Public service pensions: summary of July 2020 McCloud consultations

Public service pension schemes consultation: changes to the transitional arrangements to the 2015 schemes (closes 11 October 2020)

• The consultation documents can be found here.
• The consultation relates to the main unfunded public service schemes and includes the NHS, Teachers, Civil Service, Armed Forces, Police, and Firefighters pension schemes, and covers members who were in service on or before 31 March 2012 and on or after 1 April 2015.
• The proposed remedy will take account of the ongoing Employment Tribunal proceedings in judges' and firefighters' schemes.
• Members would given the choice between their legacy scheme and the reformed scheme (CARE) in respect of service between1 April 2015 and 31 March 2022.
• The choice should either be made immediately or through a deferred choice underpin (DCU).
• Immediate choice would see members make their decision within the year or two after implementation in 2022. Under the DCU members would be deemed to have accrued benefits in the legacy scheme rather than the reformed scheme between 2015 and 2022 and be able to decide, on retirement, whether to take those benefits or benefits under the reformed scheme.
• The government is seeking views on the viability and desirability of both approaches, and is keen to ensure that the final solution takes account of all relevant issues.
• The government is also seeking views on the provision for public sector pension benefits from 1 April 2022, when it expects all public sector workers to be placed in the reformed schemes.

Local Government Pension Scheme (England and Wales): amendments to the statutory underpin (closes 8 October 2020)

The LGPS transitional protection arrangements were implemented through a statutory underpin. All members joined the CARE (reformed) scheme on 1 April 2014, but members with the statutory underpin protection (those within 10 years of retirement as at 1 April 2012) were guaranteed at least the level of pension they would have received under the final salary legacy scheme.

• The consultation documents can be found here.
• The proposal is to remove the requirement for a member to have been within ten years of their normal pension age on 1 April 2012 in order for the underpin to apply. All members who were active members on 31 March 2012 and have accrued benefits since 1 April 2014 will be eligible. The underpin will apply to service between 1 April 2014 and 31 March 2022, ending when active membership ends or on death in service.
• From 1 April 2022, underpin protection will end. All active LGPS members will then accrue benefits in the CARE scheme without the final salary underpin.
• Because the changes are retrospective, it will be necessary to review benefits for pensioners and pay any arrears that are due.
• Certain changes are proposed to the underpin itself, to better account for breaks in service, early / late retirement factors, and death in service and survivors benefits. The consultation includes draft regulations implementing the changes.
• The scale of these checks will prove challenging for administrators, who should prepare in advance. According to the consultation document, potentially 1.2 million LGPS members may be affected.

Judges' Pensions: Proposed response to McCloud (closes 16 October 2020)

From 1 April 2015, members were moved from tax-unregistered final salary schemes to tax-registered career average schemes, with a lower accrual rate and the application of annual and lifetime allowances. The protections available to members within 10 years of retirement were that they would remain in their legacy schemes

• The consultation documents can be found here.
• The proposed remedy for the period 1 April 2015 – 31 March 2022 is that judges who did not benefit from the transitional protections be given a choice between accrual in the legacy scheme or the reformed scheme, through an options exercise to be run at the end of the remedy period. Judges who have retired or are due to retire before 2022 should be able to decide sooner. The options exercise would follow the introduction of a reformed pension scheme that MoJ intends to introduce for all judges from 1 April 2022.