That the Bill be now read a second time.
My Lords, the Public Service Pensions and Judicial Offices Bill consolidates and strengthens a common UK legal framework for pensions across all the main public services—that is, the NHS, the judiciary, the police, firefighters, the Armed Forces, teachers, local government and the Civil Service. The Bill ensures that those who deliver our valued public services continue to receive guaranteed benefits in retirement that are among the best available on a fair and equal basis. In addition, the Bill includes measures that will address resourcing challenges facing the judiciary, recognising the unique constitutional role of judges. The Bill will also lead to the creation of a new UK asset resolution public service pension scheme for the beneficiaries of the existing Bradford & Bingley and NRAM—that is, Northern Rock —pension schemes.
I will start with the measures that relate to ensuring fairness and equality across public sector pensions, but first I will set out the wider context for reform. As your Lordships will recall, in June 2010, supported by cross-party consensus on the need for the greater sustainability and transparency of public sector pensions, the coalition Government established an Independent Public Service Pensions Commission chaired by the noble Lord, Lord Hutton of Furness. The commission undertook a fundamental structural review of public service pensions. This review was underpinned by a set of principles against which the options for reform were judged. These principles were that the measures should be affordable and sustainable, adequate and fair, supportive of productivity, and transparent and simple. These principles are just as important today as they were then, and they highlight the need to achieve greater fairness between lower and higher earners and for the taxpayer, as well as the future sustainability and affordability of public sector pensions.
Following that review, the Government introduced a number of key changes. Pension benefits would no longer be based on an individual’s final salary, but instead on career average revalued earnings. Member contribution rates were increased and the normal pension age was linked to the state pension age for all schemes, except those specific to the police, firefighters and the Armed Forces. These changes achieved greater fairness for low earners by giving many a more generous pension. In addition, the reforms will save taxpayers an estimated £400 billion over the following 60 years.
Having provided this background, I will turn to the Bill’s specific measures on the remedy. Prior to the 2015 reforms, the Government agreed, following negotiations with trade unions, to protect the pensions of those closest to retirement. They did this by allowing those members within 10 years of retirement in most public service pension schemes to remain in the final salary schemes, instead of being moved to a career average scheme. This step was known as transitional protection. However, in 2018 the courts found that this step unlawfully discriminated against younger members. Although the legal challenge was specific to the judicial and fire schemes, the Government recognised the wider implications across all public service schemes. We therefore began a thorough programme of work to identify and implement a robust remedy. This Bill brings that remedy into effect and its measures follow public consultations in 2020 and government responses earlier this year.
For the remedy period—that is, from April 2015, when the reforms were implemented, to 31 March 2022—all eligible members will be given a choice between legacy and reformed scheme benefits. For the majority of members that choice will be made at retirement, when it will be clearer which scheme is most beneficial to each individual. This is known as a deferred choice and was the preferred option in the majority of consultation responses. The exception is the judicial schemes, where affected members will make their choice before retirement in a so-called options exercise.
The local government arrangements reflect that the remedy for the discrimination does not require member choice. Instead, protection will be granted to younger eligible members via the extension of the existing underpin, which gives protected local government pension scheme members a guarantee that their reformed scheme pension will be no lower than it was in the legacy scheme. The local government arrangements also reflect that in England and Wales the scheme reforms were implemented a year earlier than other public service pension schemes—from 1 April 2014. For those members who have already taken pension benefits in relation that period, a choice will be offered as soon as is practicable. This measure therefore remedies the differential treatment of younger members as a result of transition protection.
Although the Bill ensures retrospective fairness, it is also right that we ensure that all pension savers are treated equally in future—the so-called prospective remedy. Therefore, from 1 April 2022 all legacy schemes will be closed to future accrual and all those impacted will be placed in their 2015 reforms schemes or, in the case of the judiciary, moved to a new scheme. This measure guarantees that all members within each scheme will be put on an equal footing and underlines our recommitment to the principles of the 2015 reforms. Local government workers have already moved to career average arrangements and these schemes will continue after 31 March 2022.
