Public Service Pensions and Judicial Offices Bill [HL] — House of Lords, 2021-09-07
Topic: Labor
Barbara Janke (Liberal Democrats, Centre to centre-left): My Lords, I too thank the Minister for his clear and succinct introduction. As he said, this legislation is necessary to remedy the effects of the McCloud judgment relating to the Public Service Pensions Act 2013. I rise to highlight some of our concerns in a number of areas The first is discrimination. In introducing the remedy, the Government must be certain that new measures will not produce further discrimination, such as placing a greater burden on newer or younger members of the scheme or reducing the right of part-time workers to make up their pensions by working for longer. This particularly affects women who have worked part-time due to family or caring responsibilities. In their responses to the consultations, some have described, with particular reference to the police and the benefits of the legacy schemes, how the Bill must pay particular attention to discrimination to avoid further long and drawn-out legal cases Also, as the noble Lord, Lord Davies, said, it is very important that the changes be just, and there must be trust in government to protect citizens. Promises and commitments already entered into by government must be addressed and cannot simply be brushed aside as being too costly. It will be of great importance to many members that promises made by the Government are honoured. Equally, commitments made by the Government, as agreed in the cost mechanism, have not been acted upon—as, again, the noble Lord, Lord Davies, said—following the 2016 valuation, which should have benefited members. It is worth noting here the comments of the Public Accounts Committee: "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 it being its mistake." The National Audit Office said in March 2021: "Employee representatives told us that the review of the mechanism" because of what has happened at the first valuation "undermined trust between employees and the Government" The recommendation of the House of Commons report on public service pensions stated: "HM Treasury must prioritise work to quickly resolve the challenges presented by the McCloud judgment and cost control mechanism, in order to give certainty to scheme members and employers, and rebuild the trust lost" Other concerns relate to the treatment of disbenefits to members of current legacy schemes. These must be fully evaluated before March 2022, when they enter the career-related schemes and the legacy schemes are closed. There are significant differences between the new schemes and legacy schemes such as the police pension—again, that is specifically referred to—which is based on years of service rather than pensionable age. Both these schemes are seen by members as being based on promises made by the Government to the service. Retirement in the career-related scheme is at 60, but as police pensions are based on years of service, members may wish to retire at an earlier age. If they do this under the career average scheme, which allows retirement at 55, they could lose up to 25% of their pension, which is a very significant issue. I am sure that this will be considered in more detail in Committee. There are similar structural issues for fire and rescue services, which were highlighted by the LGA. I would like the Minister to take note of an anomaly in Clause 29 and consider an amendment to recognise the special arrangements of the service where the employer is also the scheme manager The complexity of the current position with regard to public service pensions legacy schemes, given the Government’s intention that all be included in CARE schemes by March 2022, gives rise to a lot of practical problems, and I would like to understand how the Government intend to deal with them. It will be extremely important that the proposals in the Bill are workable. It is easy to say that members get to retirement and make whichever choice is best for them, but in some cases, they may have rights built up that fall due at different ages—some at 60, some at 65. So, if there is not a single retirement age, when do they have to make the choice? In some cases, the higher pension at retirement may be under one set of rules, but as retirement continues it may turn out that the other set of rules would have given a bigger total pension. What happens then The Government have accepted that people with really complex tax issues can have financial advice, but what about the millions of public sector workers who will have to make these choices? Where is the help and guidance coming from for them? What about financial planning between now and retirement? Presumably, any statement will show rights based on the assumptions of the old scheme, even though some people will opt for the new scheme. Will they have access to both numbers when they are planning and will the pensions dashboard show both numbers? It is going to be an extreme challenge for schemes to unpick, administer and communicate, and members are going to need a lot of help to understand what is happening. What plans do the Government have to resource support systems and enable members to make the best choices? Support for trustees of pensions schemes will also be needed The Bill deals with the consequences of government failure to foresee the age discrimination issue which gave rise to the McCloud judgment. The Bill will determine the future means of many public service employees. The Minister and the noble Lord, Lord Davies, said that many complex and difficult matters need to be resolved if members are to have confidence in the competence, integrity and political will of the Government to get it right.