As I was saying, the modifications that we are making mean that for these purposes such individuals do not cease to be active members of their existing scheme until they leave their new scheme.
We also make modifications to the regulations that govern contracting out, specifically those dictating the process that a scheme must follow to be contracted out. For the new public service pension schemes we have simplified the process, ensuring that the new schemes, and therefore their members, continue to be contracted out of the additional state pension until the end of contracting out in April 2016.
The second set of modifications that we are making to the Pension Schemes Act 1993 concern only the police, firefighters’ and Armed Forces pension schemes. These are needed to ensure that the 1993 Act is in line with the 2013 Act, which requires active and deferred members in these three schemes to have different pension ages. To give a little context, the 1993 Act says that schemes cannot calculate the pensions of deferred members differently from active members, while the 2013 Act explicitly requires the uniformed schemes to assign a different pension age to active and deferred members. That difference in pension age makes a difference in pensions calculation inevitable.
In recognition of the unique nature of these occupations, and following recommendations made by the noble Lord, Lord Hutton, the Government are implementing a normal pension age of 60 in these three schemes, while members of other schemes will have a normal pension age well above this, set equal to state pension age, which for the majority of members will be 68. The Government have also decided to implement the noble Lord’s recommendation for deferred members of the police, firefighters’ and Armed Forces pension schemes to have a deferred pension age equal to the state pension age as the need for early retirement does not apply once a member has left these services and is no longer performing that unique and physically demanding role. The modifications before us today enable this split pension age in the police, firefighters’ and Armed Forces pension schemes to operate in harmony with wider legislation on short service benefits.
The third set of modifications that we are making today relate to the Finance Act 2004 and ensure that members with service in both a new and an existing pension scheme who retire with an ill health pension do not face unintended tax consequences. Specifically, they ensure that parts of the ill health pensions available to members who fall ill are not measured twice for annual allowance and lifetime allowance limits simply because of the transitional mechanics for payment of ill health benefits. Put simply, the modifications ensure that the tax regime will apply in the way intended by the Government to those members who move into the new scheme and then retire because of illness.
These are very technical modifications to wider pensions legislation that seek to ensure that civil servants, teachers, NHS staff, firefighters, police officers and military personnel can get the pensions that they expect without any unexpected effects as a result of tensions with the wider law. I therefore commend these modifications to the Committee.