Judicial Pensions and Fee-Paid Judges’ Pension Schemes (Contributions) (Amendment) Regulations 2020

Work was undertaken from March 2016 on the first such valuation of public service pension schemes to analyse the provisional results of the valuation for each affected scheme. This work was affected by the age discrimination cases brought by members of the judicial and firefighters’ pension schemes—the McCloud litigation. As your Lordships will no doubt recall, this litigation concerned the transitional protection policy that was applied by the Government in implementing the 2015 public service pension scheme reforms. The courts found that the transitional protection policy amounted to unlawful age discrimination, and in June 2019 the Government’s application for permission to appeal was refused by the Supreme Court.

In January 2019, the Government took the decision to pause the cost control element of the valuation. It was prudent to do so, because the effect of the McCloud litigation on public service pension schemes was unclear. While the outcome of that litigation is now known, addressing the discrimination, including settling the details of tax treatment, is a complicated process, involving decisions across a number of government departments, and will take some time to deliver. The pause of the cost control mechanism will therefore continue until there is more clarity about the shape of the McCloud remedy.

To avoid the need to make further interim regulations, the regulations propose that the existing rates will continue to apply with no specific expiry date. This is a pragmatic measure reflecting the fact that the timeline for resolving the issues arising from the McCloud case is uncertain. Once this work is complete, and the outcome of the cost control element of the valuation is known, the Government will reconsider whether further changes to member contribution rates for these schemes are required.

No changes were made to the earning thresholds for member contribution rates as part of the measures put in place for 2019-20. However, the Government are mindful that it would not be desirable for the earning thresholds to fall significantly out of step with salary or fee rates. That is why the regulations provide that all earning thresholds below the top £150,001 threshold are uprated each year in line with CPI. This approach is consistent with various other aspects of public service pensions. In recent years, increases to public service pensions in payment have been in line with the September-to-September increase in CPI. CPI is already used to annually uprate the earning thresholds in other public service pension schemes, such as the Local Government Pension Scheme and the Teachers’ Pension Scheme.

The £150,001 band will not be increased. In the 2015 scheme, the rates have been designed to align with the top rate of income tax such that the net-of-tax contribution rates are broadly the same above and below the £150,001 threshold. In the case of the fee-paid 2017 scheme, the total contribution rates are broadly the same, when the member and dependant contribution rates are taken together. Additionally, the Government consider it desirable to maintain broad parity between the Judicial Pensions and Retirement Act 1993 and the two sets of judicial pension regulations being amended, as the £150,001 threshold is common across all judicial schemes.

As the regulations provide that the lower earning thresholds will be uprated each year automatically, similar provisions will not be needed next year. However, the Government will revisit the question of appropriate levels of contribution rates and thresholds once wider pension issues have been resolved.

The relevant legislation—Section 22 of the Public Service Pensions Act 2013—requires the Government to fulfil a number of procedural requirements before making changes to features of the scheme under the 2015 regulations which are classed as protected elements. Member contribution rates are one such protected element, and as such cannot be altered without the Government first consulting the persons or representatives of those persons affected with a view to reaching agreement. I can confirm that the Ministry of Justice issued a four-week consultation, which ran from 25 October to 22 November 2019. The Ministry of Justice consulted representative judicial organisations with a view to reaching agreement. An additional statutory requirement for changes to protected elements is that an accompanying report must be laid before Parliament setting out the rationale for the amendment. I can confirm that such a report has been laid. Separately, the Government also satisfied the requirement to consult the Secretary of State for Scotland in relation to judicial offices with Scottish jurisdiction, and he was content with the proposal.

Under this further interim measure, the cost of accruing pension scheme benefits will remain the same for most members but will be reduced for some members, as they will pay contributions at a lower rate than they would have done if no changes were made to the earning thresholds.

I conclude by reinforcing the point that the existing arrangements for member contribution rates will expire on 31 March 2020, in relation to both the 2015 and the 2017 judicial pension schemes. Therefore, these draft regulations are a necessary further interim measure to continue the effective operation of these pension schemes, until a long-term solution is put in place. I hope that noble Lords will agree that these regulations are a 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.

The noble Lord, Lord McNicol, asked when the McCloud judgment might be remedied. The case is now with the employment tribunal to determine an appropriate remedy. The next hearings in the employment tribunal are on injury to feelings, scheduled for June this year, and then on financial losses, in October this year. Those hearings should settle the detail of how past discrimination will be rectified. MoJ officials are working hard on engaging with the employment tribunal on this process, but meanwhile, and more generally, the Treasury is developing a central remedy to address the discrimination for both claimants and non-claimants for the wider public service schemes, on which it aims to consult in the late spring of this year. The Ministry of Justice is aiming to mirror the Treasury timetable, with a consultation also planned for this spring.

The noble Lord, Lord McNicol, also asked who took part in the consultation. The Ministry of Justice received 10 responses to the consultation from representative judicial organisations and individual salaried and fee-paid court and tribunal judges.

Other than the point about the Miller case, I think I have addressed all the issues that were raised by noble Lords, but if not I am very happy to write on those points as well. I hope that noble Lords will agree that these regulations are a necessary interim measure to prevent a lapse in arrangements for member contribution rates and to ensure the continuing effective operation of the judicial pension scheme. I therefore commend this draft to the Committee.