My Lords, before I turn to the amendments in this group, I will begin by briefly reminding the House of the driving force behind this Bill and why it is so important that we get it right.
In the light of the Court of Appeal’s judgment, the Government have taken steps to provide an effective remedy to the discrimination that arose in public service pension schemes. The Government have sought to approach this matter responsibly from the outset, and this Bill is key in ensuring an effective remedy for the 3.4 million people who are affected. At the heart of the Bill is fairness and equal treatment for the public servants on whom we all rely. To ensure that we achieve this objective, the Bill is underpinned by the core principles of greater fairness between lower and higher earners, fairness for the taxpayer, future sustainability and affordability of public service pensions.
I recognise that tabling a large volume of amendments is highly unusual at this stage of a Bill’s passage. I want to take a moment to explain why this approach has proved necessary—indeed, crucial—to ensuring a robust and effective remedy. As we have all acknowledged, this is a complex and technical matter. The Bill covers more than 40 schemes which each individually have their own layers of detail and complexity. We are dealing with a somewhat unprecedented issue, and retrospective changes on this scale have not previously
been required for occupational pension schemes. However, it is undoubtedly vital that, despite the complexity, we get this right.
Since the Bill was introduced, the Government have continued to work with the schemes, stakeholders and departments to check and re-check it to ensure that it will deliver our commitments to remove the discrimination and offer a complete and effective remedy. The amendments I have tabled today reflect that work and clarify, correct or adjust the Bill to ensure that it works correctly for each of the schemes.
The first group is large and consists of technical amendments. The House will hopefully be pleased to hear that I will not seek to set out the detail of each and every amendment, but I hope your Lordships will find it helpful if I explain the themes that they address. I will of course be happy to turn to specific amendments if your Lordships have any questions.
A large number of the amendments in this group deal with a single theme. In reviewing the Bill, we recognised that a gap exists in how some of the processes operate for members who die before they are able to make a deferred choice. So, 44 amendments are needed to correct the position and ensure that the Bill provides an effective remedy for instances in which a member sadly dies before they reach their retirement. The reason why so many amendments are needed to achieve this outcome is that it must be applied across all the key areas of the remedy so that, for example, any correction of pension benefits or member contributions in relation to a deceased member can be addressed with the member’s personal representatives. The changes must also be made across the provisions for the main schemes and those for the judiciary.
The next theme is amendments which have arisen from work that we have undertaken with each of the public service pension schemes. There are a number of differences between the schemes within the scope of the Bill—for example, to reflect the different needs of the workforces. We have identified some scheme-specific issues that must be reflected in the Bill to ensure that the remedy operates correctly for their members.
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Amendment 5 ensures that the remedy correctly applies to members who were subject to fair deal arrangements. This refers to instances in which employees are subject to a compulsory transfer from the public sector to the private sector, and therefore a period of service in a private sector pension scheme does not count as a
“disqualifying gap in service”
when assessing their eligibility for the remedy. I am grateful to the trade unions for identifying the need for this amendment and I am happy that this has been addressed.
Turning to the firefighters, a technical change is made to Clause 1 setting out the scope of the remedy, to ensure that all affected members of the firefighters’ schemes are included. This clarification is necessary to reflect the fact that the eligibility criteria in certain schemes for firefighters were slightly different to those provided in all other arrangements.
The Armed Forces pension schemes contain features that reflect the unique nature of the Armed Forces. Members of the Armed Forces may qualify for an early departure payment when they leave the service and a separate pension benefit when they subsequently reach pensionable age, which is potentially many years later. Amendments 13 and 16 introduce new clauses to the Bill ensuring that these members make their decision about both entitlements at the time they leave service, therefore avoiding having to revisit payments made under the early departure scheme in future. Similarly, an amendment is made to Clause 10 ensuring that members of the Armed Forces who are discharged as a result of ill health can make an election at the correct time—for example, the point at which they become entitled to an ill-health lump sum on the grounds of incapacity for service. One further amendment is made for the Armed Forces: Clause 88 is amended to ensure that restrictions in the Armed Forces Act 2006 which prohibit pension or pay from being assigned and thus would conflict with the operation of the remedy do not apply to the operation of Part 1 of the Bill.
Turning to family courts, the amendments also deal with specific issues regarding the judiciary. The Bill as drafted allows the Lord Chancellor to consider only the resourcing needs of the magistrates’ court when reappointing retired magistrates. Amendments will allow the Lord Chancellor additionally to consider the needs of the family court, in which magistrates also sit, when making such decisions. This will allow the judiciary to boost capacity when needed to better meet the demands placed on both courts.
Finally on this theme, there are scheme-specific amendments for members of the judiciary and Civil Service. Members of these schemes were provided with the option of alternative pension arrangements and could choose to participate in partnership pension accounts. These are defined contribution arrangements, rather than the main defined benefit schemes. The Bill already allows for this decision to be reversed where the member made their decision as a result of the discrimination that arose. A number of technical amendments to the Bill are being made to ensure that where members wish to be reinstated in the main judicial or civil service pension schemes, that can be done correctly and the member placed in the position they would have been in, had the discrimination not occurred.
Turning to the third theme, a number of corrective or clarifying changes are made to ensure that the Bill operates as intended. Amendments to Clause 1 ensure that where a member has multiple periods of service, those periods are separately considered in determining whether they are subject to the remedy provided by the Bill. These clarifications ensure that a member who was affected by the discrimination will be subject to remedy for each and every period of service that was affected. These amendments are replicated for the judiciary. Following on, there are multiple legacy schemes in most public service workforces. Amendments to Clause 4 ensure that it is clear which legacy scheme a member’s remediable service should be returned to, which is the scheme they would have been eligible to participate in had the discrimination not occurred.
An amendment to Clause 20 clarifies that scheme regulations that make provision about special cases may modify the application of Chapter 1 of the Bill to certain persons. This ensures that scheme regulations can provide an accurate remedy for members with less straightforward circumstances, for example, those who have mixed service—your Lordships may know that otherwise as tapered protection—or have partially retired. Again, equivalent amendments are made for the judiciary.
An amendment is made to Clause 29 to provide greater clarity around the scope of the clause, to ensure that all cases where a person has obtained an immediate detriment remedy are captured—that is, members in relation to whom a scheme has taken actions to correct that member’s position outside the operation of this legislation. Following on, further minor amendments are made to definitions and references to ensure that there is consistency across the Bill.
The final theme specifically deals with tax-related consequences of remedy, to ensure that members are returned to their correct position absent the discrimination. Amendments to Clauses 20 and 55 provide that scheme regulations may make provision for cases where a liability for a lifetime allowance charge or annual allowance charge is settled via the scheme administrator. This is where the scheme pays the tax liability on behalf of the member and adjusts their pension benefits to recover the amount from future payments. The amendments ensure that schemes can vary a member’s benefits to take account of amounts that the member has paid in the past or will pay in the future in respect of the lifetime allowance tax charge, or the annual allowance tax charge, via the scheme.
Although it has been rather lengthy, I hope that my explanation of how the amendments in this group will work has proved helpful. I reiterate that these amendments all share the objective of ensuring that members affected by the discrimination identified by the courts are able to receive a comprehensive remedy in line with the overall approach set out in the Government’s consultation response, on a fair and equal basis. I beg to move.