Viscount Younger of Leckie
Main Page: Viscount Younger of Leckie (Conservative - Excepted Hereditary)Public Service Pensions and Judicial Offices Bill [HL]
Viscount Younger of Leckie ExcerptsMonday 29th November 2021
(2 years, 4 months ago)
Lords ChamberRead Full debate Public Service Pensions and Judicial Offices Act 2022 View all Public Service Pensions and Judicial Offices Act 2022 Debates Read Hansard Text Amendment Paper: HL Bill 44-R-I Marshalled list for Report - (25 Nov 2021)
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.
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.
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.
Member’s explanatory statement
This amendment simplifies the condition in subsection (2)(b).
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.
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.
“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.
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).
“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.
“(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.
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.
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.
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.
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.
“(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).
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.
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.
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.
“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.
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.
“(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.
(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.
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.
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.
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).
Member’s explanatory statement
This amendment is in consequence of the government amendment of Clause 29(1).
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).
“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.
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.
“(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.
“(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.
Member’s explanatory statement
This amendment clarifies the treatment of effective pension age payments under this clause.
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.
“(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.
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.
“(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).
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.
“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.
“(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.
“(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.
“(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.
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.
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.
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.
Member’s explanatory statement
This amendment clarifies the reference to pension contributions in subsection (2) of this Clause.
Member’s explanatory statement
This amendment is in consequence of the government amendment of Clause 64(1).
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).
“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.
“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.
Member’s explanatory statement
This amendment is consequential on the new subsection inserted into this Clause after subsection (1).
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.
“(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).
“(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.
“(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.
“(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.
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.
““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.
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.
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.