What is the McCloud court case about?
When the Government reformed public service pension schemes in 2015 it introduced protections for older members. In December 2018, the Court of Appeal in England and Wales ruled that younger members of the Judges’ and Firefighters’ Pension schemes have been discriminated against because the protections do not apply to them. This ruling is often called the ‘McCloud judgment’ after a member of the Judges’ Pension Scheme involved in the case.
The Westminster Government confirmed that there will be changes to all main public sector schemes, including the LGPS, to remove this age discrimination. HMT published a consultation on proposals for the unfunded public service schemes in England, Wales and Scotland on 16th July 2020. A separate consultation was issued for the funded LGPS in England and Wales. The reformed public service schemes in Northern Ireland incorporate similar age-based protections and changes are required to remove age discrimination in those schemes also. The Department of Finance consulted on proposals for the unfunded public service pension schemes in Northern Ireland and the Department for Communities issued a separate consultation on proposals for the funded LGPS (NI) on 11 November. This consultation closed on 31 January 2021.
When the LGPS (NI) changed from a final salary to a career average pension scheme in 2015, members who were within 10 years of their Normal Pension Age (usually age 65) on 31 March 2012 were provided with a protection called the ‘underpin’. When a protected member takes their pension, the benefits payable under the career average (CARE) and final salary schemes are compared and the higher amount is paid.
The Department for Communities will need to provide younger members with a protection equal to the underpin protection provided to older members to remove the discrimination. The consultation on what changes need to be made to the underpin closed on 31 January 2021.
In the Department for Communities consultation it is proposed that revised protections are extended to cover all members who were in active scheme membership on or before 31 March 2012 and have membership in the CARE schemes (without a 5 year break) after 31 March 2015.
If a member left the scheme before 1 April 2015, they built up benefits in the final salary scheme only. These changes will not affect their pension.
If a member joined the scheme after 31 March 2015, they will have built up benefits in the CARE scheme only. These changes will not affect their pension.
Most members are unlikely to see an increase to their pension, and where an increase is applied, it is likely to be small. This is because most members will build up a higher pension in the career average pension scheme than they would have under the final salary scheme.
We will know more about when the changes are likely to take effect when the Department of Finance and the Department for Communities publish their responses to the consultations on removing the discrimination. We do not expect any changes to be introduced before April 2022.
As the proposed revised underpin extends the final salary scheme for comparison purposes NILGOSC will need additional data on the hours and weeks worked and any service breaks for all members who are within scope of the revised underpin. NILGOSC issued each employer with a data collection template spreadsheet listing the members for whom the additional data is required in January 2021. These are to be returned before 30 June 2021.
The LGS15 Leavers’ Form has been amended to capture changes in contractual hours and weeks since 31 March 2015 on an individual basis for anyone leaving before the template spreadsheet is completed and returned to NILGOSC.
On 16 December 2020, NILGOSC held an online seminar on the Department for Communities’ consultation on amendments to the statutory underpin. Questions from the seminar are listed below.
Will the NILGOSC pension online portal be adapted in due course to provide members with a comparator forecast based on both CARE or final salary where that applies?
We will need to await regulations being made to know what information needs to shown on benefit statements and other quotations.
Does the new LGS15 need completed for all leavers in previous tax years or do we include the full membership data on the spreadsheet provided?
The LGS15 is for current leavers only. Any membership data required for leavers since April 2015 should be returned to NILGOSC on the template.
If an officer has been on unpaid leave for few days a year since 2015, in some instances for only the equivalent of an hour each time, do you now need to know all of these occurrences from 2015 to date?
NILGOSC now needs a complete membership history and this includes service breaks that were not paid for via an APC. NILGOSC can only work in days therefore we suggest that any unpaid leave is added together and detailed in the template as number of days. Any unpaid leave less than 1 day can be ignored.
Is a parental leave break that an employee and employer has paid the additional pension contribution to regarded as a service break?
No – it is only breaks where a member decided against purchasing the lost pension through an APC that needs to be included in the returned template.
There is no requirement to do so however the member can so if they wish. As they will have passed 30 days since returning to work, the cost will no longer be shared between the member and the employer. The employer can choose to exercise their discretion here if they wish and pay the 2/3 cost.
The data collection is for all employees and ex employees within scope of the consulted protected period. This is to allow employers to remit the missing data wef 1 April 2015. NILGOSC may adapt new operational systems going forward for hour changes rather than the paper LGS25 form.