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This is the response of the POA to the consultation paper published by HM Treasury on 17 July on the changes required to public service pensions as a result of the McCloud and Sargeant cases. The POA is the professional union for prison, correctional and secure psychiatric workers, with 30,000 members throughout the United Kingdom.
The POA have been consistent about Lord Hutton’s recommendations on changes to the Civil Service Pension Scheme that Prison Officer Grades should have been treated differently because of the unique challenges as a vital Uniformed and Emergency service. The POA brought successful claims for its members which are parallel to the claims in McCloud and Sargeant and has obtained declarations from the Employment Tribunal similar to the McCloud and Sargeant declarations.
The majority of the POA’s members are entitled to membership of the pension schemes for civil servants, but its secure psychiatric workers are entitled to membership of the NHS pension schemes. Except where stated otherwise this response applies equally to both.
Our position in outline
We agree that the discrimination found in McCloud and Sargeant must be addressed by allowing members to make a choice between the benefits of the 2015 schemes and the legacy civil service or NHS schemes, and that choice must be given retrospective effect. We believe that the choice should be made available to members who joined the service from 1 April 2012, not 1 April 2015.
Of the options presented, we are strongly in favour of the deferred choice underpin (DCU). We do not believe that immediate choice (IC) is workable from a member’s perspective and will lead to further litigation. We doubt it is administratively workable either.
We do not agree that the underpin should cease to apply with effect from 1 April 2022 (or any other date). To expect prison officers, correctional workers and secure psychiatric workers to continue working until their State pension age is unrealistic. They should be permitted to retire with an unreduced pension from the age of 60, or from the age of 55 in the case of members of the 1995 Section of the NHS scheme who had “Special Class” status before 6 April 1995.
Chapter 2: removing discrimination arising from transitional protection
Question 1: Do you have any views about the implications of the proposals set out in this consultation for people with protected characteristics as defined in section 149 of the Equality Act 2010? What evidence do you have on these matters? Is there anything that could be done to mitigate any impacts identified?
Question 2: Is there anything else you would like to add regarding the equalities impacts of the proposals set out in this consultation?
Our major concerns relate to the position of members who are expected to work on to a normal retirement age which is unfeasible. We believe that the proposal to link their normal pension age to State pension age is discriminatory on the grounds of age and sex and cannot be justified. We expand on this in our response to question 9 below. This issue is not addressed in the equalities impact assessment at all.
We believe that the proposed treatment of members who joined between 1 April 2012 and 31 March 2015 is unfair. They joined the service on the basis of a contract of employment offering them membership of a final salary pension scheme with a normal pension age of 60 in most cases, or age 65 in some cases. We note the point made in the equalities impact assessment that they could be expected to know that they would be transferred to a pension scheme with a normal pension age equal to their State pension age, but it is much more realistic to expect them to have read their contracts of employment than the “wide publicity” that the equalities impact assessment refers to.
As the equalities impact assessment notes, this group is likely to be younger than the group of members who joined before 1 April 2012. Not to offer them the choice that is offered to their older co-workers who are in an identical position apart from their date of joining (and therefore age) is age discriminatory. That is particularly the case where the cost of providing a remedy is treated as within the cost control mechanism, as the government proposes (and which the POA has challenged). The younger group are penalised by the government’s past discrimination, but the older group are not.
The administrative workload and financial cost justifications offered in the equalities impact assessment do not justify discriminatory treatment.
Question 3: Please set out any comments on our proposed treatment of members who originally received tapered protection. In particular, please comment on any potential adverse impacts. Is there anything that could be done to mitigate any such impacts identified?
The consultation paper acknowledges that requiring members with tapered protection to make the same choice as others might worsen their position as it stands today.
Take, as an example, a member of a legacy scheme which has a higher accrual rate than their 2015 scheme, but which does not provide a pension for an unmarried partner whereas the 2015 scheme does. The 1995 NHS Scheme is an example, particularly in the case of members with mental health officer status where double accrual applies for years of pensionable service in excess of 20 years. If such a member has passed their transition date, (a) they have the benefit of the higher accrual rate for their years of service before the transition date and (b) they now have a contingent pension for an unmarried partner for all of their pension, under the legacy scheme and the 2015 scheme.
If such a member dies and if all of their service between 2015 and 2022 is treated as membership of the 2015 scheme – either because they default to the 2015 scheme or because they die before exercising any option – their unmarried partner would get a pension for all of their pensionable service, but the higher accrual rate earned in the legacy scheme between 2015 and their transition date would be lost.
This would be a retrospective worsening of benefits, and sections 23 and 24 of the Public Service Pensions Act 2013 would apply.
There is no justification for this. If members have been given tapered transition, they must be permitted to retain the benefit of it if they chose to do so.
Question 4: Please set out any comments on our proposed treatment of anyone who did not respond to an immediate choice exercise, including those who originally had tapered protection.
The POA does not support the immediate choice option. Quite apart from the high-volume administrative complexity, members will be bombarded information on choices which they do not fully understand. We think that a great many members will end up with the default option because they do not know what else to do. In effect they will be relying on the choice that the government makes for them.
That will be a particular problem for younger members who are likely to default into the 2015 scheme. They will find out, potentially many years later, that they have defaulted into a pension scheme with a normal pension age equal to their State pension age. The most important aspect of any pension scheme design for prison officers is the normal pension age, and the likely build up of frustration and anger is easy to foresee. They will blame it on the government’s failure to explain the choice in terms which are easy to understand.
As stated in our response to the next question, immediate choice is almost impossible for younger members even if they do understand the information they are given. Trying to guess what the future holds for them in terms of pay progression, inflation, health etc is too imponderable. And that’s before they have to factor in the possible consequences of the cost control mechanism that applies to the reformed schemes.
The risk of future disputes about what was or was not said many years ago is all too obvious.
We have mentioned in response to question 3 that there is a particular issue for members with tapered protection. They could find that their benefits have been worsened without their express consent, and that is not acceptable.
Question 5: Please set out any comments on the proposals set out above for an immediate choice exercise.
We do not see any advantages of an immediate choice option. The stated advantages – early resolution and clarity – are illusory.
Early resolution – we have already dealt with this. Immediate choice may mean that quick decisions are made, but disputes are just stored up for the future.
Clarity – the pension schemes concerned are immensely complicated. Providing examples such as the ones in the consultation paper, or on-line calculators will end up being too complex to be intelligible or too simplistic to give an accurate idea of the alternatives. For instance, it might be possible to provide some reasonably accurate pension projections using standard assumptions about inflation etc. But detailed differences about, for instance, ill health retirement criteria would also need to be explained.
Modelling the reformed schemes is not possible at all unless huge caveats are made about the possible future effects of the cost sharing mechanism.
Faced with a choice to make which is not easy to understand, many members will undoubtedly end up taking advice at considerable expense or, worse, taking advice from people who are not qualified to give it.
Question 6: Please set out any comments on the proposals set out above for a deferred choice underpin.
We believe that deferred choice underpin is the only option that removes the discrimination in a way which can be clearly understood and avoids disputes in the future.
Members will still have a choice to make because, as the consultation paper says, different members will have different priorities. But a choice between two sets of figures is clear and concrete and eliminates having to make extensive guesses about the future.
The idea that members will have choices to make at retirement (such as surrendering pension for a lump sum) is something members are already familiar with.
We do not think that delayed certainty as to the pension benefits that will ultimately be paid needs to be an issue. Annual benefit statements can outline possible benefits which the member will be able to choose when they retire or leave.
Question 7: Please set out any comments on the administrative impacts of both options
The POA understands that either solution will be administratively complex to deliver, but it does seem sensible to spread the workload over a number of decades rather than cram it into a year or two. Getting it wrong first time because of data inaccuracies, for instance, would just mean redoing the work later.
We do not see that DCU needs to cause additional complexity as a result of maintaining two member records. Dual records will have to be created anyway, and once the computer software is in place, the fear of losing institutional knowledge of past scheme designs should not be an issue.
