Public Service Pensions Update | April 2020

Written on 30 Apr 2020

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

With Covid-19 continuing to affect almost every aspect of day-to-day life and work, we highlight our pensions developments tracker and a number of public service-specific announcements and resources. We also discuss other recent developments, including around the McCloud case and the costs cap, and (hot off the press) the Supreme Court's decision in the Palestine Solidarity Campaign case.

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

Covid-19 | Pensions development tracker

Our regular pensions development tracker lists Covid-19-related legislative and regulatory developments that are likely to be of interest to the administering and employing authorities of public service pension schemes. We have published two trackers so far, and the first and the second also contain links to our wide range of business insights.

In addition, the following developments will be of particular interest to public service pension schemes:

  • The government has announced a new life assurance scheme to support the families of health and care workers on the frontline in England during the Covid-19 pandemic;
  • The Local Government Pensions Committee has published and updated Covid-19 FAQs for LGPS administrators. These include a link to Covid-19 FAQs for scheme members;
  • The Local Government Pension Scheme Advisory Board has established and continues to update a dedicated Covid-19 page;
  • The Ministry of Housing, Communities and Local Government has written and is updating its dedicated Covid-19 guidance for local government;
  • HMRC's guidance for employers on the Coronavirus Job Retention Scheme anticipates that the scheme will not be used by many public sector organisations or any employers receiving public funding for staffing costs;
  • The government has proposed to temporarily suspend pensions tax rules which would otherwise apply "significant tax charges" to the pension income of recently retired individuals aged 50 to 55. This will allow key workers to continue to provide critical public services during the Covid-19 pandemic. The government also proposes to make complementary changes to the rules of relevant public service pension schemes (subject to HM Treasury's agreement).These measures will only apply to returning key workers and are expected to apply (initially at least) in respect of payments made between 1 March and 1 June 2020.

Update | The McCloud case

On 25 March 2020, the Economic Secretary to the Treasury made a written statement to Parliament on the development of proposals to address, across all public service pension schemes, the unlawful age discrimination identified by the Court of Appeal in the McCloud case.

The written statement confirmed that "[s]ince February 2020 relevant pension schemes have been conducting technical discussions with member and employer representatives to seek initial views on the government’s high-level proposals for removing the discrimination". It said that the government is "considering the initial views of stakeholders and continuing to work through the details of the technical design elements of the proposals" with a view to publishing detailed proposals for public consultation "later in the year".

The statement says that "[t]he proposals the government is considering would allow relevant members to make a choice as to whether they accrued service in the legacy or reformed schemes for periods of relevant service, depending on what is better for them", but does not explain what is meant by "choice"'. Does this mean that an active, one off, decision will be required by the member and, if so, when?

When they are published, the detailed proposals will include the government's proposal to remove the discrimination for future service. At the same time, the government will provide an update on the cost control mechanism.

On 30 March 2020, the Local Government Pension Scheme Advisory Board updated its FAQ to take account of the written statement.

The costs cap | Legal challenge

In our February 2020 public service pensions update, we reported that the Public and Commercial Services Union (PCS) had announced that – with the Fire Brigades Union – it intended to seek a judicial review on the question of whether the government should return to members the 2% difference between the pension contributions which they are paying (and the government intends they should for the time being continue to pay) and the lower contribution rate which they say is supported by the outcome of the 2016 valuations.

On 24 April 2020, the Fire Brigades Union (FBU), Public and Commercial Services Union, the Professional Trades Union for Prison, Correctional & Secure Psychiatric Workers and the GMB Union issued legal proceedings against the government, challenging the government's continuing decision to pause the cost cap process pending resolution of the McCloud decision.

The FBU has said that "[s]hould the unions win the case, the legislation says that members would be eligible for a choice between contribution reductions, benefit improvements, or a mixture of both". It has also confirmed that "[t]he outcome of the case could affect anyone who joined the pension schemes for those working in local government, civil servants, NHS, teachers, armed forces, police, or firefighters on or after 1 April 2012".

Investment | Supreme Court's judgment in Palestine Solidarity Campaign case

On 29 April 2020, the Supreme Court handed down its judgment in the Palestine Solidarity Campaign case. By a majority of three to two, the court has restored the High Court's order: that the two passages in the Secretary of State's 2016 guidance ("using pension policies to pursue boycotts, divestment and sanctions against foreign nations and UK defence industries is inappropriate, other than where formal legal sanctions, embargoes and restrictions have been put in place by the Government" and authorities "[s]hould not pursue policies that are contrary to UK foreign policy or UK defence policy") are unlawful, on the basis that the Secretary of State exceeded his powers in issuing them.

It remains to be seen whether the government will proceed with the legislation 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” that we discussed in our January 2020 public service pensions newsletter.

Parental Bereavement Leave and Pay | Amending regulations

On 6 April 2020 new regulations, The Parental Bereavement Leave and Pay (Consequential Amendments to Subordinate Legislation) Regulations 2020, came into force. The regulations amend a number of pieces of secondary legislation, including provisions applying to public service schemes, to reflect the introduction of parental bereavement leave and pay for parents who lose a child on or after 6th April 2020.

Data Protection | Employer not liable for mass data breach caused by employee

In a judgment handed down on 1 April 2020, the Supreme Court reversed the decision of the Court of Appeal and found that Morrisons was not vicariously liable for the actions of a rogue employee who posted payroll data of 100,000 other employees on a file-sharing website. We discuss the decision, which will be of interest to administering and employing authorities, in our Insight.

Pensions Ombudsman | Recovery of overpayments

The Pensions Ombudsman has reached a decision in relation to the Principal Civil Service Pension Scheme, which contains a helpful reminder of some of the key principles and time limits that apply in recovery of overpayment cases.

House of Commons Library briefing papers | New and updated

The House of Commons library has published or updated a number of briefing papers relating to public service pension schemes: