Public Sector Pensions Update – January 2020

Written on 21 Jan 2020

Welcome to the latest edition of our Public Sector Pensions Update.

This edition focuses on announcements made in the December 2019 Queen’s Speech and in relation to the March Budget. It also contains an update on the McCloud case and on a series of other decisions affecting public sector pension schemes.

If you would like to discuss any of the developments in this newsletter, please contact one of the experts listed below.

Update | The McCloud case

The December 2019 edition of the Firefighters’ Pension Schemes newsletter contains a link to two documents, a Home Office factsheet and a Fire & Rescue Services National Employers (FRSNE) circular, giving updates on the McCloud case. The updates follow an interim order on remedy on 18 December 2019 relating to the Firefighters’ Pension Schemes.

According to the FRSNE circular, the interim order is only binding in the period pending the final determination of all of the remedy issues, and in that interim period claimants are entitled to be treated as if they remained in the 1992 Fire Pension Scheme. It is anticipated that the final determination in regards to membership of the 1992 scheme should be resolved around mid-July 2020 and following that it may be some time before this part of the remedy can be put into effect for all claimants. There may be other remedy issues to be resolved including in respect of claims for injury to feelings.

In the meantime, the FRSNE is pushing Home Office to release guidance on a number of issues including ill-health retirements, backdated employee contributions, taper members tapering into the 1992 scheme from 21 January 2020, and immediate normal retirements from age 50 with over 25 years of service.

The Home Office circular provides more general comment, including that many non-claimants who did not benefit from the transitional protection, which led to the McCloud discrimination ruling in favour of claimants, may in fact be better off in the new career average arrangements and would suffer a detriment if they moved back to the old schemes. The government therefore intends to allow these people to keep the benefits they have accrued. This will mean that it will take some time to make the required changes to public service pension schemes.

Queen’s Speech | Stopping boycotts by public institutions

On 19 December 2019, Her Majesty delivered a second Queen’s Speech in less than three months. The background briefing notes for the speech confirmed that, in line with its manifesto pledge, the newly elected Conservative government intends to “stop public institutions from imposing their own approach or views about international relations, through preventing boycotts, divestment or sanctions campaigns against foreign countries and those who trade with them”.

The briefing notes say that “further details on the extent and application of the policy will be published in due course”. However, the fact that they refer to “investment decisions” and to “previously issued local government pension guidance” suggests the government intends the new policy to apply to the Local Government Pension Scheme. The fact that the briefing notes list a bar on public bodies engaging in boycotts as a legislative brief also suggests that the government intends to introduce the ban through legislation.

At the moment, we are waiting for the Supreme Court’s decision in R (on the application of Palestine Solidarity Campaign Ltd and another) v Secretary of State for Communities and Local Government. The Supreme Court heard a final appeal on 20 November 2019. However, even if it rules that the original Local Government Pension Scheme investment guidance (which precluded “boycotts, divestment and sanctions against foreign nations and UK defence industries”) was unlawful, the government should be able to sidestep this by introducing new legislation.

Queen’s speech | Pension Schemes Bill

The same background briefing notes confirmed that the government would bring forward a new Pension Schemes Bill to cover the same matters as the Bill we discuss in our October 2019 update and Insight. The Bill has now been republished, with some amendments.

March Budget | Annual and lifetime allowance

In our December 2019 update, we reported that the Secretary of State for Health and Social Care had agreed a temporary annual allowance solution with NHS England to try and protect patient care over this winter.

On 7 January 2020, the Chancellor of the Exchequer confirmed that the next Budget would take place on 11 March 2020. The Conservative party’s election manifesto contained a number of pledges relating to pensions, including a pledge to urgently address the tapered annual allowance problem in doctors’ pensions. The NHS, and many other public and private sector employers, will be waiting to hear whether the government announces a specific policy proposal to address the impact of the tapered annual allowance on senior clinicians and or a wider review of the annual and lifetime allowances.

TUPE | Application to workers and agency workers

The Employment Tribunal has handed down a decision suggesting that TUPE should be interpreted as protecting ‘workers’ and not just employees. Our Insight considers the decision in Dewhurst and others v Revisecatch Ltd and another, which could have significant implications in relation to outsourcing, in more detail.

The application of TUPE to occupational pension scheme rights, including in public service pension schemes, is complicated. With the exception of some early retirement rights (especially enhanced ones arising on redundancy), they are not, generally speaking, protected by TUPE. As a result of this, employees transferring from a public service employment may be eligible for protection under Fair Deal 2013 or the Best Value Authorities Staff Transfers (Pensions) Direction 2007 (the direction is currently under review by the Ministry of Housing, Communities and Local Government).

The Employment Tribunal’s decision is only likely to affect limited cases where public service employees have been employed as workers or agency workers and in those cases we recommend that specialist legal advice is taken before proceeding with staff transfers in order to understand how pension rights are protected including in some cases a requirement to provide a defined contribution arrangement.

Judicial Pensions | Time limit for part-time worker claim

On 16 December 2019, the Supreme Court handed down its judgment in Miller (and others) v Ministry of Justice on the question of when time starts to run for a claim by a fee-paid part-time judge to a pension under the Part-time Workers’ Directive, as applied by the Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2000. The judgment looks to be specific to judicial pensions, but could be relevant in other cases if similar features are present.

Pensions Ombudsman | Ill health and widows’ pensions

The Pensions Ombudsman has issued three recent decisions of interest relating to public sector pension schemes. In the first, the Pensions Ombudsman considered a complaint by a widow who was told that her Teachers’ Pension Scheme widow’s pension would be reduced if she lived with a new partner but was not told that, if that relationship came to an end, it would only be possible for the pension to be reinstated if she was suffering financial hardship. The Ombudsman rejected the complaint but commented that it “would have been helpful” if Teachers’ Pensions had confirmed this point.

In the second, the Pensions Ombudsman upheld a complaint by a member of the NHS Pension Scheme who had applied for an ill health pension when her employment was terminated and was later told that she could not appeal the decision not to grant that pension because she had since applied for and started to receive a deferred member’s pension.

In the third, the Pensions Ombudsman considered questions around conflicting medical evidence in a case where a member of the Local Government Pension Scheme wished to be considered for ill health early retirement.

House of Commons Library briefing papers | New and updated

The House of Commons library has published several new or updated briefing papers relating to public sector pension schemes: