may choose instead to receive compensation for their additional voluntary contributions, where they do not wish to receive the alternative or equivalent benefit. Making this provision directive rather than permissive would not therefore work, as not all options will exist in all cases. I hope that explanation is clear and helps to answer the questions raised by the noble Lord.

The final amendment brought forward by the noble Lord relates to interest, as he mentioned, and requires that interest is paid on compensation payments. It is a fair point. The Government have committed to pay interest on these compensation payments, and provision is already made under Clause 23 accordingly. With those assurances on all the noble Lord’s amendments, I hope he is willing not to press them.

[Lord Davies of Brixton (Lab)]

I welcome the Minister’s comments, particularly on unpaid AVCs. I will look forward to his response with interest. In light of his other comments, we will read Hansard with interest and decide what to do on Report. I therefore withdraw Amendment 4.

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[Baroness Janke (LD)]

I, too, would like to speak to the amendments in my name. I do not have a great deal to add to what the noble Lord, Lord Ponsonby, has said other than to say that I think that this is a particularly important part of the Bill. We have heard from many people who are affected by this Bill about the need for confidence in the measures contained in it and for trust in light of what happened to lead to the need for this legislation. These amendments are to probe what the Government are planning in terms of a compensation scheme and, as has already been said, the right of appeal and members’ rights as to how their representatives may be involved in any compensation scheme. The requirement for consultation clearly goes without saying, and the Government need to do much more work on this part of the Bill to ensure that members have confidence in it.

The noble Lord, Lord Davies, referred to promises having been made but not being honoured and the fact that many outstanding issues still await resolution. I hope that the Minister can clarify what the Government intend and that the proper process will fill members with confidence and ensure much greater trust than has been the case so far.

[Viscount Younger of Leckie (Con)]

My Lords, I thank the noble Lord, Lord Davies, once again and indeed the noble Lord, Lord Ponsonby, and the noble Baroness, Lady Janke, for their valuable contributions and remarks. Given that the noble Baroness is right that this is an important part of the Bill, I wish to give a pretty full response, so I hope the Committee will indulge me as I want to go through in some detail the issues that have been raised and, of course, answer as many questions as I can.

I start by saying, just as a point of agreement, that this group of amendments seeks to ensure that members are correctly compensated for any detriment that they have suffered as a result of the discrimination that has arisen. I reassure this Committee that this is certainly a shared objective.

The noble Lord, Lord Davies, put forward three amendments to Clause 21. It may be helpful if I set out the intended purpose of this clause. It confers power on scheme managers to make payments in relation to compensatable losses. This is compensation in relation to losses incurred as a result of the discrimination, the remedy provided by the Bill, or in respect of certain tax losses. The clause allows for matters that are not directly remedied by the Bill or scheme regulations to be put right.

Amendment 14 would remove the requirement that losses may be compensated only where they are of a description specified in Treasury directions. However, in the Government’s response to the consultation on remedying the discrimination, we set out that some member representatives and employers considered that there would be a need for consistent treatment across and within schemes.

The Treasury directions are one way in which we intend to ensure that such consistency is achieved. The proposed amendment would remove the central consistency that we have committed to provide and would instead require scheme managers to determine all claims in an exercise of their own discretion alone, which could lead to inconsistent and potentially unequal treatment across schemes. I am sure this Committee would agree that we do not want that. That approach would give rise to the concerns that respondents to the consultation raised. We do not consider that is a responsible or appropriate approach. The Government have committed to providing a consistent and full remedy to members and we believe that will be best achieved by the current drafting.

Amendment 15—which was spoken to eloquently by the noble Lords, Lord Davies and Lord Ponsonby—seeks to compensate members for the closure of the legacy pension schemes and for any contingent decisions taken where a member had a period of remediable service that was under a new scheme. Paragraphs (b) and (c) of the amendment from the noble Lord, Lord Davies, in particular, closely relate to an ongoing judicial review challenge before the courts—which the noble Lord alluded to—and it would be inappropriate to discuss in detail. However, the effect of the amendments would be to provide the substantive remedy that the claimants are seeking in the judicial review claim. It would compensate members who were in scope of transitional protection but have not yet retired and will now be in scope of the prospective measures set out in Clauses 76 and 77 of this Bill. Providing compensation in this circumstance would therefore be contrary to the intention of those clauses that all members are to be treated equally from 1 April 2022 by accruing service in the reformed schemes, regardless of their age.

It is important to stress that the Court of Appeal found in the McCloud and Sargeant case in 2018 that the transitional protections offered under the Public Service Pensions Act 2013 amounted to unlawful discrimination. Accordingly, offering compensation to transitionally protected members would effectively undermine the Court of Appeal judgment by perpetuating this unlawful discrimination through different means. The effect would be that instead of allowing transitionally protected members to continue in service in legacy schemes, they would now be receiving the benefit of financial compensation. Non-transitionally protected members would not receive such compensation, so there would still be an unfair difference in treatment.

I will pick up on a point made by the noble Lord, Lord Davies, to try to be helpful concerning police stakeholders. The Government really do understand the concern raised by stakeholders regarding the difference in when members can access their full pension in the 1987 and 2015 police pension schemes. I can reassure noble Lords that the Home Office is engaging with police stakeholders on these matters. However, it is the Government’s view that it will be appropriate for future pension accrual to occur in a scheme with different retirement provisions, for the reasons set out by the noble Lord, Lord Hutton, in his report. As set out in the consultation response regarding this specific issue, it is right that the Government be able to make changes when they judge it necessary to do so. The commission’s original objectives and recommendations, leading to the 2015 reforms and reform schemes, still hold. The Government therefore consider that this is not appropriate and that it is crucial to the effectiveness of the remedy that the discrimination is not perpetuated.

Returning to paragraph (a) of the amendment, this clause already makes provision for losses that arose as a result of the discrimination; that is covered by the first condition, contained in subsection (4). I hope that I can therefore reassure the noble Lord, Lord Davies, that the amendment is not needed.

The noble Lord has also put forward four amendments to Clause 23. Amendments 16 and 17 would require, rather than allow, scheme regulations to make provision under which interest is required to be calculated and paid on amounts owed to or by members under or by virtue of the Bill, and about the process by which amounts and any interest on them are to be paid; I know that this matter cropped up in debate slightly earlier. Where sums are owed to schemes or members, for example relating to contributions or benefits, Clause 23 provides powers for scheme regulations to make provision about the payment of interest on those amounts. Interest will be added to amounts payable by schemes or members. The Government consider that the addition of interest is necessary to ensure fairness between members. For example, where members owe contributions, their comparators in the scheme will have been paying the correct level of contributions throughout, so would not have had the benefit of the additional money over time. Interest will be paid on benefits or contributions owed to members to reflect that the payments relate to earlier periods of time.

Clause 23 also provides that scheme regulations may make provision about the process by which amounts due to and from schemes are to be paid. This includes matters such as providing for when amounts are to be paid, allowing for those to be paid by instalments if appropriate, netting off amounts owed by a person against amounts owed to a person, and conferring rights of appeal against a decision taken under the regulations. The amendments would require scheme regulations to make such provision. However, the Government do not consider that imposing a duty on schemes to make such regulations would be appropriate. Doing so could lead to vexatious claims that schemes have not made regulations to deal with obscure situations that could arise. Rather, the Government consider that granting schemes a broad power, exercisable in accordance with Treasury directions, is the right approach to ensure that schemes can make all the necessary and appropriate provision in scheme regulations, while providing sufficient flexibility to account for the differences in the public service pension schemes that I referred to earlier.

The noble Lord’s third amendment, Amendment 18, would remove provision for schemes to make a payment only on the making of an application. This provision is there for the benefit of members: for example, members may not wish to receive amounts that they are owed. This could arise if they are an active or deferred member and intend to choose reformed scheme benefits upon retirement in order to avoid double corrections, as envisaged by Clause 16(8).

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[Viscount Younger of Leckie (Con)]

My Lords, once again I start by thanking the noble Lord, Lord Ponsonby, and the noble Baroness, Lady Janke, for introducing this theme and for their contributions. Providing sufficient guidance for members to make informed decisions regarding their pensions is of course of the utmost importance and worthy of proper scrutiny, so I am pleased to respond to their points and hope that I can give reassurances. The noble Baroness is correct that it is a challenge, but I hope that I can prove, or show, that much thought has been put into this important matter already.

Amendments 21 to 25, tabled by the noble Lord, Lord Ponsonby, and Amendment 33, tabled by the noble Baroness, Lady Janke, all deal with the important matter of communication: communicating the impacts of the remedy and the choices available to members. Amendments 21 to 25 seek to ensure that the information provided to members is clear and easy to understand, as well as signposting them to sources of further information and assistance and ensuring that certain tax information is provided. Amendment 33 seeks to require the Government to publish guidance for members and provide further assistance, such as a helpline or online services, as well as laying a copy of such guidance before Parliament and providing a report on the effectiveness of this guidance.

The Government recognise the importance of providing members with clear, accessible and accurate information. It is this information that will inform members’ decisions about whether to receive legacy or reform scheme benefits in relation to their remediable service, or whether to opt for service to be reinstated under Clause 5. Perhaps I may provide reassurance to the Committee on the measures already in the Bill which provide for members to receive information that shows the option of benefits available to them in the form of remediable service statements. That will include details of any lump sum, pension and survivor’s benefits under the scheme. For the vast majority of members, the decision will be very straightforward: the member will simply choose the option that is most valuable to them.

Clause 26 already contains the appropriate provisions as to what should be included in the remediable service statements; for example, subsection (5) outlines that a statement

“must include … a description of when and how any election”

should be made. The information contained in the remediable service statement will be personal to the member. The statement will set out their entitlements and allow them to clearly understand the benefits available, under the options available, to determine which one they wish to take.

The provisions in the Bill are additional to existing requirements under the Public Service Pensions Act 2013—an important point—which already require the public service schemes to provide members with information about their entitlements. Clause 26 ensures that members are provided with additional information, specifically about their remediable service only. To break this down, first, for active members statements will be provided on an annual basis and enable members to see how the two sets of benefits compare as their careers progress and they get closer to retirement. Secondly, for deferred members, a one-off statement will be provided initially but the member will be able to request up to one further statement per year. For pensioner members, and in respect of deceased members, a one-off statement will be provided, ensuring that these members have the information they need to make an immediate choice in respect of their remediable service.

Schemes will also develop further guidance and tools where appropriate; we expect that some will choose to provide retirement calculators, for example. However, in view of the different requirements of workforces, the different methods of communication currently used by schemes and the different tools they already provide, it would not be appropriate for the Bill to require this to take a particular form. To give an example, the NHS scheme is, as the Committee can imagine, one of the largest—if not the largest—occupational pension schemes in the world. It has considerable expertise in providing bespoke member communications, guidance and support. The information required under this clause will supplement and become part of an established service provided for members.

Furthermore, in relation to Amendment 25, it is worth noting that most individuals affected by the Bill will not have to correct their tax position, either through the tax system or by claiming compensation. The Bill also contains various provisions to reduce interaction with self-assessment. In addition, schemes are already required to provide members, where appropriate, the relevant information to complete their tax return on an annual basis, and this information will be updated and provided to the member where their tax position changes. Therefore, this amendment would duplicate the existing processes. However, where there is an interaction with the tax system, the Government recognise that there will need to be further guidance to complement existing HMRC guidance and scheme processes which already provide the required information to complete a self-assessment return, and this will be provided in time to allow members to make an informed choice, which is an important point to make.

I wholly agree that communication with members will be key to the successful implementation of the remedy but I hope I have reassured the Committee that the Bill already provides for all the information required for members to make necessary informed decisions. Taking all this into consideration, I hope that the noble Lord will withdraw his amendment.

[Lord Ponsonby of Shulbrede (Lab)]

I thank the Minister for that explanation. I have to say that he did not provide me with a great deal of reassurance because on the one hand he said that all the information will be provided in any event and then, on the other, he said that he recognises that further guidance will be necessary. I am grateful that further guidance will be forthcoming. It is a concern that has been raised directly by the various police forces I have spoken to about this issue. Nevertheless, I beg leave to withdraw the amendment.

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[Lord Ponsonby of Shulbrede (Lab)]

My Lords, I wish to speak briefly to this amendment. I open by paying tribute to my noble friend Lord Davies for the expertise with which he has raised these issues surrounding the cost control element. I look forward to a comprehensive response from the Minister on this difficult issue—that would be to the benefit of the whole Committee.

