Judicial Pensions and Fee-Paid Judges’ Pension Schemes (Amendment) Regulations 2019 — House of Lords, 2019-02-20
Topic: Labor
Richard Keen (Conservative, Centre-right): My Lords, the draft regulations before us today were laid on 7 January under the affirmative resolution procedure and relate to the contribution rates for members of two judicial pension schemes. The purpose of these draft regulations is to make provision to extend the current member contribution rates and earning thresholds in two different pension schemes until the next financial year. The two schemes are: the judicial pension scheme 2015, which was established by the Judicial Pensions Regulations 2015 following wider public service pension reforms; and the fee-paid judicial pension scheme 2017, which was established by the Judicial Pensions (Fee-Paid Judges) Regulations 2017, following the Supreme Court decision in 2013 in the case of O’Brien, and related court decisions. The reason for extending the existing rates is that the current provision for member contribution rates will expire on 31 March 2019. Therefore, the draft regulations are needed to make an amendment to specify the member contribution rates which will apply for the next year: for the period from 1 April 2019 to 31 March 2020. The regulations will enable us to ensure the continuing operation of the schemes by deducting the appropriate member contributions for that year. Given that we propose to continue the same rates under the regulations, this amendment simply maintains the existing provision for a further year. This interim measure is required pending the completion of a broader process, which relates to the valuation of the judicial pension schemes. This process has been ongoing for a period of time, and the outcome of the valuation is yet to be determined Having referred to a link between the regulations and the broader valuations process, I should like to provide some brief background with regard to that matter. Following the reform of public service pension schemes in 2015, and as reflected in the current legislative framework, government departments are required to undertake valuations of their respective public service pension schemes every four years. This includes the Ministry of Justice in respect of the judicial pension schemes. The valuations of public service pension schemes do two things. One is to measure the cost of providing pension benefits to members of the schemes; and the second is to inform the future contribution rates paid into the schemes, by both the employer and members of the scheme Work has been under way on the first such valuations of public service pension schemes, and part of the initial stage is to analyse the provisional results produced for each respective scheme—which, as I mentioned, includes the judicial pension schemes. However, the current position is that the Government have recently announced a decision to pause part of the valuations of public service pension schemes. This is because the Government are seeking permission to appeal the Court of Appeal decision in the case of McCloud. Therefore, pausing the valuations is considered a prudent approach at this stage I now seek to explain the relevance of the Court of Appeal matter in McCloud. In December 2018, the Court of Appeal ruled that transitional protection offered to some individuals as part of the 2015 public service pension reforms amounted to unlawful discrimination—including the transitional protections in the judicial pension schemes. The issue relating to this transitional protection is that, as part of the 2015 reforms, most public servants and judges moved to a new career-average pension scheme. However, members within 10 years of their normal retirement age were protected and remained in the existing final salary schemes, together with members between 10 years and 13 years 6 months from their normal retirement age, who were given what was termed tapered protection, which is to remain in the existing scheme for a period of time before moving to the new scheme introduced by the reforms The Ministry of Justice has applied to the Supreme Court for permission to appeal the Court of Appeal’s ruling, and a decision on that application for permission is awaited. I understand that it is anticipated that it will be available in about July. As the legal process is ongoing and there is some uncertainty about the impact of the court ruling on wider pension reforms, it was considered prudent to pause that element of the valuation, which has the potential to affect member benefits and/or contribution rates in future. That element is referred to as the "cost control mechanism", and is referred to in the Written Ministerial Statement issued by the Chief Secretary to the Treasury on 30 January this year I return to the draft regulations, which are the subject of this debate. There is a specific requirement to consult those affected by the draft regulations, as this proposal entails making a change to member contribution rates which are classed under the governing legislation as a protected element. Therefore, in accordance with the relevant requirements, we carried out a four-week consultation from 24 October to 21 November 2018. We consulted representative judicial organisations with a view to reaching agreement on the proposal. We received 23 responses to the consultation, of which the majority of respondents agreed with the proposal but two respondents did not. The two respondents who did not agree with the proposal also raised some points relating to wider pensions issues which were outside the scope of the consultation relating to the proposal for extending the current rates as an interim measure for a year. For example, they disagreed with the stepped approach for contribution rates and expressed preference for a flat rate to apply and for having a non-contributory scheme. We engaged further with the aim of reaching agreement, but unfortunately we were unable to secure the agreement of these two respondents In accordance with additional procedural requirements, we have also laid a report before Parliament setting out the rationale for this amendment. Furthermore, as the judicial pension schemes to which these regulations relate are UK wide, we have engaged with the devolved Administrations and kept them informed of progress. We will also continue to engage closely with them on further developments I conclude by reinforcing the point that the existing arrangements for member contribution rates will expire on 31 March 2019, in relation to the 2015 and 2017 judicial pension schemes. These draft regulations are therefore a necessary interim measure to continue the effective operation of these pension schemes, until a longer-term solution is put in place. Under this interim measure, the cost of accruing pension scheme benefits will remain the same for members of both schemes for the scheme year April 2019 to March 2020. If it is agreed that changes to member contribution rates—or other changes—are required in future, as a result of the valuation outcome, any changes that are agreed will be backdated until 1 April 2019, where it is appropriate to so do I hope noble Lords will agree that these regulations are an important and necessary interim measure to continue the arrangements for member contribution rates and for the effective operation of the judicial pension scheme. I beg to move.