As your Lordships may recall, the Independent Public Service Pensions Commission also recommended that the new public service pension schemes should include a cost ceiling to protect the taxpayer from unforeseen increases in scheme costs. However, the Government chose to go a step further and establish a symmetrical cost control mechanism that also maintains the value of pensions to members when costs fall. The mechanism was designed in such a way that, if the cost of a scheme rises above or falls below specified margins, the scheme rules must set out a process for agreeing how costs can be brought back to target. So, where costs rise above a certain level, benefits are reduced, or where costs fall below a certain level, benefits are improved.
It is right that the additional benefits that members will receive as part of the remedy are considered by this mechanism as a cost, by giving members a choice of benefits. The value of schemes to members will increase and therefore costs will rise. This assessment of the costs of member benefits is precisely what the mechanism was established to do. However, to ensure that no members’ benefits are reduced as a result of this assessment, the Bill contains a measure to waive any results that might lead to benefit reductions. This should mean that no member will be worse off. In addition, the Government have committed that, where benefit improvements are due, these will be delivered.
As I have outlined, the Bill builds on the Public Service Pensions Act 2013 to create an overarching legislative framework for all public service pension schemes. While this piece of legislation is comprehensive, I am sure your Lordships would acknowledge that pension schemes are extremely complex and must be tailored to fit each workforce’s individual requirements. As a Government, we intend that our legislation accounts for those differences, many of which are found in scheme regulations. Therefore, given the level of detail involved, these measures will come before Parliament as statutory instruments for further scrutiny. Furthermore, to demonstrate the approach to secondary legislation, I pledge to deposit policy statements in the House Library in the coming weeks for further scrutiny.
Allow me now to turn to the Bill’s next element: the package of reforms to help address the resourcing challenges facing the judiciary, recognising the unique role that judges fulfil in our constitution. The UK justice system is known across the world for its excellence, objectivity and impartiality. This is due in no small part to the exceptional expertise of our courts, our tribunal judges, our coroners and our valued magistrates.
However, as the structure and operation of our courts and tribunals have developed, so has the resourcing needs of the judiciary. The frequency and volume of judicial recruitment has increased considerably in recent years and, despite recruiting about 1,000 judges and tribunal members per annum since 2018, we have not been able to recruit the full number of judicial officeholders needed across all courts and tribunals, putting considerable pressure on judges and the justice system.
I am sure your Lordships will agree that it is vital that we continue to attract and retain high-calibre judges to secure the proper functioning of our justice system. This Bill brings forward bespoke measures to address some of the current recruitment and retention challenges facing the judiciary. It enables the provision of a new, reformed career-average judicial pension scheme. It increases the mandatory retirement age of judicial officeholders to 75, extends the potential for sitting in retirement to the fee-paid judiciary and puts judicial allowances on a firmer legal footing. Taken together, those measures represent significant steps that will allow us to continue to support our world-class judiciary, for which we are so rightly renowned, to meet the demands of the present day and the future.
I now move to the measures to establish new UK asset resolution public service pension schemes for the beneficiaries of the existing Bradford & Bingley and Northern Rock asset management pension schemes—so-called NRAM. These two schemes cover the pension schemes of the former staff members of both bodies, some of whom worked for in the region of 30 years for each company respectively. These measures are an important step in the Government’s careful long-term management of the financial assets acquired as a result of the 2007-08 financial crisis. The new schemes will provide former Bradford & Bingley and Northern Rock staff members with the assurance that their pensions are secure over the long term. Let me stress that members’ pensions and pension promises will be unaffected by this change. In addition, this measure will ensure better value for the taxpayer through the creation of a more efficient structure for the Government to meet their liabilities towards those two schemes.
There is no doubt that the Bill before the House is complex legislation. It is therefore crucial that all technical changes are robust and legally operable across all schemes. As I mentioned, we are committed to getting the detail right and to giving in-depth consideration to each scheme’s specific circumstances. Therefore, to ensure a comprehensive and effective remedy with consistent application of measures across all relevant schemes, it is expected that some technical amendments will be required during the Bill’s passage. In addition, I am pleased that the Welsh, Scottish and Northern Irish Governments are considering legislative consent Motions to aim to ensure parity across the UK for the areas where legislative competence is devolved.