I particularly ask the Minister to respond to the point made by the cross-party Public Accounts Committee that this is the Treasury’s mistake, yet, in the words of the committee:

“The Treasury now wants pension scheme members to pay the estimated £17 billion cost to put that right.”


I want also to touch on the Government’s response to the consultation on the cost control mechanism, which was published only a few days ago, as my noble friend said. I know that the details of the reforms are to be dealt with in future primary legislation, and I am sure that that will be thoroughly debated at the time, but the response did not give us any information on how the proposed reforms interact with the issues that we are dealing with in the Bill in front of us today. This is essentially the question that my noble friend was asking.

The response said:

“The Government will provide further details on … the extent to which there will be any interaction with the McCloud remedy at future valuations, in due course.”


It seems that, at the same time as we are having complex discussions on the immediate impact of the 2016 valuations on members, there is little or no information about how the Government plan to deal with this issue in the long term.

Clause 80 is welcome, but Ministers will be only too aware that it neither fully answers the concerns of the trade unions over the inclusion of the remedy in the 2016 valuations nor sheds any light on the Government’s intentions for the treatment of the remedy costs in future valuations. I understand that this is a complex matter, and I look forward to the Minister walking us through this complex landscape of issues.

[Viscount Younger of Leckie (Con)]

My Lords, we have come to another important part of the Bill. I recognise that the operation of the cost control mechanism is of considerable interest to the Committee, particularly the noble Lord, Lord Davies, whom I thank once again for his remarks, and the noble Lord, Lord Ponsonby, who—I remind myself—gave some valuable contributions at Second Reading and touched on this topic. We should also remember that the cost control mechanism should be considered within the wider context within which the Bill should be considered.

I hope that my subsequent letters on this topic have proved informative on progress being made in this area. I am happy to be able to expand on some of those key areas during this debate, but obviously there are some questions that need answers arising from this particular debate, and I will do my best to answer them.

First, on the subject of letters, I deposited a letter in the Library last week to bring to the Committee’s attention the fact that, on 7 October, the Treasury published amending directions that will allow schemes to complete the cost control element of the 2016 valuation process. As previously announced, these amending directions confirm that the McCloud remedy will be captured as a member cost in the completion of the 2016 valuations. This is right, given that addressing the discrimination identified in the McCloud and Sergeant judgments, giving members a choice of scheme benefits for the remedy period, involves increasing the value of schemes to members.

This matter led to a couple of questions being raised, first by the noble Lord, Lord Davies, who made the point that he thought that it was not appropriate for members to pay the costs of remedy. Separately, the noble Lord, Lord Ponsonby, raised the question of the inclusion of remedy in the 2016 valuations. Indeed, he questioned the role of the Treasury and government.

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[Viscount Younger of Leckie (Con)]

This was a much shorter debate. I begin by thanking the noble Baroness, Lady Janke, and the noble Lord, Lord Ponsonby, for the points they made and for raising this important matter. As I touched on earlier in debate, of course I agree that fairness and equal treatment lie at the heart of the Bill—that is, fairness between lower and higher earners and fairness for the taxpayer—as well as the future sustainability and affordability of public service pensions.

Let me go further. The Government agree with the importance of assessing the impact of the Bill on members of the public service pension schemes with protected characteristics, including—importantly—women. This is why the Government sought responses to the consultation on equalities impacts and conducted a full equalities impact assessment of the Bill, which was published alongside its introduction. In addition, when making the necessary changes to their scheme rules to deliver remedy, schemes will carry out any appropriate analysis of equality impacts for their specific schemes alongside consultations on these changes, in compliance with the public sector equality duty contained in Section 149 of the Equality Act 2010.

The Government’s equalities analysis highlights a number of important features of this Bill, which aims to ensure equal treatment between men and women. I note the points made by the noble Lord, Lord Ponsonby. For example, with regard to the main public service schemes, requiring members in scope of remedy to choose their benefits long before retirement could disadvantage women, who may be more likely to take a career break or work part time between implementation of the remedy and their retirement. By allowing this choice to be made at retirement, the deferred choice underpin avoids additional complexity for these groups by allowing them to make their decision in full knowledge of how part-time work or career breaks have affected their earnings and pension accrual. Similarly, by making remedy available to individuals who were in service on or before 31 March 2012 but subsequently left and rejoined, provided that their break in service was less than five years, the Bill ensures parity for groups that may have been more likely to take career breaks—for example, to care for young children or elderly relatives.

The Bill also provides that, from 1 April 2022, all public service workers who remain in service will do so as members of the reformed schemes, which provide career average—so-called CARE—benefits. CARE schemes offer fairer outcomes to those who experience lower salary progression over the course of their careers. As such, statistically, a higher proportion of women and those with other protected characteristics are likely to be better off under CARE schemes, which are broadly more beneficial for lower and some middle earners. The Bill also provides that men and women in the same scheme and of the same date of birth will have the same scheme normal pension age—NPA—under their particular reformed scheme design, and the same NPA for their legacy scheme benefits.

More broadly, the Government recognise the importance of public service pensions in addressing the pensions gap in society between men and women. As women make up roughly 65% of active public service pension scheme members, the provision of generous defined benefit public service pensions actively serves to reduce that gap. Nevertheless, the Government recognise that, in the public sector, differences remain in average annual pension payments and accrued pensions; this was alluded to by the noble Baroness, Lady Janke. However, these reflect past differences in earnings over members’ careers rather than differences in their pension terms.

Therefore, the best way to combat differences in pensions accrual is to tackle the gender pay gap and promote equal opportunities for career progression, regardless of sex or other protected characteristics. The Government are taking active measures on both, including through mandatory gender pay gap reporting. As a result, the gender pay gap continues to be lower in the public sector than the private sector; I have some statistics that I could give to the Committee. As already mentioned, these differences should reduce over time as a result of the move to a CARE benefit design, which all members will accrue from 2022 and which will lead to fairer outcomes for those with lower pay progression.

Given the extensive analysis that has already been conducted and published, as well as the further analysis that schemes will carry out, the Government do not think that a further review is required at this stage. I understand the sentiments behind the amendment but we do not agree that it is necessary. I therefore ask the noble Baroness to withdraw her amendment.

[Baroness Janke (LD)]

I thank the Minister for his response and take his assurances very seriously. Again, this is perhaps something we need to reflect on as it affects society as a whole. I believe we should use every occasion we can to address these fundamental unfairnesses. Having said that, I am sure we will reflect on this, but at this point I beg leave to withdraw the amendment.

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[Lord Woolf (CB)]

I am sorry; could I just add one thing? The noble and learned Lord, Lord Brown, was sitting here wanting to address the Committee. I know without hesitation or doubt that he was going to support the view I was taking. So, I am afraid that we have to bear in mind that there are some who have a different view from that expressed by other noble and learned Lords and who would take a more relaxed view than has been indicated about the Government’s proposals.

[Viscount Younger of Leckie (Con)]

My Lords, this has been a rather busy debate. I thank all noble Lords who have contributed, including the noble Lord, Lord Ponsonby, at the beginning, the noble and learned Lords, Lord Etherton and Lord Woolf, the noble Baroness, Lady Janke, and particularly the noble and learned Baroness, Lady Hallett, who I do not think has spoken in any of the debates I have been involved in; she is most welcome. I appreciate the careful consideration that has clearly been given to this knotty issue, and I welcome the opportunity to discuss the matter further and in depth. We obviously covered it in some depth at Second Reading.

I wanted to say something at the outset about Amendment 34, which seeks to raise the mandatory retirement age in the Judicial Pensions Act 1959 to 72, rather than 75 as proposed in the Bill. I point out that the amendment as drafted would have the effect of changing the retirement age to 72 for only a small number of senior judges. However, I understand from the contributions today that this is, if I have got this right, more of a probing amendment, and that its intention is to raise for debate—which we have had today—what mandatory retirement age should be provided for in this Bill for all members of the judiciary. I just wanted to make that point.

I recognise that there are different views, not just among Members of this House but among others outside, including within the judiciary, on the most appropriate age at which members of the judiciary should retire. I therefore appreciate the close interest that this Committee has in the consultation that took place in 2020 on this matter. It is obviously a challenge to get agreement, and I take the view from the noble and learned Lords, Lord Woolf and Lord Etherton, and indeed the noble and learned Baroness, Lady Hallett, that there are definitely different views. We know that.

As the noble Lord, Lord Ponsonby, mentioned, I endeavoured to cover in some detail in the letter I wrote to your Lordships following Second Reading some more information on this issue. However, I welcome the opportunity to provide further reassurance—and I hope I can—on the robust consultation that took place, which has to led to the decision, and to explain why, on balance, the Government feel it is right at this point to raise the mandatory retirement age to 75. I shall expand on that in my remarks.

First, as this Committee will know, a full public consultation ran from July to October 2020 and received 1,004 responses. The vast majority of respondents, 84% in total, believed that the mandatory retirement age should be increased, with 67% of respondents indicating that a retirement age of 75 was the better option—in a measured way and all things considered, I should say. Of the individual respondents who reported their gender, 62% of female respondents supported a mandatory retirement age of 75. But let me now turn to the Government’s rationale for raising the judicial retirement age to 75.

It is interesting to note that there is, of course, a view that the mandatory retirement age should be raised. I think the point was raised that this is about whether it should be either 72 or 75; at least that is some form of agreement. It is important that we set a judicial retirement age which we believe will stand the test of time, given that such changes are once in a generation.

Just to put all this in perspective, the previous adjustment to the judicial retirement age was 28 years ago. I pick up the point raised by the noble and learned Lord, Lord Woolf. In my view, and in his, it would not be ideal to make a modest increase of just two years and then to have to revisit this question in the relatively near future. It is better for the smooth administration of justice that we make a change now—if we want to make a change, and we think it is right—that supports our judiciary to meet the demands of the justice system, both now and in the future.

We have, of course, seen many changes since 1993, when the current retirement age of 70 was set. By 2019, life expectancy had increased for men by 5.8 years and for women by 4.1 years. We have also seen changes in wider societal norms on retirement: the Equality Act 2010 resulted in the removal of a compulsory retirement age from most professions. It is a widely accepted position that the judiciary is different in this respect, and there are very important principles we wish to maintain for setting a judicial officeholder’s retirement age in statute. However, the Government believe that the time is right to review the age at which that should be set. The proposal to increase it now is in line with the wider acceptance in our society that older people continue to make a significant contribution. Indeed, many noble Lords continue to make valuable contributions to the work of this House long past 70 or indeed 72 and even 75. As I expect noble Lords are aware, the average age of Members of this House in January last year was a positively spring chickenlike 77. I think we should bear that in mind.

The noble Lord, Lord Ponsonby, raised appraisal schemes, which I found interesting with my background in human resources. I would love to expand a lot on this, but appraisals are a matter for the judiciary. I shall set out the Government’s position on this as it is an important point. It is not for the Government to direct, but here we are. Having individual assessments undermines one of the core purposes of the mandatory retirement age, which is to maintain public confidence in the health and capability of the judiciary without the need for individual assessments. Individual assessments have the potential to infringe on the principle of judicial independence which is fundamental to our judicial system and must be fiercely protected. Judges must be free to hear and decide cases without the spectre of assessment sitting over their shoulder. Some sitting judges can already have their appointments extended past their compulsory retirement date to 75 without the need for a capability assessment. Subjecting only older judges to individual assessment risks being discriminatory on the basis of age, and we do not currently consider that that would be justified. However, I return to the first point that I made that appraisals are a matter for the judiciary and as I speak for the Government I have to stick with that.

A key issue here is trust. This was mentioned. The legitimacy of our judiciary relies on public confidence that its judgments can be accepted as right and fair. It is very positive that the Ipsos MORI Veracity Index shows a remarkably high level of trust in our judiciary. The 2020 index showed that 84% of the public trust the judiciary. Thank goodness for that. I do not think that more judges, magistrates and coroners sitting up to age 75 will dent that high level of trust.

As the noble and learned Lord, Lord Woolf, said, it is important to note here that the new mandatory retirement is, of course, a maximum, rather than a minimum, retirement age. It is not expected that even a simple majority of the judiciary, and judges in particular, will wish to sit until they are 75, but I take the messages that were relayed by the noble and learned Lord, Lord Etherton, from his experience. I do not dismiss what he said. It again comes back to the balance that we have decided to take. Data from the Forty-Second Annual Report on Senior Salaries showed that from 2011-12 to 2018-19, the average age of retirement across salaried judges in England and Wales was 67, but the Government believe that it is right that this measure would provide the judiciary a little more flexibility over when they retire.

