Public Service Pensions Update | January 2022

Judicial review | McCloud

The Police Superintendents’ Association (PSA) is seeking leave to appeal the High Court's decision on 15 December 2021 to dismiss its claim for judicial review of the government's McCloud remedies consultation and the decision, announced on 4 February 2021, to close all legacy public service pension schemes, including the police schemes, and move active members to reformed pension schemes from 1 April 2022. The PSA is concerned that the impact of this decision on the police workforce is not being addressed.

The PSA is challenging the government's decision on the grounds that the government made "clear representations" that the transitional protection for members of the New Police Pension Scheme 2006, who were ten years or less from their normal pension age on 1 April 2012, would involve the member remaining in their current scheme until they retired, even if this was after 31 March 2022. (Similar representations were made in relation to members of the Police Pension Scheme 1987, although the transitional protection works slightly differently in that scheme because members do not have a normal pension age.) 

Before the High Court, the PSA argued that the government did not properly consider the McCloud remedy consultation responses put forward on behalf of police pension scheme members. These responses raised a concern that not all protected members will have reached a point, by 31 March 2022, at which they can take a full (maximum) immediate unreduced pension. Also that members are likely to have made life choices and financial decisions on the understanding that they will remain in their legacy scheme. There might be a particular impact on women, for example, because they have worked part time.

The High Court accepted aspects of grounds one and two of the application (unlawful consultation and breach of the public sector equality duty) but rejected grounds three and four (breach of substantive legitimate expectation and material error of fact in wrongly believing that all members of the affected public service pension schemes who had received transitional protection would have reached their normal pension age in their respective legacy schemes by 1 April 2022). 

The court refused relief because it concluded that it was highly likely the Chief Secretary to the Treasury (CST) would have reached the same decision if the behaviour complained of had not occurred (for example, if the CST had conscientiously considered a summary of the responses to the consultation before taking a decision on closure), and the "exceptional public interest" test was not met. (As a matter of law, the court must refuse to grant relief on an application for judicial review if it appears highly likely that the outcome for the applicant would not have been substantially different if the conduct complained of had not occurred. The court can only disregard this rule if it considers that it is appropriate to do so for reasons of exceptional public interest.)

For completeness, the court also considered Parliamentary privilege. The PSA was seeking an order quashing the McCloud remedy consultation and the consultation response, a declaration that the consultation was unlawful, and a declaration that the closure decision was unlawful. The court concluded that, even if it had decided that it should grant relief, Parliamentary privilege would have been a barrier: "If the court was to quash the consultation then this would inevitably result in disruption to the Parliamentary timetable given the current passage of the [Public Service Pensions and Judicial Offices Bill which] would amount to an impermissible interference with proceedings in Parliament. Accordingly, granting the quashing order that is sought would infringe Parliamentary privilege. The position is more borderline in respect of the declarations. … A declaration that the closure decision was unlawful, would be tantamount to saying that the decision embodied in Clause 76 of the Bill is unlawful. Yet, the form of primary legislation is a matter for Parliament and not for the courts…. Furthermore, Parliamentary privilege would be breached if a court were to declare that the procedure leading to legislation being enacted was unlawful…. However, that would be the effect of granting a declaration that the consultation preceding the Bill was unlawful. It would also entail disruption to the Parliamentary timetable in the sense that the Defendant would be under a public law duty to then do something about the consultation. Declaratory relief is sought in these proceedings precisely because the Claimant wants to influence the course of the Bill."

As Daragh McGinty comments, this application is separate to the judicial review sought by the Fire Brigades Union, GMB and British Medical Association. Those unions are challenging the Public Service Pensions (Valuations and Employer Cost Cap) (Amendment) Directions issued by the government in October 2021, on the basis that they pass McCloud costs back to scheme members. 

Judicial pensions | New scheme

The Ministry of Justice has published the response to its consultation on draft regulations to establish and govern the new judicial pension scheme – the Judicial Pension Scheme 2022 (JPS 2022). It has also published revised draft regulations.

The consultation response explains that the tax-unregistered JPS 2022 "is intended to deliver on the commitment the Government made to develop a pensions-based, long-term solution to the serious recruitment and retention problems identified by the Senior Salaries Review Body … in its Major Review of the Judicial Salary Structure, published in 2018".