Our public servants provide vital services on which we all rely. Their unwavering commitment has been particularly vital during the pandemic. We have an obligation to continue to provide guaranteed pension benefits to reward those workers for their dedicated service, but we must do so on a fairer basis, in a way that ensures that pensions are affordable and sustainable in future.
In conclusion, I believe that the package of measures contained in the Bill will bring about long-term sustainable changes that are in keeping with the original principles of the 2015 reforms and provide fairness for members, employers and taxpayers. I hope noble Lords will recognise the Bill as a clear sign of the Government’s responsible approach to public service pension provision, as well as responding to the specific resourcing challenges facing the judiciary. It is for those reasons that I commend the Bill to the House.
My Lords, first, I need to mention my entry in the register of interests. I have had an actuarial career, largely advising a range of trade unions about their members’ pension schemes, including most public service schemes covered by the Bill, but I am no longer actively engaged in such work.
I very much welcome the Minister’s careful and lucid explanation of what he rightly says is a complicated subject; it was a fine introduction to the work that faces us over the next few months. I also very much welcome the fact that I have a pensions Bill to get my teeth into, and I will be a committed and active member of the Committee when it considers the Bill. I look forward to interesting and detailed discussions.
I ask the Minister to say something about the expected timetable for passing the legislation. Much detailed work is being undertaken at the moment in parallel with the Bill going through Parliament. The government departments and scheme advisory boards are busy implementing the measures in the Bill, and it would be good to have some idea of exactly how that process will work because, clearly, they need certainty about the legislation’s outcome before they can reach final decisions.
My major issues with the Bill arise from Chapter 1, about public service schemes. The problem is that we have here only part of the story. It deals with the consequences of the decisions in McCloud and Sargeant, which, as the Minister explained, ruled against transitional protection. In its place, we have this remedy to sort out what is undoubtedly a significant mess, but the difficulty is that this is only part of the story of what is happening to public service pensions at the moment. These measures can be fully understood only in the context of the other things occurring at the same time, which the Minister did not mention—they are not in the Bill—but I think we need to understand the context in which this particular part of the picture is being considered.
There is a range of matters. The most significant is getting the 2016 valuation concluded. The 2016 valuation—the results of which should have been implemented some years ago—is ongoing and must still be resolved. At the same time, the Government are reviewing the cost-control mechanism. As explained by the Minister, this is highly contentious, because the Government are attempting to make changes which the unions consider go against the spirit of the Government’s agreement made 10 years ago. At the same time, the Government are reviewing the SCAPE discount rate mechanism—a particular element in the cost-control mechanism.
What is the effect of all those changes on the 2020 valuation? You might think that in 2021 the 2020 valuation would be done and dusted but, as I explained, we have not finished the 2016 valuation yet, so there is a certain amount of slippage here. It is difficult to understand. A sequence of events needs to be taken into account and, unless we have some picture of how this will affect the 2020 valuation, it is difficult fully to assess this legislation without putting it in the context of the other things happening.
One significant additional issue which must be resolved is whether the cost of the remedy this Act sets out is to be met by the members. This is taken for granted by the Government; the members contest it. It is currently the subject of a legal process but it is crucially important. When considering the legislation, we must consider the effect of that issue. So, while this Bill is presented to us as a set of standalone measures, it is difficult to be confident that the solution, the remedy proposed here, is just and workable when all these other factors are still in play.
I have gone over the allotted time; I apologise. I will quickly mention some other issues that I will seek to raise in Committee. We must carefully consider the use of Treasury directions. It raises constitutional issues that must at least be clarified. Concern has been expressed by various groups of employees, most notably the police service and firefighters, that the specific way in which the remedy is being implemented has an adverse effect because of their particular past pension structures.
I am heavily outnumbered here by the lawyers, but finally, I will stray into Chapter 2. Clearly, there is a strong case for the special tax treatment being afforded to the judicial pension scheme, but it raises the possibility of circumstances in which other groups of employees deserve special tax treatment as well. These are all issues that we will have to resolve, or at least discuss, in Committee.