It is known that we already greatly benefit from the expertise of judges older than 70; indeed, many incredibly important inquiries are chaired by former Justices of Appeal and High Court judges whose intellectual capacity was undimmed when they retired at 70. There are also many instances in which members of the judiciary are, at present, able to retire up to the age of 75: a number of judges who, having been appointed before 1995 when the changes to retirement age came into effect, are not due to retire until after 72 or up to 75. Similarly, coroners appointed before the Coroners and Justice Act 2009 do not have a retirement age in statute.

Public Service Pensions and Judicial Offices Bill [HL]

Viscount Younger of Leckie Excerpts

Report stage
Monday 29th November 2021 Lords Chamber

Moved by

[Viscount Younger of Leckie]

1: Clause 1, page 1, line 7, leave out “a person’s service” and insert “any continuous period of service of a person”
Member’s explanatory statement
This amendment clarifies that the definition of “remediable service” applies separately in relation to service of a person that takes place at different times (so that a person may have some service that is “remediable service” and some that is not, and may have more than one period of remediable service).

[Viscount Younger of Leckie (Con)]

My Lords, before I turn to the amendments in this group, I will begin by briefly reminding the House of the driving force behind this Bill and why it is so important that we get it right.

In the light of the Court of Appeal’s judgment, the Government have taken steps to provide an effective remedy to the discrimination that arose in public service pension schemes. The Government have sought to approach this matter responsibly from the outset, and this Bill is key in ensuring an effective remedy for the 3.4 million people who are affected. At the heart of the Bill is fairness and equal treatment for the public servants on whom we all rely. To ensure that we achieve this objective, the Bill is underpinned by the core principles of greater fairness between lower and higher earners, fairness for the taxpayer, future sustainability and affordability of public service pensions.

I recognise that tabling a large volume of amendments is highly unusual at this stage of a Bill’s passage. I want to take a moment to explain why this approach has proved necessary—indeed, crucial—to ensuring a robust and effective remedy. As we have all acknowledged, this is a complex and technical matter. The Bill covers more than 40 schemes which each individually have their own layers of detail and complexity. We are dealing with a somewhat unprecedented issue, and retrospective changes on this scale have not previously been required for occupational pension schemes. However, it is undoubtedly vital that, despite the complexity, we get this right.

Since the Bill was introduced, the Government have continued to work with the schemes, stakeholders and departments to check and re-check it to ensure that it will deliver our commitments to remove the discrimination and offer a complete and effective remedy. The amendments I have tabled today reflect that work and clarify, correct or adjust the Bill to ensure that it works correctly for each of the schemes.

The first group is large and consists of technical amendments. The House will hopefully be pleased to hear that I will not seek to set out the detail of each and every amendment, but I hope your Lordships will find it helpful if I explain the themes that they address. I will of course be happy to turn to specific amendments if your Lordships have any questions.

A large number of the amendments in this group deal with a single theme. In reviewing the Bill, we recognised that a gap exists in how some of the processes operate for members who die before they are able to make a deferred choice. So, 44 amendments are needed to correct the position and ensure that the Bill provides an effective remedy for instances in which a member sadly dies before they reach their retirement. The reason why so many amendments are needed to achieve this outcome is that it must be applied across all the key areas of the remedy so that, for example, any correction of pension benefits or member contributions in relation to a deceased member can be addressed with the member’s personal representatives. The changes must also be made across the provisions for the main schemes and those for the judiciary.

The next theme is amendments which have arisen from work that we have undertaken with each of the public service pension schemes. There are a number of differences between the schemes within the scope of the Bill—for example, to reflect the different needs of the workforces. We have identified some scheme-specific issues that must be reflected in the Bill to ensure that the remedy operates correctly for their members.

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[Lord Ponsonby of Shulbrede (Lab)]

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

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

[Viscount Younger of Leckie (Con)]

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

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

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

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

Amendment 1 agreed.

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Moved by

[Viscount Younger of Leckie]

2: Clause 1, page 2, line 3, after “that” insert “all of”
Member’s explanatory statement
This amendment clarifies that the second condition (which is concerned with whether service is pensionable) must be met in relation to all of the service in question.

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Moved by

[Viscount Younger of Leckie]

6: Clause 4, page 4, line 12, leave out from “person” to “the” in line 16 and insert “from becoming an active member of”
Member’s explanatory statement
This amendment simplifies the condition in subsection (2)(b).

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Moved by

[Viscount Younger of Leckie]

8: Clause 5, page 5, line 42, leave out from “which” to “or” in line 43 and insert “a remediable service statement is first provided in respect of the member”
Member’s explanatory statement
This amendment ensures that the definition is apt for a case in which the member to whom a remediable service statement relates has died.

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Moved by

[Viscount Younger of Leckie]

12: Clause 7, page 7, line 38, leave out from “which” to “or” in line 39 and insert “a remediable service statement is first provided in respect of the member”
Member’s explanatory statement
This amendment ensures that the definition is apt for a case in which the member to whom a remediable service statement relates has died.

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Moved by

[Viscount Younger of Leckie]

13: After Clause 8, insert the following new Clause—
“Persons with remediable service in more than one Chapter 1 legacy scheme
(1) This section applies where—(a) an election is made by virtue of section 6 (immediate choice to receive new scheme benefits) in relation to the remediable service in an employment or office of a member (“M”) of a Chapter 1 legacy scheme that is pensionable service under the scheme, and(b) M has any remediable service in that employment or office that is pensionable service under another Chapter 1 legacy scheme.(2) If M is a relevant member within the meaning of section 6 in relation to the scheme mentioned in subsection (1)(b), the election has effect as an election by virtue of section 6 in relation to M’s remediable service that is pensionable service under that scheme (as well as having effect as such an election in relation to M’s remediable service that is pensionable service under the scheme mentioned in subsection (1)(a)).(3) If M is a relevant member within the meaning of section 9 (deferred choice to receive new scheme benefits) in relation to the scheme mentioned in subsection (1)(b), the election has effect as an election by virtue of section 9 in relation to M’s remediable service that is pensionable service under that scheme (as well as having effect as an election by virtue of section 6 in relation to M’s remediable service that is pensionable service under the scheme mentioned in subsection (1)(a)).”Member’s explanatory statement
This amendment ensures that where a person has remediable service in an employment or office that is pensionable under more than one legacy scheme, the person can opt for new scheme benefits in respect of service in that employment or office in all of those schemes, but cannot opt for new scheme benefits in only some of those schemes.

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Moved by

[Viscount Younger of Leckie]

14: Clause 10, page 9, line 5, leave out from “which” to end of line 6 and insert “it is reasonably expected that, if an election were made, new scheme benefits would become payable under the scheme to or in respect of the member.”
Member’s explanatory statement
This amendment adjusts the rule in subsection (2) so that it operates by reference to the time that benefits would become payable in accordance with an election (which may be a different time to the time at which benefits would become payable if no election were made).

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Moved by

[Viscount Younger of Leckie]

16: After Clause 11, insert the following new Clause—
“Persons with remediable service in more than one Chapter 1 legacy scheme
(1) This section applies where—(a) an election is made by virtue of section 9 (deferred choice to receive new scheme benefits) in relation to the remediable service in an employment or office of a member (“M”) of a Chapter 1 legacy scheme that is pensionable service under the scheme, and(b) M has any remediable service in that employment or office that is pensionable service under another Chapter 1 legacy scheme. (2) If M is a relevant member within the meaning of section 9 in relation to the scheme mentioned in subsection (1)(b), the election has effect as an election by virtue of section 9 in relation to M’s remediable service that is pensionable service under that scheme (as well as having effect as such an election in relation to M’s remediable service that is pensionable service under the scheme mentioned in subsection (1)(a)).(3) If M is a relevant member within the meaning of section 6 (immediate choice to receive new scheme benefits) in relation to the scheme mentioned in subsection (1)(b), the election has effect as an election by virtue of section 6 in relation to M’s remediable service that is pensionable service under that scheme (as well as having effect as an election by virtue of section 9 in relation to M’s remediable service that is pensionable service under the scheme mentioned in subsection (1)(a)).”Member’s explanatory statement
This amendment ensures that where a person has remediable service in an employment or office that is pensionable under more than one legacy scheme, the person can opt for new scheme benefits in respect of service in that employment or office in all of those schemes, but cannot opt for new scheme benefits in only some of those schemes.

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Moved by

[Viscount Younger of Leckie]

17: Clause 13, page 11, line 42, at end insert—
“(6A) A reference in subsection (6) to pension contributions paid by M includes, in relation to any pension contributions paid under a partnership pension account, such sums as are deducted by M under section 192 of FA 2004 (relief at source).”Member’s explanatory statement
This amendment clarifies that “the paid contributions amount” defined in subsection (6) includes tax relief deducted at source.

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Moved by

[Viscount Younger of Leckie]

18: Clause 14, page 12, line 29, leave out “M” and insert “the appropriate person”
Member’s explanatory statement
This is one of a number of amendments clarifying or adjusting the processes and powers under Part 1 of the Bill so that they operate as intended in cases in which a member dies.

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Moved by

[Viscount Younger of Leckie]

22: Clause 15, page 13, line 22, leave out “M” and insert “the appropriate person”
Member’s explanatory statement
This is one of a number of amendments clarifying or adjusting the processes and powers under Part 1 of the Bill so that they operate as intended in cases in which a member dies.

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Moved by

[Viscount Younger of Leckie]

26: Clause 18, page 15, line 34, leave out subsection (2)
Member’s explanatory statement
This amendment is in consequence of the government amendment of clause 92 which applies the definition of “voluntary contributions” to the whole of Part 1.

[Viscount Younger of Leckie]

My Lords, this second group consists of three technical areas of amendments. I reassure the House that my remarks will be somewhat shorter than on the previous group. As before, I will set out the key themes in each area, rather than talking through the detail of each amendment. The three key themes these amendments relate to are: first, matters concerning voluntary contributions; secondly, flexibility in delivering the remedy in respect of judicial scheme members; and, thirdly, the closure of old schemes. Once again, I will be happy to turn to specific amendments if your Lordships have any questions they would like to raise.

Before I turn to the first area of amendments, which relate to member voluntary contributions, I thank the noble Lord, Lord Davies of Brixton, to whom I am most grateful for raising this matter in Grand Committee, which has assisted the Government in developing these new amendments. I gave the noble Lord assurances in Grand Committee that the Government would consider how the Bill should provide for members who were prevented from making voluntary contributions to the legacy schemes as a result of the discrimination that arose, and I am pleased to be able to bring forward amendments to that effect now.

First, these amendments insert new clauses so that scheme regulations may allow members to enter into remedial voluntary contributions arrangements where they would have done so had the discrimination not arisen. Additionally, the amendments ensure that information that must be provided to members includes information about remedial voluntary contribution arrangements as well as details of the eligibility criteria and the process for entering into those arrangements.

Secondly, these amendments will amend Clause 18 to ensure that the provisions work correctly in relation to persons other than a member who may obtain rights in relation to a member’s voluntary contributions.

Thirdly, the amendments clarify that, where compensation is paid to members of the judiciary representing an amount that was paid as voluntary contributions less the tax relief they received at the time, any rights that were associated with those contributions are extinguished. The amendments also clarify that, where the member is deceased, the compensation should be made to the member’s personal representatives.

Finally, the amendments add a new clause to provide that no new arrangements to pay voluntary contributions may be entered into after 31 March 2022 in a legacy scheme. This reflects the fact that the legacy schemes will close on that date. However, any existing voluntary contributions arrangements that members may have entered prior to 1 April 2022 may continue. Additionally, this prohibition does not apply to the new clauses which permit members to enter into remedial voluntary contributions arrangements in the specific circumstances I have set out.

Let me now turn to the second area of amendments in this group. These are technical amendments required to ensure the remedy can be applied most effectively in respect of judicial scheme members. Clause 65 defines the election period as a three-month period beginning with such date as is specified by the relevant authority and that the relevant authority may extend the election period in relation to a particular person, if they consider it just and equitable to do so.

It is important that judges in scope of the remedy have enough time to make an informed decision regarding their scheme membership for the remedy period. Therefore, amendments are made to Clauses 65 and 60 to provide for further flexibility to respond to judges’ individual circumstances by allowing for there to be more than one election period, and for an information statement to be sent to each member before the start of their respective election period.

