Changes to pension scheme regs will be ‘implemented by April’

Treasury says departments will publish McCloud remedy consultation feedback this month
Photo: Kurayba/Flickr/CC BY 2.0

By Jim Dunton

04 Mar 2022

Changes to public-sector pension-scheme regulations, forced by a 2018 Court of Appeal ruling that found coalition-government reforms were discriminatory, will be implemented by 1 April, Treasury permanent secretary Tom Scholar has said.

Scholar’s comments came in a formal response to a Public Accounts Committee report that said the Treasury ought to have been able to see the inherent age-discrimination issue at the heart of the botched reforms, which are set to cost at least £17bn to fix.

Civil Service Pension Scheme members will be among those shouldering some of the bill. In December, public sector unions including PCS  – the civil service’s biggest union – launched a High Court challenge to the government’s decision to pause another element of the 2015 reforms.

The cost-control mechanism built into the reformed system would have reduced scheme members’ contribution rates based on a 2016 scheme valuation. However, ministers have sought to use those higher funding rates to offset the cost of the McCloud remedy,  named after the original judgment.

In their June 2021 report, PAC members urged the Treasury to “prioritise work to quickly resolve the challenges presented by the McCloud judgment and cost control mechanism” to give certainty to scheme members and “rebuild the trust lost”. They also asked for a progress report in six months.

In his letter to PAC chair Dame Meg Hillier, dated 23 February but published this week, Scholar said departments were currently considering the feedback received in consultations on McCloud-remedy changes to individual scheme regulations.

“Departments will publish consultation response documents over February and March, and any confirmed changes to scheme regulations will be implemented through secondary legislation by 1 April 2022,” he said.

“Retrospective changes to scheme regulations through secondary legislation are required to be in place by 1 October 2023 to ensure that the retrospective remedy is implemented no later than this point. Departments will consult on the content of these regulations in due course.”

MPs also asked the Treasury to report on changes to the cost-control mechanism for public-sector pension schemes, following a report from Government Actuary Martin Clarke last year.

He called for changes including a wider “corridor” for valuation fluctuations required to trigger the mechanism, taking it from plus or minus 2% of pensionable pay to plus or minus 3%, and for the mechanism to only be applied to reformed public sector pension schemes.

Another recommendation was the introduction of an “economic check”. This would mean the broader economic situation of the nation is taken into account before a triggering of the cost-control mechanism results in a change to pension-scheme benefits.

Scholar said the changes were expected to make the cost-control mechanism more stable, as Clarke’s review had suggested.

“A more stable mechanism means changes to member benefits or contributions become less likely,” he said.

“The proposed reforms thus help provide greater certainty regarding members’ projected retirement incomes and level of contributions.”

He said an amendment to the Public Service Pensions and Judicial Offices Bill to set the framework for two of the three reforms – the economic check and the reformed-scheme-only design – had been passed in January.

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