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.

--- Later in debate ---

[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.