Finally, I come to the third and final area in this group. This last area amends the valuations and governance framework for public service pension schemes to ensure that it operates correctly when old schemes established under the Public Service Pensions Act 2013, or its Northern Ireland equivalent, are closed and new schemes are established. In the present context, these amendments are most relevant to the reformed judicial pension scheme that is set to replace the 2015 scheme. However, the same issues will arise if, in future, other schemes are closed and new ones created.

Schemes that are closed to future accrual do not require future stand-alone valuations. A new clause will ensure that these are no longer required and that an employer cost cap need not be set for the purpose of measuring changes in the costs of those schemes under the cost control mechanism.

The new clause will also allow existing governance frameworks to be carried over from old schemes to new schemes. Additionally, an amendment to Clause 80 will ensure that the cost control mechanism can operate correctly by ensuring that the employer cost cap of a new scheme can be set after the regulations have been created.

I hope the House will agree that, important though they are, all three sets of amendments I have outlined in this group make necessary technical changes to the existing legislation so as to ensure that the remedy can operate as intended. With that, I beg to move.

[Baroness Janke (LD)]

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

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

[Lord Ponsonby of Shulbrede (Lab)]

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

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

[Viscount Younger of Leckie (Con)]

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

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

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

Amendment 26 agreed.

Moved by

[Viscount Younger of Leckie]

27: Clause 18, page 16, line 9, leave out “member in question” and insert “person whose rights are extinguished”
Member’s explanatory statement
This amendment recognises that persons other than the member who pays voluntary contributions (for example their spouse) may obtain rights in consequence of the contributions.

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Moved by

[Viscount Younger of Leckie]

31: Clause 20, page 17, line 17, at end insert—
“(aa) provision about the benefits payable to or in respect of a member who has remediable service in an employment or office where—(i) there is another Chapter 1 scheme that provides benefits for persons in that employment or office, and(ii) the two schemes provide (or in any circumstances might provide) benefits to or in respect of a person in relation to the same period of service;”Member’s explanatory statement
This amendment is to enable provision to be made where service may entitle a person to benefits under more than one scheme (for example, some service in the armed forces entitles a person both to early departure payments under one scheme and (when they are older) to pension payments under another scheme).

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Moved by

[Viscount Younger of Leckie]

38: Clause 21, page 17, line 42, at end insert “or, in the case of deceased members, their personal representatives.”
Member’s explanatory statement
This amendment ensures that, where a member has died, compensation can be paid to the member’s personal representatives if they incur a compensatable loss.

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[Viscount Younger of Leckie (Con)]

My Lords, I thank the noble Lord, Lord Davies of Brixton, for raising this issue again today, and I thank other noble Lords for their comments.

Clause 21 provides the power for scheme managers to pay compensation for certain losses incurred by members. Compensation can be paid for losses that satisfy any of the three conditions set out in subsections (4) to (6) and are of a description specified in Treasury directions.

It might be helpful for the House if I set out the background and purpose of the clause. I hope I can provide the clarifications that have been asked for by the noble Baroness and both noble Lords. The purpose of the clause is to confer power on scheme managers to make payments in relation to compensatable losses. This is an important element of the remedy provided by the Bill. The Government have set out to Parliament, in public announcements and to the courts that we will take steps to remedy the discrimination that occurred when transitional protection was provided to some members when the public pension schemes were reformed in 2015. That means taking steps to place members as far as possible back into the position where they would have been had the discrimination not occurred.

Clause 21 provides for compensation in relation to losses incurred as a result of the discrimination or the retrospective remedy provided by the Bill, or in respect of certain tax losses. The clause allows for matters that are not directly remedied by other provisions of the Bill or by the intended scheme regulations to be put right. As I understand it, having listened carefully to the speech from the noble Lord, Lord Davies, the intended effect of his amendment is to compensate members who reach the required length of service to retire with full benefits in their legacy scheme before they reach the necessary age to retire with full benefits in their reformed scheme. The amendment appears to relate closely to representations made by police staff associations, which a number of speakers mentioned, regarding members of the 1987 and 2015 police pension schemes who reach 30 years of service in the legacy pension scheme before reaching minimum pension age in the reformed scheme.

However, by referring to “full benefits” in the reformed pension scheme, the noble Lord’s amendment appears to go considerably beyond these representations and proposals, effectively requiring compensation for those below normal pension age, not minimum pension age, in the reformed scheme. I know that he raised the question of whether this applies to all public servants. Perhaps I may just gently put him right—I defer to his greater knowledge but I will put him right on this—that it does not.

As implied by the reference to the required number of years in the amendment text, this issue arises for members of schemes where retirement on full benefits is based on length of service rather than age. The 1987 police pension scheme falls into that. Members of other public service pension schemes will often move from a scheme where the normal pension age is 60 to a scheme where the NPA is equal to state pension age. However, it is not quite the same issue as the normal pension age and a legacy scheme, for these members will be higher than the minimum pension age in their reformed scheme. I hope that offers a reasoned explanation.

Turning to the police pension scheme, under the Bill all members in active service on 31 March 2022 will be moved into the reformed 2015 police pension scheme in respect of service from 1 April 2022 onwards. That is what is known as a “prospective remedy” to ensure that all active members are treated equally from that date onwards. I am grateful for the hard work and extraordinary dedication shown by police officers. The Government support the police and the important work that they do to protect the public, and recognise that they face changing demands from crime.

The reformed police pension scheme is, rightly, one of the most generous pension schemes in the United Kingdom. Moreover, members with service under the 1987 police pension scheme are already afforded significant protections in the Bill, including by maintaining the final salary link of the 1987 scheme and the protection of weighted accrual. This means that accruals in the 1987 scheme will be calculated in relation to a member’s final salary when they retire or otherwise leave the police pension scheme of 2015 in the future, not their salary at the point when they leave the police pension scheme of 1987 on 31 March 2022. The improved accrual rate linked to length of service in the older scheme is also protected and will remain the same in relation to service in those legacy schemes.

The Government have been considering the issues raised by the police representatives and this amendment carefully, including the question of whether there are viable policy mitigations. I want to answer the important point raised by the noble Lord, Lord Ponsonby, on engagement. The Home Office is also currently consulting on detailed regulations to implement the prospective McCloud remedy for the police pension scheme; I hope that provides some reassurance that this is an important matter. That includes communication as well. However, the Government must not take action that would be contrary to the Bill’s intention to remove the discrimination identified by the courts and to ensure that all members are treated equally from 1 April 2022 by accruing service in the reformed schemes, regardless of their age.

It is important to stress that the Court of Appeal found in the McCloud and Sargeant cases in 2018 that the transitional protections offered under the PSPA 2013 amounted to unlawful discrimination against younger members, because they allowed older members to accrue service in the legacy schemes for longer because of their age. Accordingly, offering compensation to members depending on their age and resulting position relative to service length and normal pension age would risk perpetuating such unlawful discrimination through different means. This is an important point of clarification for the noble Lord, Lord Davies.

I thank the noble Lord for bringing attention to this issue and reassure him that the Government have been considering the position of these members, including the viability of policy solutions such as the proposal submitted by police staff associations. However, careful consideration must be given to the need to avoid introducing new discrimination against other pension scheme members—I made this point earlier—and a broadly drafted amendment to the Bill risks doing just that. I therefore ask, with that rather full explanation, the noble Lord to withdraw his amendment.

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Moved by

[Viscount Younger of Leckie]

41: Clause 21, page 18, line 44, leave out “the member” and insert “any person”
Member’s explanatory statement
This is one of a number of amendments clarifying or adjusting the processes and powers under Part 1 of the Bill so that they operate as intended in cases in which a member dies.

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Moved by

[Viscount Younger of Leckie]

43: After Clause 22, insert the following new Clause—
“Remedial arrangements to pay voluntary contributions to legacy schemes
(1) Scheme regulations for a Chapter 1 legacy scheme may make provision so as to secure that a relevant member may enter into remedial voluntary contributions arrangements.(2) In subsection (1)—“relevant member”, in relation to a Chapter 1 legacy scheme, means a member (other than a deceased member) who has remediable service in an employment or office which, after the coming into force of section 2 (1) in relation to the scheme, is pensionable service under the scheme (whether or not by virtue of that provision);“remedial voluntary contributions arrangements” means arrangements—(a) which are entered into by a member after the coming into force of section 2 (1) in relation to the scheme, and(b) under which the member pays voluntary contributions to the scheme.(3) Provision by virtue of subsection (1) may permit a member (“M”) to enter into arrangements only if the scheme manager is satisfied that it is more likely than not that, but for a relevant breach of a non-discrimination rule, M would, during the period of M’s remediable service in the employment or office, have entered into the same or similar arrangements.(4) The provision that may be made by virtue of subsection (1) includes, in particular, provision under which liabilities to pay voluntary contributions that would otherwise arise under the arrangements are reduced by tax relief amounts.(5) In subsection (4) “tax relief amounts” means amounts determined by reference to the tax relief under section 188 of FA 2004 (relief for members’ contributions) that would have been available in respect of the amounts owed if they were paid in a different tax year.(6) Provision by virtue of subsection (1) may not permit a member (“M”) to enter into arrangements after—(a) the end of the period of one year beginning with the day on which a remediable service statement is first provided in respect of M, or(b) such later time as the scheme manager considers reasonable in all the circumstances.(7) Subsection (6) does not affect the continued operation after the time mentioned in that subsection of any remedial arrangements entered into before that time.(8) In this section “non-discrimination rule” means a rule that is, or at any time was, included in a Chapter 1 scheme by virtue of—(a) section 61 of EA 2010, or(b) paragraph 2 of Schedule 1 to EEAR(NI) 2006.(9) For the purposes of this section a breach of a non-discrimination rule is “relevant” if it arises from the application of—(a) an exception to section 18(1) of PSPA 2013 made under section 18(5) to (7) of that Act, or(b) an exception to section 18(1) of PSPA(NI) 2014 made under section 18(5) to (8) of that Act.”Member’s explanatory statement
This Clause makes it possible for a Chapter 1 legacy scheme to make provision giving members with remediable service the facility to enter into new arrangements to pay voluntary contributions. The facility may only be made available to members who show that they would have entered into similar arrangements but for unlawful discrimination, and may be made available only for a limited period.

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Moved by

[Viscount Younger of Leckie]

44: Clause 23, page 19, line 33, leave out first “member” and insert “person”
Member’s explanatory statement
This is one of a number of amendments clarifying or adjusting the processes and powers under Part 1 of the Bill so that they operate as intended in cases in which a member dies.

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Moved by

[Viscount Younger of Leckie]

46: Clause 24, page 20, line 19, at end insert—
“(ha) the power to make scheme regulations by virtue of section (Remedial arrangements to pay voluntary contributions to legacy schemes) (remedial arrangements to pay voluntary contributions to legacy schemes) and any powers exercisable by virtue of such regulations;”Member’s explanatory statement
This amendment ensures that Treasury directions can be used in relation to remedial voluntary contributions arrangements.

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Moved by

[Viscount Younger of Leckie]

50: Clause 26, page 21, line 27, at end insert “, and
(d) a description of—(i) the arrangements (if any) that, by virtue of section (Remedial arrangements to pay voluntary contributions to legacy schemes) (remedial arrangements to pay voluntary contributions to legacy schemes), may be entered into under the scheme, and (ii) the circumstances in which, and the process by which, such arrangements may be entered into.”Member’s explanatory statement
The amendment ensures that a statement under this clause includes information to enable the recipient to decide whether they are entitled to enter into new arrangements to pay voluntary contributions, and if so how to go about doing it.

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Moved by

[Viscount Younger of Leckie]

51: Clause 28, page 22, line 36, leave out from “if” to “in” in line 37 and insert “an immediate detriment remedy has been obtained”
Member’s explanatory statement
This is one of a number of amendments clarifying or adjusting the processes and powers under Part 1 of the Bill so that they operate as intended in cases in which a member dies.

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Moved by

[Viscount Younger of Leckie]

53: Clause 29, page 23, line 15, leave out from “of” to “person’s” in line 16 and insert “section 28 an “immediate detriment remedy” has been obtained in relation to a”
Member’s explanatory statement
This is one of a number of amendments clarifying or adjusting the processes and powers under Part 1 of the Bill so that they operate as intended in cases in which a member dies.

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Moved by

[Viscount Younger of Leckie]

57: Clause 33, page 25, line 25, leave out “A person’s service” and insert “Any continuous period of service of a person”
Member’s explanatory statement
This amendment clarifies that the definition of “opted-out service” applies separately in relation to service that takes place at different times (so that some service may be “opted- out service” and some may not and a person may have more than one period of opted-out service).