"Judges who have pension arrangements under existing judicial pension schemes – the Judicial Pensions and Retirement Act (JUPRA) 1993, the Fee-Paid Judicial Pension Scheme (FPJPS) 2017, the New Judicial Pension Scheme (NJPS) and the Northern Ireland Judicial Pension Scheme (NI JPS), collectively referred to below as ‘Pre-2022 Schemes’ - will transfer into JPS 2022 and accrue benefits under it for future service. These predecessor judicial pension schemes will then be closed to further accrual with all benefits previously accrued in the schemes preserved, including the preservation of the automatic lump sum and final salary link in respect of service in those schemes. Therefore, from the date of its implementation [1 April 2022, subject to the Public Service Pensions and Judicial Offices Bill and the scheme regulations being approved by Parliament before that date ] the JPS 2022 will be the only scheme in which eligible judges are able to accrue benefits for future service".

"The Public Service Pensions and Judicial Offices … Bill will close the Pre-2022 Schemes to accrual for future service. It will also clarify the way the governance of schemes, and the valuation process, work where a new scheme is established under the [Public Service Pensions Act 2013], and an old scheme is closed. These updated measures are reflected in the drafting of the JPS 2022."

Climate change risk  | New guidance

The Pensions Regulator has published final guidance for pension scheme trustees on what they should do and report in order to comply with the new climate change risk governance and reporting requirements introduced under the Pension Schemes Act 2021. It has also published a new appendix to its monetary penalties policy.

The Department for Levelling Up, Housing and Communities is due to consult on draft regulations for the Local Government Pension Scheme with the view to introducing similar requirements. In the meantime, the Pensions Regulator's guidance says that "Trustees who are not subject to the requirements, and decision-makers at local government pension schemes, might wish to follow this guidance to improve the governance and resilience of their schemes in relation to climate change."  

Pensions dashboards | Call to action

The Pensions Dashboard Programme (PDP) has released a short update on progress made during 2021. The update ends by urging all schemes to work on their data "so that it is clean, up to date, online and accessible". It also refers to the data matching convention guidance released by the Pensions Administration Standards Association (PASA) in December 2021, which is intended to help schemes to decide how they want to digitally compare and match "find requests" from dashboard users against scheme records.

Funds should discuss with their scheme administrators when compulsory staging to the pensions dashboard could apply to them and what actions, including around data accuracy, they should take to prepare.

Funds might also like to note that:

• The PDP has published a research report created by Ipsos MORI on its behalf into people's motivations, attitudes and behaviours around engaging with pensions via pensions dashboards. Among other things, the research suggests that "a find and view service, containing both accrued and projected value information had a wide level of appeal and resonated with the broadest possible range of potential end users. The research showed that consumers expect to see value information (both accrued and projected) on dashboards. It is a priority in terms of the most essential elements of information for users, along with the pension start date and retirement age."
• It has been reported that ITM and Altus are partnering to offer a dashboard connection solution for pension schemes, one of the challenges being the volume of "find requests" that schemes are likely to receive each day.
• The PDP has chosen three potential commercial pensions dashboards providers to take part in initial development of the pensions dashboards ecosystem, alongside the Money and Pensions Service’s non-commercial dashboard. The three potential commercial providers are Aviva, Bud and Moneyhub (an insurer, an open banking platform and an open data fintech). You can read more on the Pensions Dashboard Programme website.
• PASA has appointed the independent pensions data management company ITM to be their expert data partner for pensions dashboards.

Transfers | Podcast on new rules

In our November 2021 update, we reported on important new rules for statutory transfers which came into force on 30 November 2021. The rules are intended to help protect members from pension scams.

We have now released a podcast on these changes. The new rules require specific decisions to be taken, and specific tests to be applied when taking those decisions. Funds should take legal advice as needed.

Pensions Ombudsman | Various

The Pensions Ombudsman has handed down decisions in complaints relating to a failure to adequately communicate a change in abatement policy, an ill health retirement quotation based on an incorrect pensionable pay figure, and an incorrect statement that a child's pension would be put back into payment.

Local Government Pension Scheme (PO-14629)

Partly upheld – A complaint by a member of the Local Government Pension Scheme about abatement of pension following re-employment. The member made three complaints against the administering authority of the West Yorkshire Pension Fund (the Administering Authority). The first related to events in 2003 which he says resulted in him missing out on scheme membership between 2003 and 2014. The second was a complaint that, if abatement should have applied from 2003, he was not told of a change to the abatement policy in 2005 following which he could have re-joined the scheme in 2005. The third was a complaint that he was not told of a change of abatement policy in 2008, following which he could have re-joined the scheme in 2008.  

