Welcome to the latest edition of the Public Service Pension Update.
This month, we discuss developments ranging from the draft Civil Service Exit Payments Guidelines to the Data Protection and Digital Information Bill.
If you would like to discuss any of the changes to this bulletin, please contact one of the experts listed below.
advice | Civil service exit payments
Her Majesty’s Treasury is consultant on draft guidance on approving high-value exits from the public service and special severance packages. The draft guidance states that supplementary pension payments “may constitute contractual or special severance pay“, depending on a number of factors. This means that an employer-funded pension “deformation cost“from early retirement or dismissal would seem likely to be caught up by the guidance.
The consultation is open until October 17, 2022. It follows the revocation, last yearthe £95,000 cap on exit payments introduced by the Public Sector Exit Payments Restriction Regulations 2020.
The consultation document explains that the draft guidance introduces two new control processes for exit payments. “The first is a new high-value exit control process within central government, where the approval of the relevant secretary of state must be sought before an exit is agreed. The second is a modified version of the current system for approving special severance payments. For releases that exceed the high value threshold and include a special severance amount, both approval processes will apply.”
“Approval will be required from the relevant Secretary of State for the agreement of any exit where the total proposed exit payments would exceed £95,000. … Such approval would relate to the decision to offer or mandate an exit, in which any Legal or contractual payment due on exit will be understood as a fixed cost, so the process should not result in situations where individuals leave an organization without receiving the payments to which they are contractually entitled.
“Further approval will be required if payments in excess of contractual obligations (i.e. special severance packages) are to be offered. Approval of special severance payments will be given by UK Treasury officials, unless the proposed payment exceeds £95,000 or the individual in question receives a salary of more than £150,000. This is a slightly reduced threshold for approving special severance packages, intended to align with the new contract exit review threshold and other thresholds used across government.“
The guidelines also provide for improved reporting to Her Majesty’s Treasury and the inclusion of refund clauses to allow for the recovery of special severance pay in certain circumstances.
advice | Civil Service Compensation Plan
The Cabinet Office has published a additional consultation document to continue its consultation on reforms to the public service compensation system. The principles of the reform include the creation “significant savings on the current cost of outings” and ensure “proper use of taxpayers’ money“.
On pensions, the proposals are “only to allow an employer-funded pension supplement from the age of 56 to follow 10 years behind the legal retirement age” and “partial pension redemption for those who have reached the minimum retirement age when their cash payment is not sufficient to fully redeem their pension“. Proposals also include “clawback provisions for individuals who return to an organization using CSCS within six months of receiving a compensation payment“.
Mc Cloud remedy | Update on schedules
The July 2022 Local Government Pensions Committee newsletter contains an update from the Department of Leveling, Housing and Communities (DLUHC) on the likely timeline for some of the key milestones in the implementation of the Mc Cloud recourse to the Local Government Pension Scheme (LGPS).
The update indicates that the response to the 2020 consultation on the draft regulations is awaited “Later this year” and that the updated draft regulations will be published with the response. The updated draft regulations will then be “be the subject of a new consultation period at the beginning of 2023″ in the same way “other aspects of the McCloud action that did not appear in [the] initial consultation (e.g. remuneration and interest rate)“. Settlement will be made”later in 2023 and will come into force on October 1, 2023“. DLUHC plans to issue statutory guidelines on “the establishment of McCloud in 2023 after a consultation period“.
Mc Cloud remedy | Pensions Ombudsman Fact Sheet
The Pensions Ombudsman has published a fact sheet setting out his views on what plans and members can do now, and confirming the approach he will take if he receives a complaint from a member about Mc Cloud discrimination issues.
Funds should consider what action to take in light of this fact sheet.
The fact sheet states that diets “should communicate with affected members about the steps they are taking to address discrimination and direct members to their plan’s IDRP [internal dispute resolution procedure] and/or TPO [the Pensions Ombudsman] if the problem cannot be solved. Plans can consider and decide (taking appropriate advice) whether to make a remedy available earlier for members who may suffer immediate harm. Systems should contact TPO, for example, if they receive a large number of similar or grouped complaints, and they believe there is a reasonable chance that these complaints will be referred to TPO“.
He also says that “Currently, TPO’s general starting position is that it will not investigate complaints or disputes relating to the redress of age discrimination in public sector schemes, but will carefully examine the facts. of each case before making a decision. Instances where TPO can investigate include allegations of maladministration, such as failure to explain what is happening and/or to properly engage with the member; or investigate where a member is suffering serious financial hardship or other serious injustice and the plan does not put in place any interim arrangements to remedy the injustice within a reasonable time“.
Consultation and taxation of pensions | NHS pension scheme
The Ministry of Health and Social Affairs has consulted on the draft regulation for “update the brackets of pensionable earnings that determine a member’s contribution rate in cases where that member’s pensionable earnings are calculated on the basis of his or her earnings in the plan year In progress [and] correct an omission in the National Health Service Pension Schemes (Amendment) Regulations 2022 which made changes to the Transitional Regulations“.
Pension tax continues to pose serious problems for older health care workers. This press release by Quilter explains some of the problems. The recent report of the House of Commons Health and Social Affairs Committee says it is a “nationwide scandal that senior doctors are being forced to reduce their working NHS contribution or leave it entirely because of NHS pension schemes. We recognize that the government has made progress in this direction by modifying the sliding scale of the annual allowance. But the problem persists and after rejecting calls to establish an unregistered tax regime” see here “the government must act quickly to put in place an alternative scheme and prevent the early retirement of NHS consultants“.
Data protection | Data Protection and Digital Information Bill
On July 18, 2022, the Data Protection and Digital Information Bill (previously called the Data Reform Bill) was introduced in Parliament. In our Insightwe summarize some of the key changes included in the bill, including changes to the rules around data subject access requests to try to prevent abuse.
Governance | Public Sector Fraud Authority
Other developments | Q4 2022 Retirement Action Plan
We have released our fourth quarter 2022 pension action plan. Each action plan is a summary of changes and proposals in pension legislation and regulation over the last quarter, most of which also relate to public sector pension plans.
Topics covered include: retirement scams, cyber risk, pension dashboards, effective governance systems and the bill to fix the take-home pay anomaly.
To receive your copy of the Action Plan, please contact your usual Osborne Clarke contact.
Pensions Ombudsman | Various
The Pensions Ombudsman (TPO) has not confirmed a complaint from an LGPS member who was granted a tier 3 sickness pension in 2017 and a tier 2 pension under review in 2019. TPO confirmed that the fact that the regulations include “the option to grant Level 2 benefits from the date of the review decision recognizes that a member’s medical condition may not improve as expected at the time of the original decision. A change from level 3 to level 2 does not, in itself, invalidate the previous decision“which had to be made on a balance of probabilities based on the evidence available at the time. (LLocal Government Pension Scheme – CAS-32219-X0J8.)
Information materials from the Library of the House of Commons | New and updated
The House of Commons Library has published or updated the following information material which may be of interest to public service pension plans and employers:
This newsletter covers developments relating to civil service pensions in England and Wales, with a focus on the local government pension scheme.