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Moved by

[Viscount Younger of Leckie]

58: Clause 35, page 26, leave out lines 22 and 23
Member’s explanatory statement
This amendment is in consequence of the government amendment of Clause 29(1).

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Moved by

[Viscount Younger of Leckie]

61: Clause 36, page 27, line 32, leave out “a person’s service” and insert “any continuous period of service of a person”
Member’s explanatory statement
This amendment clarifies that the definition of “remediable service” applies separately in relation to service of a person that takes place at different times (so that a person may have some service that is “remediable service” and some that is not, and may have more than one period of remediable service).

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Moved by

[Viscount Younger of Leckie]

64: Clause 38, leave out Clause 38 and insert the following new Clause—
“Partnership pension account: requirement to transfer and surrender rights
(1) Subsection (2) applies where—(a) a person (“P”) has remediable service in a salaried judicial office, and(b) any of the remediable service is PPA opted-out service.(2) A legacy scheme election in respect of P may not be made unless—(a) the relevant authority is satisfied that the steps mentioned in subsection (3) have been taken, or(b) the appropriate person has notified the relevant authority that they intend to instigate and facilitate the taking of those steps.(3) The steps are—(a) the transfer of any relevant assets and liabilities to the relevant judicial legacy salaried scheme,(b) the surrender of any entitlement to a pension under the relevant judicial legacy salaried scheme, and any right to a future pension under that scheme, that would otherwise arise under the rules of the scheme in respect of the value of the assets and liabilities transferred, and(c) if at any time any relevant assets and liabilities were transferred out of the partnership pension account (otherwise than in the course of a transfer to the relevant judicial legacy salaried scheme), the payment by the appropriate person to the relevant judicial legacy salaried scheme of an amount, determined by the relevant authority after consulting the Government Actuary, in respect of the value of the relevant assets transferred.(4) Subsection (5) applies where—(a) a person (“P”) has remediable service in a fee-paid judicial office, and(b) any of the remediable service is PPA opted-out service.(5) A legacy scheme election in respect of P may not be made unless—(a) the relevant authority is satisfied that the steps mentioned in subsection (6) have been taken, or(b) the appropriate person has notified the relevant authority that they intend to instigate and facilitate the taking of those steps.(6) The steps are—(a) the transfer of any relevant assets and liabilities to the judicial legacy fee-paid scheme,(b) the surrender of any entitlement to a pension under the judicial legacy fee-paid scheme, and any right to a future pension under that scheme, that would otherwise arise under the rules of the scheme in respect of the value of the assets and liabilities transferred, and(c) if at any time any relevant assets and liabilities were transferred out of the partnership pension account (otherwise than in the course of a transfer to the judicial legacy fee-paid scheme), the payment by the appropriate person to the judicial legacy fee-paid scheme of an amount, determined by the relevant authority after consulting the Government Actuary, in respect of the value of the relevant assets transferred.(7) In this section “the appropriate person”, in relation to a person (“P”) who has PPA opted-out service, means the person by whom a legacy scheme election in respect of P may be made (see section 43).(8) For the purposes of this section assets and liabilities are “relevant” in relation to any PPA opted-out service of a person (“P”) if—(a) they are referable to pension contributions or voluntary contributions that were made by or on behalf of P in respect of the service, and(b) they are held for the purposes of a partnership pension account.This is subject to subsection (9).(9) Where—(a) the total of the pension contributions, together with any voluntary contributions, that were paid by P in respect of the PPA opted-out service, exceeds(b) the total of the pension contributions that would have been payable by P in respect of that service if the service had been pensionable service under the judicial legacy scheme to which the relevant assets and liabilities are to be transferred,the assets and liabilities that the relevant authority, after consulting the Government Actuary, determines are referable to the excess are not “relevant” in relation to the PPA opted-out service.(10) A reference in subsection (9) to pension contributions or voluntary contributions paid by P in respect of PPA opted-out service is a reference to the amount of the contributions paid, net of any tax relief under section 188 of FA 2004 (relief for contributions) to which P was entitled in respect of them.” Member’s explanatory statement
This amendment substitutes Clause 38. The replacement Clause is updated in a number of respects, and now caters in particular for cases in which the member has died, and cases in which transfers have been made from the partnership pension account.

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Moved by

[Viscount Younger of Leckie]

65: Clause 45, page 34, line 10, leave out “, civil partner or other adult” and insert “or civil partner”
Member’s explanatory statement
In the judicial legacy schemes, the only adult who may be entitled to benefits on a member’s death is a surviving spouse or civil partner. This amendment therefore removes the redundant reference to other adults.

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Moved by

[Viscount Younger of Leckie]

66: Clause 48, page 37, line 8, at end insert—
“(5A) If—(a) M is deceased,(b) a PPA lump sum death benefit has been paid on the death of M, and(c) a legacy scheme election has been made in respect of M,the PPA lump sum death benefit is to be treated for the purposes of subsection (4)(a) as a lump sum benefit paid under the scheme in respect of M’s remediable service in the judicial office.”Member’s explanatory statement
Where a person has opted out of the public service pension scheme available to them and instead has a partnership pension account, and the person dies, a lump sum may be paid by the department to the person’s nominated beneficiary (or, in the absence of a nomination, to the person’s personal representatives). Where a legacy scheme election is made in respect of the person, the arrangements for lump sum death benefits under the legacy scheme will apply. This amendment ensures that a correction is made for the lump sum already paid.

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Moved by

[Viscount Younger of Leckie]

68: Clause 49, page 37, line 28, leave out subsections (2) to (4) and insert—
“(2) Where—(a) the paid contributions amount for an in-scope tax year in respect of M’s remediable service in the judicial office, exceeds(b) the payable contributions amount for that tax year in respect of that service,the scheme manager must (directly or indirectly) pay an amount in respect of the difference to the appropriate person.(3) Where—(a) the paid contributions amount for an out-of-scope tax year in respect of M’s remediable service in the judicial office, exceeds(b) the payable contributions amount for that tax year in respect of that service,no amount is to be paid by the scheme manager in respect of the difference to the appropriate person.(4) Where—(a) the paid contributions amount for an in-scope or out-of-scope tax year in respect of M’s remediable service in the judicial office, is less than(b) the payable contributions amount for that tax year in respect of that service,the appropriate person must pay pension contributions in respect of the difference to the scheme.(4A) A reference in this section to “the paid contributions amount” for a tax year in respect of M’s remediable service in a judicial office is a reference to the sum of—(a) the aggregate of the pension contributions that (after taking into account the effect, if any, of section 47(2), (4) and (6)) have been paid under the scheme by M in the tax year in respect of so much of the service as was not PPA opted-out service, and(b) where any of the remediable service was PPA opted-out service—(i) the aggregate of the pension contributions and any voluntary contributions that have been paid by M under the partnership pension account in the tax year in respect of the PPA opted-out service, or(ii) if lower, the aggregate of the pension contributions that (after taking into account the effect, if any, of section 39(2) to (5) or 42 (2)) were payable under the scheme by M for that tax year in respect of the PPA opted-out service.(4B) A reference in this section to “the payable contributions amount” for a tax year in respect of M’s remediable service in a judicial office means the aggregate of the pension contributions that (after taking into account the effect, if any, of section 39(2) to (5) or 42 (2)) were payable under the scheme by M for that tax year in respect of the service.(4C) In this section “the appropriate person” means—(a) M, or(b) if M is deceased, M’s personal representatives.”Member’s explanatory statement
This amendment ensures that the treatment of contributions paid to a partnership pension account is properly accounted for; it is also one of a number of amendments clarifying or adjusting the processes and powers under Part 1 of the Bill so that they operate as intended in cases in which a member dies.

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Moved by

[Viscount Younger of Leckie]

70: Clause 50, page 38, line 24, leave out “Subsection (2) applies” and insert “Subsections (1A) and (2) apply”
Member’s explanatory statement
This amendment clarifies the treatment of effective pension age payments under this clause.

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Moved by

[Viscount Younger of Leckie]

74: Clause 51, page 39, line 1, leave out “P” and insert “The appropriate person”
Member’s explanatory statement
This is one of a number of amendments clarifying or adjusting the processes and powers under Part 1 of the Bill so that they operate as intended in cases in which a member dies.

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Moved by

[Viscount Younger of Leckie]

76: Clause 52, page 39, line 17, at end insert—
“(1A) Scheme regulations for a judicial scheme may make provision under which, in a case in which a person is (by virtue of provision made under subsection (1)) not required to pay an amount to the person’s employer, the scheme manager is required to reimburse the employer.”Member’s explanatory statement
This amendment ensures that, where a person has an obligation to pay an amount to the person’s employer as a result of this Chapter (for example a requirement to repay transitional protection allowance under clause 51) and regulations under subsection (1) of this clause mean that, instead of paying the full amount immediately, the person receives reduced benefits from the scheme in retirement, the scheme is require to reimburse the employer for the amount owed.

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Moved by

[Viscount Younger of Leckie]

77: Clause 54, page 39, line 41, leave out “member of the scheme” and insert “person”
Member’s explanatory statement
This amendment is to ensure that the power under Clause 54 is available in relation to the benefits payable to or in respect of any person who has a pension credit or debit under a scheme, whether or not they are regarded as a member of the scheme under its rules.

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Moved by

[Viscount Younger of Leckie]

80: Clause 55, page 41, line 13, leave out paragraph (g) and insert—
“(g) provision about cases in which the scheme administrator of a judicial scheme pays a liability under section 217 or 237B of FA 2004 (joint liability of scheme administrator to lifetime allowance charge or annual allowance charge);” Member’s explanatory statement
This amendment generalises the power in subsection (2)(g) of this clause so that it confers power to make provision about any case in which a member’s liability to a lifetime allowance charge, or an annual allowance charge, is paid under the “scheme pays” facility (under which the liability is paid by the scheme administrator and the member’s benefits from the scheme are reduced in consequence).

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Moved by

[Viscount Younger of Leckie]

85: Clause 56, page 41, line 38, at end insert “or, in the case of deceased members, their personal representatives.”
Member’s explanatory statement
This amendment ensures that, where a member has died, compensation can be paid to the member’s personal representatives if they incur a compensatable loss.

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Moved by

[Viscount Younger of Leckie]

89: After Clause 56, insert the following new Clause—
“Remedial arrangements to pay voluntary contributions to judicial schemes
(1) Scheme regulations for a judicial scheme may make provision so as to secure that a relevant member may enter into remedial voluntary contributions arrangements.(2) In subsection (1)—“relevant member”, in relation to a judicial scheme, means a member (other than a deceased member) who has remediable service in a judicial office which, after the end of the election period, is pensionable service under the scheme;“remedial voluntary contributions arrangements” means arrangements—(a) which are entered into by a member after the end of the election period, and(b) under which the member pays voluntary contributions to the scheme.(3) Provision by virtue of subsection (1) may permit a member (“M”) to enter into arrangements only if the scheme manager is satisfied that it is more likely than not that, but for a relevant breach of a non-discrimination rule, M would, during the period of M’s remediable service in the judicial office, have entered into the same or similar arrangements.(4) The provision that may be made by virtue of subsection (1) includes, in particular, provision under which liabilities to pay voluntary contributions that would otherwise arise under the arrangements are reduced by tax relief amounts.(5) In subsection (4) “tax relief amounts” means amounts determined by reference to the tax relief under section 188 of FA 2004 (relief for members’ contributions) that would have been available in respect of the amounts owed if they were paid in a different tax year.(6) Provision by virtue of subsection (1) may not permit a member (“M”) to enter into arrangements after—(a) the end of the period of one year beginning with the day on which a statement under section 60 (information statements) is sent in respect of M, or(b) such later time as the scheme manager considers reasonable in all the circumstances.(7) Subsection (6) does not affect the continued operation after the time mentioned in that subsection of any arrangements entered into before that time. (8) In this section “non-discrimination rule” means a rule that is, or at any time was, included in a judicial scheme by virtue of—(a) section 61 of EA 2010, or(b) paragraph 2 of Schedule 1 to EEAR(NI) 2006.(9) For the purposes of this section a breach of a non-discrimination rule is “relevant” if it arises from the application of—(a) an exception to section 18(1) of PSPA 2013 made under section 18(5) to (7) of that Act, or(b) an exception to section 18(1) of PSPA(NI) 2014 made under section 18(5) to (8) of that Act.”Member’s explanatory statement
This Clause makes it possible for a judicial scheme to make provision giving members with remediable service the facility to enter into new arrangements to pay voluntary contributions. The facility may only be made available for members who would have entered into similar arrangements but for unlawful discrimination, and may be made available only for a limited period.