Question 8: Which option, immediate choice or DCU, is preferable for removing the discrimination identified by the Courts, and why?
For the reasons outlined above, we believe that DCU is the only realistic means of removing the discrimination without storing up problems for the future. Members will be in a position to make clear choices on the basis of known facts, and not guesses about the future.
Chapter 3: future pension provision
Question 9: Does the proposal to close legacy schemes and move all active members who are not already in the reformed schemes into their respective reformed scheme from 1 April 2022 ensure equal treatment from that date onwards?
The POA believes strongly that the reformed NHS and civil service schemes do not take proper account of the nature of the work which secure psychiatric nurses and prison officers are required to do. They impose a normal pension age which is unattainable, meaning that many members will end up leaving early with a reduced pension or no pension at all.
Prison officers recruited since 1 April 2001 are required to perform an annual fitness test which includes, in particular, tests of a member’s strength and cardiovascular fitness. Prison Service Order 8625, which came into force on 2 April 2001, states in paragraph 1.4 that “The fitness standards and assessments are based on the requirements of the job which in theory and in practice female and male Officers are required to carry out in the same way. By basing the fitness standards and tests on the requirements of the job, we are ensuring that the deciding factors are job-related and not related to gender or age. Thus, the fitness strategy is age and gender neutral.” The scientific basis on which the specific standards were set has never been outlined and, in particular, no analysis has ever been provided showing how they correlate to the duties of a prison officer. It is noteworthy that this order was published, and these standards were set, when the normal pension age for a prison officer was age 60.
We have seen parallel studies commissioned for the police and fire services. They show quite clearly that (a) for any measure of cardiovascular fitness, women are more likely to fail the test than men and (b) starting from any level, cardiovascular fitness declines with age. It has been established in a number of Employment Tribunal decisions concerning the police service that setting a fitness standard that does not correlate with the requirements of the job in question discriminates on the grounds of sex and age.
It has always been our belief that it is not realistic to expect a prison officer to carry on performing front-line duties to the age of 65, 66, 67 or 68 (or more). Failing a fitness assessment has drastic consequences for an officer. He or she is likely to lose his or her job altogether. The financial consequences for drawing pension benefits below State pension age in the reformed civil service scheme are penal.
The combined effect of an unrealistic normal pension age and an unjustified fitness standard therefore discriminates against women on the grounds of their sex, and older members on the grounds of their age.
Question 10: Please set out any comments on our proposed method of revisiting past cases.
It is important to recognise who the “past cases” referred to are at this stage. If a member has left the service with an entitlement, or possible entitlement to a pension, it is because they left on the grounds of ill-health.
For the POA, the most pressing cases are those of members who should be entitled to an early and enhanced pension under the terms of the Classic Section of the PCSPS, as former Classic Section members. Instead, they are receiving a lower-tier alpha scheme pension or no pension at all.
It is completely unacceptable that these cases will be reviewed once the legislative changes have been implemented as stated in paragraph 2.24 of the consultation paper. In the case of POA members who have made a claim in the Employment Tribunal, a declaration has already been made that they are entitled to be treated as if they were still members of their legacy scheme. The need for implementing legislation simply does not arise.
There may be consequential issues regarding arrears, interest, tax and contributions to be resolved, but there is no excuse for not getting on with assessing their cases and paying them now.
Question 12: Please provide any comments on the proposed treatment of voluntary member contributions that individuals have already made.
We do not agree with the proposal for the treatment of members who have paid AVCs for the purchase of an effective pension age (EPA) or early retirement reduction buy-out (ERRBO). If a member has paid AVCs, they should receive a proper return on the investment they have made, and not simply a return of their contributions.
If the preferred option is for a deferred choice underpin, we believe that the proposal discriminates on the grounds of age.
Paragraph A.18 of the consultation paper says:
Members who are returned to the legacy scheme for the remedy period (under either IC or DCU) would therefore receive a refund of their contributions to such arrangements. A refund would void the EPA or ERRBO benefit even if reformed scheme benefits were ultimately chosen.
