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The government responds to the consultation on arrangements to rectify the age discrimination in public sector pension schemes

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​Key takeaways for the Teachers' Pension Scheme (TPS) England and Wales members

The government has chosen the 'deferred choice' option. This was the NAHT's preferred approach and means that members of the TPS will only be required to make a choice about their pension when they retire.  This is good news as you will have as much certainty as possible at this point.

Members do not need to take any action in relation to their pension in the TPS at the moment. The TPS will soon begin an exercise to address all pensions to ensure that the remedy (if applicable to that person) is applied.  They will start with any pensions that have already been paid out that require revisiting and will then begin to look at pensions that are not already in payment.  The TPS will contact you about this, you do not need to take any action.  Please note this process is complex and will take considerable time.

If you are considering retirement in the near future, it's likely that your pension will be paid based on the current regime.  However, as noted above, the TPS will then contact you when they are ready to review the pension you have been paid.  Again, no action is needed and you do not need to delay taking your pension if this is what you were planning.

 

Context

Last year the government released two consultations outlining proposals aimed at removing age discrimination from public sector pension schemes, including from the Teachers' Pension Scheme (TPS) and the Local Government Pension Scheme (LGPS), in the wake of a court judgement from 2018.

We have now received a response for the TPS in England and Wales; there is a separate consultation for the schemes impacted in Northern Ireland, which we are currently still waiting for a response on.

For members in the Isle of Man, your pension schemes are unlikely to be impacted as the schemes did not operate in a way which was age discriminatory. 

When we have the results of the outcome of the consultation related to the Local Government Pension Scheme (LGPS) (England and Wales), we will provide a further update.  However, as many of you will recall, the impact on the LGPS will be less extensive as the way that pension scheme was changed in 2014 was less discriminatory in its design and it is also unlikely that LGPS members will need to take any action in relation to their pension when the announcement regarding the remedy is finally made.

 

Background in relation to the TPS

The proposal follows court cases brought by judges and firefighters in the wake of changes in 2015, when members of the UK's public sector pension schemes were compulsorily transferred to less generous new schemes. However, in the TPS and other similar schemes, scheme members within 10 years of retirement age were permitted to remain in their previous, often more generous, schemes rather than transfer to the new schemes.

In December 2018, the Court of Appeal (CoA) ruled that the Ministry of Justice had discriminated against younger judges on the grounds of age (as older people were protected and younger people weren't), and it found in favour of a group of firefighters on the same issue. The court said the discrimination must be remedied by the government.

The government proposed to provide members with the option to choose between receiving legacy (the former, final salary scheme) or reformed scheme (the new, career average scheme) benefits in respect of their service between 1 April 2015 and 31 March 2022 (known as the 'remedy period').

 The consultation sought views on that proposal and especially on which of the two possible approaches should be taken when making this choice, and how each of these approaches might work. The two possible approaches were:

  1. An immediate choice – here, members would make this decision in the year or two after the point of implementation in 2022 (which might be many years ahead of their retirement, and at a time when there is still some uncertainty over the precise benefits that would accrue to them in the alternative schemes)
  2. A deferred choice underpin (DCU) -  here, a decision would be deferred until the point at which a member retires (or when they take their pension benefits).

 

 

Government decision

Following extensive feedback, including from NAHT, the government has confirmed that they will be implementing the 'Deferred Choice Underpin' to remedy the discrimination.

This means that those who are affected will receive a choice of which pension scheme benefits they would prefer for the period between 2015 and 2022 (known as the remedy period). The choice will be between the legacy (final salary) or career average (reformed) scheme benefits.

The choice will be made at the point in time when benefits are put into payment, which for the majority of individuals will be at retirement.

The response also confirms that the final salary (legacy) scheme will end on 31 March 2022. Any pension members have built up in the final salary (legacy) scheme up to that date, and the normal pension age at which benefits can be taken in full, are protected.  This means that from 1 April 2022, all legacy scheme benefits will remain in place but benefits for future service will then build up in the career average (reformed) scheme.

 

NAHT's view

NAHT welcomes the government's decision to implement the deferred choice underpin. As outlined in our response to the consultation, NAHT believes this option maximises the likelihood individuals will be able to choose the scheme that's most beneficial for them. We also feel this option is fairer, given all members will make the decision at the point of retirement where no assumptions on life and career choices will have to be made.


Next steps

Members do not need to anything at this stage. The TPS will contact those who are affected and they are currently working on the timescales for this.

We would encourage members to keep up-to-date by checking the information on the TPS website. There are also helpful FAQs that members may wish to look at.

NAHT will continue to work closely with the Department for Education and the TPS on the implementation of the decision to ensure it remains as appropriate as possible for members including consideration of some of the technical issues this change will create, and ensures that members are effectively supported to make the best decision for them and their situation at the point of retirement.

 

 

First published 09 February 2021