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Moved by

[Viscount Younger of Leckie]

90: Clause 57, page 43, line 6, leave out subsection (3) and insert—
“(3) In this section “relevant amounts” mean any amounts that are payable under or by virtue of this Chapter—(a) by a person to the scheme or to an employer in relation to the scheme, or(b) by the scheme to a person.”Member’s explanatory statement
This amendment broadens the definition of “relevant amounts” so that it covers payments to a member’s employer. It is also one of a number of amendments clarifying or adjusting the processes and powers under Part 1 of the Bill so that they operate as intended in cases in which a member dies.

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Moved by

[Viscount Younger of Leckie]

91: Clause 58, page 43, line 29, at end insert—
“(fa) the power to make scheme regulations by virtue of section (Remedial arrangements to pay voluntary contributions to judicial schemes) (remedial arrangements to pay voluntary contributions to judicial schemes) and any powers exercisable by virtue of such regulations;”Member’s explanatory statement
This amendment ensures that Treasury directions can be used in relation to remedial voluntary contributions arrangements.

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Moved by

[Viscount Younger of Leckie]

95: Clause 60, page 44, line 24, leave out subsection (1) and insert—
“(1) The relevant authority must—(a) prepare a statement in relation to any person (“P”) in respect of whom a legacy scheme election or a 2015 election may be made, and(b) send it to the person who may make the election (see section 43).(1A) Subsection (1) must be complied with before the beginning of the election period in relation to P.”Member’s explanatory statement
This amendment is consequential on the government amendments of Clause 65.

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Moved by

[Viscount Younger of Leckie]

99: Clause 63, page 45, line 20, leave out from “if” to “in” in line 21 and insert “an immediate detriment remedy has been obtained”
Member’s explanatory statement
This is one of a number of amendments clarifying or adjusting the processes and powers under Part 1 of the Bill so that they operate as intended in cases in which a member dies.

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Moved by

[Viscount Younger of Leckie]

101: Clause 64, page 46, line 2, leave out from “of” to “person’s” in line 3 and insert “section 63 an “immediate detriment remedy” has been obtained in relation to a”
Member’s explanatory statement
This is one of a number of amendments clarifying or adjusting the processes and powers under Part 1 of the Bill so that they operate as intended in cases in which a member dies.

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Moved by

[Viscount Younger of Leckie]

104: Clause 65, page 46, line 29, after “period”” insert “, in relation to a person who has remediable service in a judicial office,”
Member’s explanatory statement
This amendment (together with the other government amendment of this Clause) makes the definition of “the election period” more flexible by enabling different periods to be specified for different descriptions of judge.

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Moved by

[Viscount Younger of Leckie]

106: Clause 69, page 47, line 42, after “to” insert “pension”
Member’s explanatory statement
This amendment clarifies the reference to pension contributions in subsection (2) of this Clause.

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Moved by

[Viscount Younger of Leckie]

107: Clause 71, page 48, leave out lines 21 and 22
Member’s explanatory statement
This amendment is in consequence of the government amendment of Clause 64(1).

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Moved by

[Viscount Younger of Leckie]

109: Clause 73, page 49, line 38, leave out “a person’s service” and insert “any continuous period of service of a person”
Member’s explanatory statement
This amendment clarifies that the definition of “remediable service” applies separately in relation to service of a person that takes place at different times (so that a person may have some service that is “remediable service” and some that is not, and may have more than one period of remediable service).

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Moved by

[Viscount Younger of Leckie]

111: After Clause 78, insert the following new Clause—
“Prohibition of new arrangements to pay voluntary contributions
(1) No arrangements are to be entered into after 31 March 2022 under which voluntary contributions are payable by a member of a relevant scheme to the scheme.(2) In subsection (1) “relevant scheme” means—(a) a Chapter 1 legacy scheme (within the meaning of Chapter 1),(b) a judicial legacy salaried scheme (within the meaning of Chapter 2),(c) a local government legacy scheme (within the meaning of Chapter 3),(d) the Judicial Pensions Regulations 2015 (S.I. 2015/182),(e) the Judicial Pensions Regulations (Northern Ireland) 2015 (S.R.(N.I.) 2015 No. 76), or(f) the pension scheme established for certain employees of the Secret Intelligence Service which came into operation on 1 January 1946 and was amended on 1 September 1957 and 1 July 1964.(3) Subsection (1)—(a) does not affect the continued operation after 31 March 2022 of any arrangements entered into on or before that date; (b) does not apply to arrangements entered into by virtue of section (Remedial arrangements to pay voluntary contributions to legacy schemes) or (Remedial arrangements to pay voluntary contributions to judicial schemes) (remedial arrangements to pay voluntary contributions).”Member’s explanatory statement
This Clause sets out the general rule that no arrangements to pay voluntary contributions to legacy schemes may be entered into after 31 March 2022.

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Moved by

[Viscount Younger of Leckie]

112: After Clause 79, insert the following new Clause—
“Amendments relating to the establishment or restriction of schemes
(1) PSPA 2013 is amended in accordance with subsections (2) to (7).(2) In section 4 (scheme manager)—(a) after subsection (3) insert—“(3A) Subsection (1) does not apply to a scheme under section 1 if—(a) the scheme is connected with another scheme under section 1, and(b) a scheme manager is provided for under subsection (1) in scheme regulations for that other scheme.”;(b) after subsection (6) insert—“(6A) The reference in subsection (6) to a statutory pension scheme includes a statutory pension scheme established (under section 1 or otherwise) after the establishment of the scheme under section 1 mentioned in that subsection.”(3) In section 5 (pension board), after subsection (2) insert—“(2A) Subsection (1) does not apply to a scheme under section 1 if—(a) the scheme is connected with another scheme under section 1, and(b) a pension board is provided for under subsection (1) in scheme regulations for that other scheme.”(4) In section 7 (scheme advisory board)—(a) in subsection (1), for “on the desirability of changes to the scheme” substitute “on—(a) the desirability of changes to the scheme, or(b) the desirability of changes to any other scheme under section 1 which—(i) is connected with it, and(ii) is not an injury or compensation scheme.”;(b) after subsection (1) insert—“(1A) Subsection (1) does not apply to a scheme under section 1 if—(a) the scheme is connected with another scheme under section 1 which is not an injury or compensation scheme, and(b) a scheme advisory board is provided for under subsection (1) in scheme regulations for that other scheme.”(5) In section 11 (valuations), after subsection (1) insert—“(1A) Subsection (1) does not apply to a scheme under section 1 if— (a) the scheme is connected with another scheme under section 1, and(b) actuarial valuations are provided for under subsection (1) in scheme regulations for that other scheme.”(6) After section 12 insert—“12A Sections 11 and 12: restricted schemes(1) Section 11(1) (valuations) does not require scheme regulations to provide for actuarial valuations to be made of a scheme to which this section applies.(2) Section 12(1) (employer cost cap) does not apply to a scheme to which this section applies.(3) This section applies to a scheme under section 1 which—(a) is a restricted scheme, and(b) is specified for the purposes of this section in Treasury regulations.(4) For the purposes of this section a scheme under section 1 is a “restricted scheme” at any time if any enactment restricts the provision of benefits under the scheme to or in respect of a person in relation to the person’s service after that time.(5) Treasury regulations under this section may include consequential or supplementary provision.(6) Treasury regulations under this section are subject to the negative Commons procedure.”(7) In section 30 (new public body pension schemes), in subsection (1)(e), for “and 12” substitute “to 12A”.(8) PSPA(NI) 2014 is amended in accordance with subsections (9) to (15).(9) In section 4 (scheme manager)—(a) after subsection (3) insert—“(3A) Subsection (1) does not apply to a scheme under section 1 if—(a) the scheme is connected with another scheme under section 1, and(b) a scheme manager is provided for under subsection (1) in scheme regulations for that other scheme.”;(b) after subsection (6) insert—“(6A) The reference in subsection (6) to a statutory pension scheme includes a statutory pension scheme established (under section 1 or otherwise) after the establishment of the scheme under section 1 mentioned in that subsection.”(10) In section 5 (pension board)—(a) in subsection (1), for “subsection (2)” substitute “subsections (2) and (2A)”;(b) after subsection (2) insert—“(2A) Subsection (1) does not apply to a scheme under section 1 if—(a) the scheme is connected with another scheme under section 1, and(b) a pension board is provided for under subsection (1) in scheme regulations for that other scheme.”(11) In section 7 (scheme advisory board)—(a) in subsection (1), for “on the desirability of changes to the scheme” substitute “on—(a) the desirability of changes to the scheme, or(b) the desirability of changes to any other scheme under section 1 which—(i) is connected with it, and(ii) is not an injury or compensation scheme.”;(b) after subsection (1) insert— “(1A) Subsection (1) does not apply to a scheme under section 1 if—(a) the scheme is connected with another scheme under section 1 which is not an injury or compensation scheme, and(b) a scheme advisory board is provided for under subsection (1) in scheme regulations for that other scheme.”(12) In section 11 (valuations), after subsection (1) insert—“(1A) Subsection (1) does not apply to a scheme under section 1 if—(a) the scheme is connected with another scheme under section 1, and(b) actuarial valuations are provided for under subsection (1) in scheme regulations for that other scheme.”(13) After section 12 insert—“12A Sections 11 and 12: restricted schemes(1) Section 11(1) (valuations) does not require scheme regulations to provide for actuarial valuations to be made of a scheme to which this section applies.(2) Section 12(1) (employer cost cap) does not apply to a scheme to which this section applies.(3) This section applies to a scheme under section 1 which—(a) is a restricted scheme, and(b) is specified for the purposes of this section in regulations made by the Department of Finance.(4) For the purposes of this section a scheme under section 1 is a “restricted scheme” at any time if any statutory provision restricts the provision of benefits under the scheme to or in respect of a person in relation to the person’s service after that time.(5) Regulations made by the Department of Finance under this section may include consequential or supplementary provision.(6) Regulations made by the Department of Finance under this section are subject to negative resolution.”(14) In section 31 (new public body pension schemes), in subsection (1)(e), for “and 12” substitute “to 12A”.(15) In section 34 (general interpretation), at the appropriate place insert—““statutory provision” has the meaning given in section 1(f) of the Interpretation Act (Northern Ireland) 1954;”.”Member’s explanatory statement
This new Clause amends the Public Service Pensions Act 2013 (and its Northern Ireland equivalent) so as to clarify and adjust the way the governance of schemes, and the valuation process, work where a scheme established under the Act for a description of persons is closed, and a new scheme under the Act is established for the same description of persons.

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Moved by

[Viscount Younger of Leckie]

113: Clause 80, page 56, line 3, leave out “(2) and” and insert “(1A) to”
Member’s explanatory statement
This amendment is consequential on the new subsection inserted into this Clause after subsection (1).

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[Lord Ponsonby of Shulbrede (Lab)]

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

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

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


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

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

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

[Viscount Younger of Leckie (Con)]

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

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

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

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

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

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

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

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

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

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

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

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

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

[Lord Davies of Brixton (Lab)]

My Lords, at the appropriate time I will indicate that I will withdraw the amendment. I am prepared to accept the advice that it does not actually achieve what I would like to achieve, and that the retrospective factor needs to be taken into account. But I would just like to highlight an issue mentioned by my noble friend Lord Ponsonby.

What the decision to make this a member cost means is that it will impact on those members who gain no benefit from the remedy. The remedy is not arbitrary, but there are broad patterns in who benefits from the remedy, and large numbers of members do not benefit from the remedy but will be affected by the inclusion of this as a member cost in the cost-control mechanism. The Government have suggested that they chose the four-year period within the cost-control mechanism for undertaking the calculation because they did not want to impact on future members of the scheme who gain no benefit from the remedy, but exactly the same problem applies to many current members of the scheme who will be active members during the relevant four-year period. To me, that sounds like an argument that the remedy should not be treated as a member cost, because of its inequitable impact.

I am very grateful to the noble Lord, Lord Hodgson, for his remarks. This is an issue that I have perhaps said more about than I originally intended, but I very much hope it will be taken seriously. What comes to me from it is that it is not easy to say what is or is not suitable to be dealt with through particular types of legislation. The issue is the impact it has, not its precise formulation—and making it a member cost has a substantial impact and so should get the appropriate level of consideration.