The Pensions Ombudsman decided that it did not have jurisdiction to consider the complaints relating to the events in 2003 and 2005. A member must usually make a complaint to the Pensions Ombudsman within three years of the events complained of, or within three years of the date when they knew or ought reasonably to have known of those events. An exception can be made where it is reasonable for the applicant not to have applied within the three year period and they have made their application within a further period that is considered reasonable. The member was aware in 2003 of the key fact for making a complaint about the 2003 events and there were no reasonable grounds for the delay in making an application to the Pensions Ombudsman. The ombudsman would also (except in the case of a complaint of pure maladministration) have to respect any limitation periods under the Limitation Act 1980, and the limitation periods for a negligence claim had expired. Similar reasoning applied to the complaint relating to events in 2005. However, for completeness, the Pensions Ombudsman did consider whether it would have upheld the complaints if they had been brought in time.

The member's complaint that he was not told of a change to the abatement policy in 2008 was upheld. The Pensions Ombudsman concluded that the Administering Authority had a duty to tell pensioners in the member's position (pensioners who had opted out of the scheme to avoid abatement, but had returned to employment and would benefit from the policy change) about changes to the abatement policy. It should have foreseen that there would be members in this category, and the information it had included in the 2008 newsletters was insufficient. The ombudsman also concluded it was more likely than not that, if the appropriate information had been included in the 2008 newsletters, the member would have asked to re-join the scheme. As a result, the Pensions Ombudsman directed that, following payment by the member of the necessary member contributions, the Administering Authority pay the employer contributions needed to credit the member with scheme membership between 2008 and 2014.  He also directed that the Administering Authority pay £2,000 in respect of severe distress and inconvenience. Once it has paid the employer contributions the Administering Authority has the option to try to reach an agreement for reimbursement with the member's employer at the relevant time.

NHS Pension Scheme (PO-28378)

Partly upheld – A complaint by a member of the NHS Pension Scheme who received an ill health retirement quotation based on an incorrect pensionable pay figure of £31,229.17 (the correct figure was £19,650.94). The member argued that, if he had been provided with a correct ill health retirement quotation, he would not have retired. "He would have remained in part-time NHS employment until his children were older and established in school … then … returned to full-time employment until aged 68". The Pensions Ombudsman rejected this part of the complaint. The member had been awarded Tier 1 ill health retirement benefits. To qualify for these, a person must be permanently incapable of efficiently discharging the duties of their employment. As such, it would not have been possible for the member to continue in his job with the Trust. In contrast, the fact that the member was not awarded Tier 2 benefits was an acknowledgement that he was still capable of alternative part-time employment, and the member still had the option of looking for this. The Pensions Ombudsman did, however, make an award of £1,000 for serious distress and inconvenience.

Judicial Pensions and Retirements Act 1993 Scheme (PO-22512)

Partly upheld – A complaint by the son of a member of the Judicial Pensions and Retirements Act 1993 Scheme in relation to non-payment of a child's pension. The scheme rules provided for payment of a child's pension while the child was in full-time education, but gave HM Treasury discretion to pay if the child left full-time education at some point after the age of 16, and later returned to it. In this case, the child's pension was stopped in 2013. The member's son returned to full-time education in 2016 after receiving an initial assurance from the scheme administrator that the child's pension would be put back into payment. The scheme administrator subsequently wrote to the son to explain that the pension would only be put back into payment if consent was given, but the son said that he did not receive either of these letters. The Pensions Ombudsman confirmed that the scheme was not bound by the incorrect information provided by the scheme administrator: it can only pay benefits in accordance with the scheme rules. The son had not provided the information about his education that the scheme had requested and so HM Treasury had not been able to take a decision on re-instatement of the pension. The son was not entitled to compensation for negligent mis-statement and the administrator was not estopped from going back on its incorrect statement that the pension would be put back into payment because it was not reasonable for the son to rely on that statement. In 2013, the scheme had written to his mother (who was acting on his behalf) to explain that a child's pension would only be paid during a continuous course of study and "should normally cease now". His mother had also been asked to provide information about the son's educational history. The ombudsman did, however, make an award of £1,000 for the distress and inconvenience caused by the provision of incorrect information in 2016 and by the scheme administrator's "unnecessary and unprofessional" delays in providing information to the Pensions Ombudsman's office.

House of Commons Library briefing papers | New and updated

The House of Commons library has published or updated the following briefing papers, which might be of interest to public service pension schemes and employers:

• Public service pensions – the cost control mechanism;
• Public Service Pensions and Judicial Offices Bill – debates in the Commons;
• Public Service Pensions and Judicial Offices Bill 2021-22.

This newsletter covers developments relating to public service pensions in England and Wales, with a focus on the Local Government Pension Scheme.