My Lords, this statutory instrument establishes the judicial pension scheme 2022 and forms part of the Government’s commitment to delivering a long-term solution to attract and retain high-calibre judges. In turn, this guarantees the proper functioning of our justice system. The international reputation of our legal system is something that I think we are all proud of and is necessarily sustained by the continued recruitment of the finest candidates to judicial office.
The recent Public Service Pensions and Judicial Offices Act closed all existing judicial pension arrangements to future accrual. The purpose of this SI, therefore, is to establish regulations for the new judicial pension scheme 2022—a scheme that is both fair to the taxpayer and attractive to the judiciary. It will be the only pension scheme open to judges for accrual for service from 1 April this year; I will come back a little later to the slight backdating to the end of last week.
The judiciary has an essential role in upholding the rule of law. Every day, judges up and down the country take decisions on important issues that have a real impact on people’s lives, from delivering justice for victims through to deciding care arrangements for vulnerable children. The exceptional work of judges and others who work in the justice system to ensure that our courts and tribunals kept on functioning despite the ravages of the pandemic served as a reminder of the pivotal role that they play in the administration of justice.
However, over the last number of years, we have experienced unprecedented recruitment and retention issues across the judiciary. A lack of judges has significant and damaging operational impacts. Cases take longer, with serious consequences across all jurisdictions. Delays in the family courts and county courts have a significant impact on children and other vulnerable people, who may have to rely on a judge being available for emergency orders and injunctions.
Of course, the importance and influence of our judges reach beyond our shores. Their reputation for integrity and impartiality plays an important role in attracting international business to the UK, contributing to a legal services industry worth around £29 billion a year to our economy. Quite simply, if we do not have enough judges, that undermines our ability to compete internationally for legal services, which are important to our economy.
A two-year comprehensive review by the Senior Salaries Review Body linked the root cause of the recruitment and retention problems in the judiciary to the 2015 pension reforms. In particular, as the 2015 scheme was tax registered, judges were caught by annual and lifetime tax limits. The Government thereafter made a commitment to introduce a long-term solution through pension scheme changes for the entire judiciary.
It is fair to say that the changes made in 2015 were consistent with those made to other public sector roles, but they did not sufficiently take into account the judiciary’s constitutional role and, importantly, its unique career path. Judges, especially full-time ones, often become judges towards the end of their careers;
the value of their pensions is therefore of particular significance. They have many years of training, and often successful private practice, behind them. Many will have taken a pay cut to join the Bench but will also have set up other pension arrangements.
It is against that background that it is important that the pension scheme can attract and retain the highest calibre candidates to judicial office. For this reason, the scheme will be tax unregistered, meaning that the benefits accrued will not be subject to annual or lifetime tax allowances. That returns the judiciary to the position before the 2015 reforms. Several of the features of the scheme, such as the member contribution rate, flow from that tax-unregistered status. There will also be no cap on the number of years for which a judge can accrue benefits, and there is an option for judges to give up part of their pension for a lump-sum payment.
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However, at the same time it is important that the scheme is fair to the taxpayer. Therefore, it has been designed to be consistent, so far as possible, with the core principles of the wider 2015 public service pension reforms. Those reforms were based on the Independent Public Service Pensions Commission’s review of public service pension provision, chaired by the noble Lord, Lord Hutton of Furness. In line with the recommendations of that commission, the judicial pension scheme 2022 will have its benefits calculated on career average rather than final salary, will have a normal pension age linked to the state pension age, and will have a cost control mechanism.
We have consulted widely with the judiciary throughout the development of the scheme design. In particular, they were invited to provide comments through two formal consultations. The first, in summer 2020, looked at the overall scheme design; the second, in summer 2021, included a draft copy of the regulations.
In consultations, we proposed a uniform contribution rate for the scheme. Although pension benefits are improved, combining the uniform rate with the change to a tax-unregistered status means that some judges might see a reduction in their take-home pay when they transition to the new scheme. We have therefore introduced a temporary option within the regulations. That allows eligible judicial officeholders to reduce their contributions to the scheme for three years in return for a corresponding reduction in the accrual rate.
However, it is fair to say that responses received to the consultations were positive, provided support for the scheme and reaffirmed our view that it will help to achieve our main objective of addressing the serious recruitment and retention issues identified by the Senior Salaries Review Body, while, as I said, being both fair to the taxpayer and affordable and sustainable in the long term.
The SI therefore establishes a pension scheme for the judiciary which is sufficiently attractive to recruit and retain high-calibre candidates to the Bench, while upholding the core principles of the 2015 public service pension reforms, thus ensuring value for the taxpayer. For those reasons, I commend the SI to the Committee.