I note what the Minister said about the amendments to the cost-control mechanism and that he did not rule out the possibility that it would be added to this Bill during its Commons stages. I am a bit concerned about the idea of debating such significant changes in the context of the ping-pong process, so maybe he could give some sort of reassurance on that. But subject to those points, I beg leave to withdraw my amendment.

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Moved by

[Viscount Younger of Leckie]

115: Clause 80, page 56, line 3, at end insert—
“(1A) 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.””Member’s explanatory statement
This amendment imposes a time limit for scheme regulations to comply with section 12(1) of the Public Service Pension Schemes Act 2013 (which requires scheme regulations to set the employer cost cap for the scheme).

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Moved by

[Viscount Younger of Leckie]

118: Clause 86, page 63, line 8, at end insert—
“(vi) section 57 (interest and process).”Member’s explanatory statement
This amendment ensures that regulations under Clause 86 are capable of including provision about interest.

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Moved by

[Viscount Younger of Leckie]

119: Clause 88, page 65, line 3, at end insert—
“(3) Subsection (4) applies in relation to any reference in section 356 of the Armed Forces Act 2006 (avoidance of assignment of, or charge on, pay and pensions etc) to an assignment (or, in Scotland, assignation) of, or an agreement to assign, any relevant pay or pension (within the meaning of that section).(4) The reference does not include anything done under or by virtue of this Part of this Act.”Member’s explanatory statement
This amendment ensures that the restrictions in section 356 of the Armed Forces Act 2006 do not apply to the operation of Part 1 of the Bill.

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Moved by

[Viscount Younger of Leckie]

120: Clause 90, page 65, line 9, at end insert—
“(1A) Regulations under this section may make retrospective provision.”Member’s explanatory statement
This amendment ensures that the power to make consequential provision in this clause can be used to make provision that operates in relation to times before it is made.

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[Lord Ponsonby of Shulbrede (Lab)]

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

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

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


The Bill provides for remedial statements to be provided to all members, which in itself is welcome. Before the Bill reaches the House of Commons, I ask the Minister to consider carefully what practical, accessible and time-sensitive help there will be for a member who is struggling to understand the statement and the complex background which precedes it. As I asked in Committee, if a person has no idea what their statement means, how their pension has been affected and when they are likely to be required to make a decision, who do they call? Where do they go for practical advice?

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

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

[Viscount Younger of Leckie (Con)]

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

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

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

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

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

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

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

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

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

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

On tax guidance, schemes are already required to provide members, where appropriate, with the relevant information to complete their tax return, and this information will be updated and provided to the member, where their tax position changes. However, where there is an interaction with the tax system, the Government recognise that there will need to be further guidance to complement existing HMRC guidance and scheme processes that already provide the required information to complete a self-assessment return.

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

[Baroness Janke (LD)]

My Lords, I thank all noble Lords who have contributed to the discussion on this amendment, particularly the noble Lord, Lord Ponsonby, and the noble and learned Lord, Lord Hope. I also thank the Minister for his clarification of the situation, as defined in the Bill.

Of course the remediable service statements will help, but the changes are taking place over such a short time and are on such a scale that it seems to me that there needs to be some form of helpline. I do not know whether the pensions dashboard could accommodate one; this might be something that the Government could look into. I ask that the implementation of these measures be closely monitored and that, should the workload and the volume of change give members a challenge in the choices that they have to make, support may perhaps be provided at a later stage. Having said that, I beg leave to withdraw the amendment.

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Moved by

[Viscount Younger of Leckie]

123: Clause 92, page 66, line 6, at end insert—
““continuous period of service”, in relation to an employment or office, means a period of service in that employment or office that does not include a gap in service;” Member’s explanatory statement
This amendment ensures that “continuous period of service”, which is an expression which, elsewhere in pensions legislation, is defined to include non-continuous periods, is not interpreted in such a way in Part 1 of the Bill.

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[Baroness Janke (LD)]

My Lords, the debate this afternoon has been passionate and enlightening. Here is a quote from Second Reading:

“I think that everybody in this House would say that it is important that our senior judges in the Court of Appeal and the Supreme Court reflect the society that we live in if they are to be respected and seen as part of our current era. At the moment, they do not.”—[Official Report, 7/9/21; col. 792.]


It is also a great pity that the Government have not conducted impact assessments with benchmarking of different ages, but they have not. In the absence of impact assessments, I look to the arguments that we have heard. The point has been admirably made: unless there are vacancies, there will not be opportunities for diversity.

We have heard arguments as to why we should not do this; for example—an argument we often hear when there is talk of promoting diversity—that somehow quality will suffer. I have heard those arguments for the last 40 years. Whether scientists, engineers or Members of Parliament, we now see women operating in spheres that were occupied only by men in the past, with no diminution in quality at all. In fact, the contrary has been the case.

I very much respect what was said by the noble and learned Lord, Lord Mackay, with his experience and knowledge. He mentioned context, however, and, the more we listen to this debate, the more we realise that it is the context that has to change. The present context does not promote diversity at all; I would venture to suggest that, to create greater diversity, the circumstances need to change. This amendment seems to me to promote the kind of change that we need.

We heard from the noble and learned Lord, Lord Etherton, that the position of women has improved and continues to improve slowly, but—to use his words—that the embarrassing position as far as minority ethnic judges is concerned is something we all ought to be ashamed of. The cause of diversity is one that we in this House, as well as people from all walks of life, welcome. Everybody here wants to see a more diverse judiciary. Whatever our own situation, and whether or not we believe, as some in this Chamber clearly do, that somehow the courts will not attract the very best people to be judges, the cause of diversity is absolutely self-explanatory and vital if the people of the country are to be able to respect those in eminent positions. From what I have heard today and in Committee, I would say that the cause of diversity is best served by this amendment. We on this side will support it.

[Viscount Younger of Leckie (Con)]

My Lords, I start by thanking all noble Lords for their contributions during this lively debate. I also thank the noble Lord, Lord Ponsonby, and the noble and learned Lord, Lord Etherton, for the consideration they have both given to this issue, not just today but throughout passage of the Bill. I have listened with care to both sides of the argument put forward today. However, I would like to use this opportunity to set out in full why—in a robust response following detailed public consultation—the Government continue to believe that 75 is the right judicial mandatory retirement age.

All four nations of the UK conducted public consultations on this important question and, following careful analysis of responses, the decision taken by each Government was to increase the mandatory retirement age to 75. I appreciate the support of noble Lords today, from my noble friend Lord Hailsham, to the noble and learned Lords, Lord Woolf, Lord Brown and Lord Hope, and my noble and learned friend Lord Mackay.

I remind the House of some of the data emerging from the UK Government’s consultation. The vast majority of respondents—84%—believed that the mandatory retirement age should be increased, with 67% indicating that a retirement age of 75 was better, all things considered. Notably, 74% of respondents believed that such a change would not damage confidence in our world-class judiciary—something raised by one or two noble Lords today.

On a point raised by the noble and learned Lords, Lord Etherton and Lord Thomas, as to why we appeared to be going against the views of the senior judicial responses to the consultation, we recognise the varied opinions on the appropriate retirement age. However, I assure noble Lords that this decision was taken after careful consideration of all responses including those of the senior judiciary. Some 67% of respondents to the consultation on this matter favoured increasing the age to 75, as I have said. We recognise the concerns raised by the senior judiciary over impacts on judicial diversity, which I shall address later in my remarks. However, on balance, we believe that raising the retirement age to 75 sets the right balance.

It is clear that we agree on one point: that the mandatory retirement age should be increased. The question being debated here is to what age. Here is a point raised by the noble and learned Lord, Lord Hope. If the retirement age is to be increased as this Bill intends, it should be a meaningful increase, which will bring a clear and tangible benefit to the resourcing of our courts, not just a minor raise by two years to 72—a decision which I suspect will not put this issue to bed and will mean that we find ourselves discussing it again in the not-too-distant future, as has been said.

This leads me to an important point on life expectancy. Since the current mandatory retirement age was set in 1993, life expectancy is longer, and social attitudes to working in later life have changed significantly. An age of 75 much better reflects this change. That was a point that the noble and learned Lord, Lord Brown, alluded to in his powerful remarks. Indeed, as I have noted previously, many Members of this House over the age of 75 are among its most knowledgeable, productive and vibrant. I look around now—not wishing to bring any individual Peer to the attention of the House—but I hope that my point is well made.

I stress that the mandatory retirement age is a maximum, not a minimum. Judges will by no means be forced to continue working to 75. The key objective here is additional flexibility, both for officeholders themselves as well as for the resourcing of courts and tribunals. Increasing the mandatory retirement age to 75 maximises this flexibility. Indeed, we already have some officeholders sitting up to the age 75 who play a key role in the administration of justice.

I must also note that, based on the evidence available, it is not clear that all, or even most, judges would choose to continue working to 75. With some trepidation, I do not entirely agree with the statistics put forward by the noble and learned Lord, Lord Etherton, on judiciary retirement. The average retirement age of salaried judges is, I understand, about 67. Over the last five years senior judges—that is, judges of the High Court and above—with a mandatory retirement age of 70, have also on average retired at 67. Evidence therefore suggests that the majority of judges do not continue working till their mandatory retirement age. As I have stated, the objective of this measure is additional flexibility to support the resourcing of courts and tribunals.

I understand that the intended effect of this amendment is to raise the mandatory retirement age to 72 rather than to 75, as has been made clear. However, I must make it clear that this presents a number of consequential issues for other related provisions in the Bill. I note that the amendments do not include changes to paragraph 25(2)(b) of Schedule 1, which repealed the powers to provide for extensions up to 75. In the consultation, only 10% of respondents believed that, if the mandatory retirement age were 72, extensions past the mandatory retirement age should not remain. The amendments as drafted would leave us with a lower retirement age but without retaining these provisions for extensions which are currently in place. Additionally, those “sitting in retirement” can currently continue to decide cases up to the age of 75. The effect of the amendment to Clause 107 would require those sitting in retirement to also retire at the age of 72. This would reduce the resourcing flexibility that “sitting in retirement” arrangements provide.

I also highlight that the amendments do not appear to take account of Part 2 of Schedule 1 to the Bill, which allows for the reinstatement of retired magistrates who are younger than the mandatory retirement age, where there is a business need. This would provide necessary additional capacity in the magistrates’ and family courts to meet forecast case volumes and provide timely access to justice as the courts recover from the pandemic. The Government’s modelling indicates a pool of about 4,000 retired magistrates would be eligible to be considered for reinstatement with a retirement age of 75, but only around 1,300 would be eligible to be considered with retirement at 72. In addition, an age of 72 would provide a much shorter timeframe over which those magistrates reinstated could sit, which means that, when the time and investment necessary to reappoint and retrain is taken into account, the number who would be able to make a meaningful contribution would be smaller still. Therefore, the amendments as tabled result in a hard cut-off at age 72, and with less flexibility than now.

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Moved by

[Viscount Younger of Leckie]

203: Schedule 1, page 93, line 27, leave out “court” and insert “courts or the family court”
Member’s explanatory statement
This amendment enables the Lord Chancellor to remove a person from the supplemental list on a temporary basis for the purpose of facilitating the disposal of business in the family court as well as in the magistrates’ courts.

Public Service Pensions and Judicial Offices Bill [HL]

Viscount Younger of Leckie Excerpts

3rd reading
Monday 6th December 2021 Lords Chamber

Moved by

[Viscount Younger of Leckie]

That the Bill be now read a third time.

[Viscount Younger of Leckie (Con)]

My Lords, before we progress with Third Reading of this Bill, I will make a short statement about our engagement with the devolved Administrations. Officials have worked closely and collaboratively with the devolved Administrations throughout the passage of this Bill. The Northern Ireland Executive have passed a legislative consent Motion on this Bill. 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.

Motion agreed.

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Moved by

[Viscount Younger of Leckie]

That the Bill do now pass.

[Viscount Younger of Leckie (Con)]

My Lords, it has been a great pleasure to lead the Bill through this House. Before the Bill moves for consideration in the other place, I want to take a brief moment to reflect on the Bill and its passage through this House.

This is important legislation that consolidates and strengthens the legal framework for pensions across all the main public services: that is, the NHS, the judiciary, the police, firefighters, the Armed Forces, teachers, local government and the Civil Service. This Bill ensures that those who deliver our valued public services continue to receive guaranteed benefits in retirement that are among the best available on a fair and equal basis. It is also vital in addressing the resourcing challenges facing the judiciary, recognising the unique constitutional role of judges.

