HM Treasury has published a consultation (Public service pension schemes: changes to the transitional arrangements to the 2015 schemes) which outlines its proposal to address the Court of Appeal's ruling of unlawful age discrimination in Lord Chancellor and anor v McCloud and ors.
McCloud concerned the transitional protections given to scheme members (who were within 10 years of their normal retirement age in 2012) in the judges and firefighters schemes as part of public service pensions reform.
The Court of Appeal found that the transitional protections given to older members directly discriminated against younger members and could not be objectively justified.
The consultation proposes to address McCloud by offering affected members a choice of scheme membership for the period running from 1 April 2015 to 31 March 2022. The change would affect schemes covering the NHS, teachers, the fire service, and the policy in England, Wales and Scotland, as well as the Civil Service and the armed forces. The consultation closes on 11 October.
The consultation proposes that affected members should be offered the choice of accruing benefits in either the career-average pension schemes or in the legacy final-salary schemes. Alternative approaches are set out to allow members to decide immediately or to defer the decision until retirement. If the latter approach is taken then the member would be deemed to have accrued benefits in the legacy scheme. The consultation also sets out proposals for moving all active members into the reformed schemes after 31 March 2022.
A consultation arising out of the McCloud case and in relation to the Local Government Pension Scheme (LGPS) has also been issued by the Ministry of Housing, Communities and Local Government (MHCLG). It's worth noting that private sector suppliers have been permitted to become admitted bodies into the LGPS since 1999 so there are likely to be financial implications for a range of private sector suppliers who have been admitted bodies to the LGPS.
Unlike other public service schemes, the LGPS moved all members into the career average revalued earnings (CARE) scheme whatever their age. Those active members who were within 10 years of their 2008 scheme normal pension age (NPA) on 31 March 2012 were protected via the statutory underpin. The MHCLG consultation (which closes on 8 October) is seeking views on proposals that would extend the LGPS statutory underpin protection to younger members of the scheme. It proposes that a two-part revised underpin will apply to all members who meet the criteria for protection regardless of their age in 2012. This revised underpin will also apply to early leavers and will take account of early or late retirement adjustments. Membership up to the earlier of leaving, 2008 NPA or 31 March 2022 will be included in the calculation of the revised underpin. It is also proposed that the revised underpin will extend to qualifying members who have left the scheme since April 2014 as well as active members.