Consider the case of a member who is in the remedy cohort, has paid for an EPA, and defaults back to their legacy scheme during the remedy period. They lose their EPA or ERRBO. If they choose to take 2015 scheme benefits when they retire, they will be treated as having a normal pension age equal to their State pension age, and if they retire early an actuarial reduction will be applied accordingly.
Contrast an officer who joined the service after 31 March 2012 and has paid for an EPA or ERRBO. Like the member above, they retire under the terms of the 2015 scheme, but unlike their older colleague in example 1, their EPA or ERRBO remains effective and any actuarial reduction is applied by reference to the pension age they have selected.
This only applies to those members in scope for the remedy who by default are older members and subject to the 2015 discrimination.
Question 13: Please set out any comments on our proposed treatment of annual benefit statements.
Annual benefit statements provide vital information for members who need to make a decision such as choosing their retirement date, but providing too much information serves only to confuse. We would be concerned if the administrative battle involved in making arrangements to provide annual benefit statements slows down the process of providing a remedy.
As stated above, we are strongly in favour of the deferred choice underpin. We think it would be sufficient to provide statements setting out the benefits of the scheme that the member is in, with a suitable note that their benefits might be higher depending on the choices that they make when they leave, and then making further information available on request.
Question 14: Please set out any comments on our proposed treatment of cases involving illhealth retirement.
We appreciate that correcting past ill-health retirement cases might involve complex tax issues, and might well require obtaining member consent. But as stated above, we believe that dealing with past ill-health retirement cases must be regarded a s a priority and must be dealt with now without waiting for amended legislation. Tax and other complexities can be dealt with later.
Question 15: Please set out any comments on our proposed treatment of cases where members have died since 1 April 2015
We agree that the cases of members who have died since 2015 must be dealt with particularly sensitively. We also note that their next of kin are very unlikely to know a lot about the pension schemes, and communications with them are going to be particularly important.
The unmarried partners of former members of the Classic Section are not entitled to a pension under the Classic rules. They should be identified as a priority and offered the partner’s pension to which they are now entitled under the reformed scheme rules.
Question 16: Please set out any comments on our proposed treatment of individuals who would have acted differently had it not been for the discrimination identified by the Court.
We are aware that a large number of members opted out of membership in 2014-15 because they no longer trusted their pension arrangements. We agree that they should be permitted to reconsider their decision now.
It should be noted that a lot of members took a “halfway house” decision and transferred to the civil service Partnership scheme rather than opting out altogether. They must not be forgotten, and they too should be permitted to transfer back, retrospectively, to their legacy defined benefit scheme.
We believe that dealing with such cases on a case-by-case basis would be time-consuming, particularly if they ended up being dealt with under the internal dispute resolution process and then by the Pensions Ombudsman. We believe that resources would be better used by allowing them to re-join retrospectively on application, subject to paying arrear of member contributions.
Question 20: Should interest be charged on amounts owed to schemes (such as member contributions) by members? If so, what rate would be appropriate?
Question 21: Should interest be paid on amounts owed to members by schemes? If so, what rate would be appropriate?
Question 22: If interest is applied, should existing scheme interest rates be used (where they exist), or would a single, consistent rate across schemes be more appropriate?
The interest payable on payments due to members is dictated by current UK law and European case law. Interest at bank base rate is totally inadequate. The legally required rate in a discrimination claim is the Judgments Act rate – 8% simple.
Question 23: Please set out any comments on our proposed treatment of abatement.
We have always believed that abatement is wrong in principle. It is not permitted in the case of private sector employment and there is no rational basis for treating public sector workers differently. It just discourages older experienced workers from returning to service, when they want to return and their employer wants them to return, at a time when there is a dire shortage of prison officers.
This exercise should be taken as the opportunity to abolish it altogether.
Representing over 30,000 Prison, Correctional and Secure Psychiatric Workers, the POA is the largest UK Union in this sector, able to trace its roots back more than 100 years.