It has been clear from the informed and considered contributions made throughout the Bill’s passage that we are agreed on the principles of fairness and equal treatment for public servants. I convey my gratitude to all noble Lords for their contributions to our well-informed debates, which have helped to ensure that we achieve this aim. The Government listened carefully to your Lordships’ arguments and concerns as the Bill progressed and made a significant number of technical amendments on Report—123 in total—which I think noble Lords will agree have strengthened the Bill.

In particular, we listened to the concerns raised by the noble Lord, Lord Davies of Brixton, during Grand Committee, regarding the importance of ensuring pension scheme members were provided with remedial voluntary contribution arrangements. I thank the noble Lord in supporting the Government to identify and address this important issue.

I would like to extend my thanks to all those who have engaged on the Floor of the House and in the meetings that we have had outside. In particular, I thank the noble Lords, Lord Ponsonby of Shulbrede and Lord Davies of Brixton, and the noble Baroness, Lady Janke, for their close engagement on the complex area that is public service pensions. I hope that the note sent to the noble Baroness, Lady Janke, earlier today provides some reassurance on her important points raised on Report regarding eligibility criteria for voluntary contributions.

In addition, I thank a number of your Lordships who made impassioned contributions to our consideration of the judicial mandatory retirement age, including the noble Lord, Lord Ponsonby, and the noble and learned Lords, Lord Etherton, Lord Woolf, Lord Thomas, Lord Hope and Lord Brown, and my noble and learned friend Lord Mackay.

I also thank the Bill team, ably lead by Fraser Johnston, 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 throughout passage of the Bill.

Finally, I thank my noble friend Lady Scott for her help as the Bill went through the House. There is a lot of technical detail in the Bill, with complex legal consequences, and the team’s guidance and expertise has been exemplary. I am sure that noble Lords will join me in expressing thanks for the support that the whole team has provided, including the updates, letters and briefings that noble Lords have received. On that note, I beg to move.

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[Lord Ponsonby of Shulbrede (Lab)]

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

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

[Viscount Younger of Leckie (Con)]

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

Bill passed and returned to the Commons with amendments.

Public Service Pensions and Judicial Offices Bill [HL]

Viscount Younger of Leckie Excerpts

Consideration of Commons amendments
Wednesday 9th March 2022 Lords Chamber

Moved by

[Viscount Younger of Leckie]

That this House do agree with the Commons in their Amendments 1 to 47.

1: Clause 1, page 2, line 3, leave out 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).”

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47: After Clause 79, insert the following new Clause—
“Interpretation of Chapter
(1) In this Chapter—
“Chapter 1 scheme” has the same meaning as in Chapter 1; “final salary benefits” has the meaning given by subsection (2); “judicial scheme” has the same meaning as in Chapter 2;
“local government legacy scheme” has the meaning given by section 79(3);
“local government new scheme” has the meaning given by section 79(2);
“local government scheme” has the meaning given by section 79(1); “scheme regulations”—
(a) in relation to a local government new scheme within section 79(2)(a) has the same meaning as in PSPA 2013 (see section 1(4) of that Act);
(b) in relation to a local government new scheme within section 79(2)(b) has the same meaning as in PSPA(NI) 2014 (see section 1(4) of that Act);
“Treasury directions” means—
(a) in relation to a local government scheme within section 79(2)(a) or (3)(a), directions given by the Treasury;
(b) in relation to a local government scheme within section 79(2)(b) or (3)(b), directions given by the Department of Finance in Northern Ireland.
(2) For the purposes of this Chapter, benefits payable under a pension scheme to or in respect of a member are “final salary benefits” if they are determined by reference to the member’s pensionable earnings, or highest, average or representative pensionable earnings, in a specified period ending at, or defined by reference to—
(a) the time when the member’s pensionable service in relation to the scheme ends, or
(b) the time when the member attains normal pension age under a local government legacy scheme.
(3) Where—
(a) a member of a pension scheme has service in multiple employments or offices that is pensionable service under the scheme, and
(b) the service is aggregated for the purpose of determining the amount of any benefit under the scheme,
the service is treated for the purposes of this Chapter as service in a single employment or office (and references to the employment or office in relation to the service are to be read accordingly).”

[Viscount Younger of Leckie (Con)]

My Lords, with the leave of the House, I will also speak to the other amendments and the Motions in the name of the noble Lord, Lord Davies of Brixton. Before I turn to the Commons amendments, I will take a moment to remind your Lordships of what the Public Service Pensions and Judicial Offices Bill will achieve. The Bill ensures that those who deliver our valued public services continue to receive guaranteed benefits in retirement that are among the best available, on a fair and equal basis. It is also vital in addressing the resourcing challenges facing the judiciary, recognising the unique constitutional role of judges. As has been acknowledged throughout the Bill’s passage, this is a complex and technical matter. The Bill covers more than 40 schemes, each of which has its own individual layers of detail and complexity.

Since the Bill’s introduction, the Government have continued to work closely with each of the public service pension schemes, with stakeholders and with departments to check and re-check the Bill to ensure that it will deliver our commitments to remove the discrimination and offer a complete and effective remedy. This has been crucial and has led to a number of refinements being made to the Bill during its stages in the other place.

I recognise that a large volume of amendments is being considered today but I hope noble Lords will agree that the Bill returns to this Chamber in an even stronger position than when it left. I therefore propose that the House agree with the Commons in its Amendments 1 to 81. The House will, I hope, be pleased to hear that I will not set out the detail of each and every amendment, but I hope that your Lordships will find it helpful if I briefly explain the themes that they address. I will of course be happy to turn to specific amendments if your Lordships have any questions they would like to ask.

The first theme is reforms to the cost control mechanism, which relates to Amendments 48, 49 and 52. Your Lordships may recall that 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 these schemes. The Government asked the Government Actuary to review the cost control mechanism after the provisional results of the 2016 valuations suggested that the mechanism was too volatile and not operating in line with its objectives. Following publication of the final report in June 2021, the Government consulted on three of the recommendations and published their response in October 2021. These reforms will be implemented from the 2020 valuations onwards.

Commons Amendment 48 would implement the framework for two of these three reforms: the reformed scheme-only design and the economic check. I will take each of these in turn. The reformed scheme-only design means that legacy scheme costs are excluded from the mechanism. This would 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 they had little, or no, access to. Although this transfers the risk associated with legacy scheme costs to the Exchequer, it ensures consistency between the set of benefits being assessed and the set of benefits potentially being adjusted.

As the Government Actuary’s report makes clear, it does not seem possible for the mechanism to be able to protect the taxpayer unless it considers the wider economic outlook. The economic check—the second reform—will therefore ensure consistency between member benefit or contribution changes and changes in the wider economic outlook. There will be a higher bar for benefit reductions or contribution increases if the country’s long-term economic outlook has improved. This will equally apply to benefit increases or contribution reductions if the long-term economic outlook has worsened.

Therefore, the economic check will operate symmetrically for the benefit of both members and taxpayers. It will operate in a transparently and be linked to an objective and independent measure of expected long-term earnings and GDP growth from the OBR. 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. The reforms 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 second theme concerns amendments relating to the local government workforce, where a number of amendments to Chapter 3 of Part 1 were brought forward by the Government in the Commons to ensure a full and robust remedy for local government workers; for reference, these are Commons Amendments 2, 28 to 30, 36 to 47, 50, 51, 55 to 60, 62, 64, 65, 72 and 75 to 77. The amendments are largely technical, including a significant number designed to ensure that many of the complexities relating to other public service pension schemes that have already been addressed in the Bill are also addressed in local government.

The Government are also making an important change to align the eligibility criteria for protection in local government with other public service pension schemes. Under the amended approach, members who were in pensionable service on or before 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.

I turn next to a single amendment that concerns a change to regulatory procedure for implementing regulations with respect to the reformed judicial pension scheme. Commons Amendment 61 will simply allow the regulations to be made under the “made affirmative” procedure instead of the draft affirmative, which is the usual process for judicial scheme regulations. This is simply a matter of timing. As the draft affirmative procedure could take four to six weeks, we must rely on the “made affirmative” procedure in order to launch the scheme on 1 April 2022. The change ensures that the reformed pension scheme is in place for all judges on 1 April and that there will be no gap in judicial pensions arrangements. Allow me to reassure the House that the “made affirmative” procedure means that Parliament will still get to scrutinise and debate the draft Judicial Pension Scheme Regulations 2022. This scrutiny is important, given the unique constitutional role of the judiciary. Furthermore, the power is narrowly drawn—it can only be exercised for regulations made within 28 days of Royal Assent and will not apply to any future amendments to judicial pension schemes.

The Ministry of Justice has carried out extensive consultation both on the principles of the new scheme and the draft Judicial Pension Scheme Regulations 2022. This has demonstrated broad support for the new scheme, which provides significantly improved benefits for all members of the judiciary compared to the 2015 scheme. There is agreement that the scheme should help address the recruitment and retention issues in the judiciary, which are considered to be primarily due to the introduction of the 2015 scheme.

I turn next to the issue of guidance on investment decisions for the Local Government Pension Scheme, which, as your Lordships may know, is different to the other main public service pension schemes as it is funded rather than unfunded. My right honourable friend Robert Jenrick, the Member for Newark, in the other place proposed Commons Amendment 54, which would expand existing powers in the Public Service Pensions Act 2013 to allow the responsible authority of a public service pension scheme to issue guidance or directions to the scheme managers to cover investment decisions that it is not proper for the scheme manager to take in light of the UK’s foreign and defence policy.

The Government support that amendment, which is in line with the Government’s manifesto commitments to stopping public bodies from pursuing their own direct or indirect boycotts, divestment and sanctions campaigns against foreign countries, known as BDS. Rather than promoting coexistence, debate and dialogue, these boycotts undermine community cohesion. There is evidence of divisive BDS campaigns in public bodies, including local authorities attempting to declare boycotts. Administering authorities can of course make decisions based on sound environmental, social and governance—so-called ESG—considerations. For example, funds may well choose to not invest based on legitimate concerns over a company’s polluting activities or its poor governance. However, what is clearly inappropriate is for a fund to adopt divisive BDS policies that are inconsistent with UK foreign policy. Sanctions should be determined by the UK Government alone. It is not for local authorities or public bodies to be pursuing their own foreign policy agendas.

Your Lordships may be aware that the Government intend to bring forward wider legislation on BDS, when parliamentary time allows, to ban public bodies from imposing such boycotts and divestments. This will of course be subject to scrutiny in both Houses in the usual way. This amendment signals the Government’s intent and provides the powers for the responsible authority to issue guidance or directions on this matter. It is important to note that the amendment would place no immediate duty on scheme managers to take any such investment or divestment decisions.

If the responsible authority were to issue guidance or directions, this would be subject to the usual 12-week consultation. I hope that this gives the House reassurance that the devising of any parameters related to this amendment would involve extensive engagement with the LGPS community over a number of months, during which time all views and concerns would be considered, so as to ensure they do not inadvertently restrict proper account of ESG matters.

Finally, I will cover the remaining amendments—Amendments 1, 3 to 13, 15 to 21, 25, 26, 31 to 35, 53, 63, 66 to 71, 73 and 79 to 81, which are minor and technical. These amendments are for clarification and are primarily to ensure that the Bill offers a comprehensive pensions remedy for eligible members in particular circumstances or special cases. For example, Amendments 15, 19 and 20 ensure that where a member has died and a child pension is already in payment which would be impacted by a decision taken by someone outside the child’s household, schemes have the powers to make regulations to allow that pension to be protected. A further example under this theme is in Commons Amendments 79 and 81, which change the reference to the Special Educational Needs Tribunal for Wales to the Education Tribunal for Wales, as the tribunal was renamed during the passage of the Bill.

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[Lord Ponsonby of Shulbrede (Lab)]

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

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

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

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

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

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

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

[Viscount Younger of Leckie (Con)]

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Motion on Amendment 48

[Viscount Younger of Leckie]

Moved by

That this House do agree with the Commons in their Amendment 48.

48: After Clause 83, insert the following new Clause—
“Employer cost cap
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”.”

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Motion on Amendments 49 to 53

[Viscount Younger of Leckie]

Moved by

That this House do agree with the Commons in their Amendments 49 to 53.

49: Insert the following new Clause—“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.”

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Motion on Amendment 54

[Viscount Younger of Leckie]

Moved by

That this House do agree with the Commons in their Amendment 54.

54: Insert the following new Clause—
“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, in 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”.”

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Motion on Amendments 55 to 81

[Viscount Younger of Leckie]

Moved by

That this House do agree with the Commons in their Amendments 55 to 81.

55: 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).”