My Lords, I too thank the Minister for his clear and succinct introduction. As he said, this legislation is necessary to remedy the effects of the McCloud judgment relating to the Public Service Pensions Act 2013. I rise to highlight some of our concerns in a number of areas.
The first is discrimination. In introducing the remedy, the Government must be certain that new measures will not produce further discrimination, such as placing a greater burden on newer or younger members of the scheme or reducing the right of part-time workers to make up their pensions by working for longer. This particularly affects women who have worked part-time due to family or caring responsibilities. In their responses to the consultations, some have described, with particular reference to the police and the benefits of the legacy schemes, how the Bill must pay particular attention to discrimination to avoid further long and drawn-out legal cases.
Also, as the noble Lord, Lord Davies, said, it is very important that the changes be just, and there must be trust in government to protect citizens. Promises and commitments already entered into by government must be addressed and cannot simply be brushed aside as being too costly. It will be of great importance to many members that promises made by the Government are honoured. Equally, commitments made by the Government, as agreed in the cost mechanism, have not been acted upon—as, again, the noble Lord, Lord Davies, said—following the 2016 valuation, which should have benefited members. It is worth noting here the comments of the Public Accounts Committee:
“HM Treasury should have foreseen the age discrimination issue that gave rise to the 2018 McCloud judgment, and putting things right will take many decades to resolve. HM Treasury wants members to pay to put this right—at an estimated cost of £17 billion—despite it being its mistake.”
The National Audit Office said in March 2021:
“Employee representatives told us that the review of the mechanism”
because of what has happened at the first valuation
“undermined trust between employees and the Government”.
The recommendation of the House of Commons report on public service pensions stated:
“HM Treasury must prioritise work to quickly resolve the challenges presented by the McCloud judgment and cost control mechanism, in order to give certainty to scheme members and employers, and rebuild the trust lost”.
Other concerns relate to the treatment of disbenefits to members of current legacy schemes. These must be fully evaluated before March 2022, when they enter the career-related schemes and the legacy schemes are closed. There are significant differences between the new schemes and legacy schemes such as the police pension—again, that is specifically referred to—which is based on years of service rather than pensionable age. Both these schemes are seen by members as being based on promises made by the Government to the service. Retirement in the career-related scheme is at 60, but as police pensions are based on years of service, members may wish to retire at an earlier age. If they do this under the career average scheme, which allows retirement at 55, they could lose up to 25% of their pension, which is a very significant issue. I am sure that this will be considered in more detail in Committee. There are similar structural issues for fire and rescue services, which were highlighted by the LGA. I would like the Minister to take note of an anomaly in Clause 29 and consider an amendment to recognise the special arrangements of the service where the employer is also the scheme manager.
The complexity of the current position with regard to public service pensions legacy schemes, given the Government’s intention that all be included in CARE schemes by March 2022, gives rise to a lot of practical problems, and I would like to understand how the Government intend to deal with them. It will be extremely important that the proposals in the Bill are workable. It is easy to say that members get to retirement and make whichever choice is best for them, but in some cases, they may have rights built up that fall due at different ages—some at 60, some at 65. So, if there is not a single retirement age, when do they have to make the choice? In some cases, the higher pension at retirement may be under one set of rules, but as retirement continues it may turn out that the other set of rules would have given a bigger total pension. What happens then?
The Government have accepted that people with really complex tax issues can have financial advice, but what about the millions of public sector workers who will have to make these choices? Where is the help and guidance coming from for them? What about financial planning between now and retirement? Presumably, any statement will show rights based on the assumptions of the old scheme, even though some people will opt for the new scheme. Will they have access to both numbers when they are planning and will the pensions dashboard show both numbers? It is going to be an extreme challenge for schemes to unpick, administer and communicate, and members are going to need a lot of help to understand what is happening. What plans do the Government have to resource support systems and enable members to make the best choices? Support for trustees of pensions schemes will also be needed.
The Bill deals with the consequences of government failure to foresee the age discrimination issue which gave rise to the McCloud judgment. The Bill will determine the future means of many public service employees. The Minister and the noble Lord, Lord Davies, said that many complex and difficult matters need to be resolved if members are to have confidence in the competence, integrity and political will of the Government to get it right.
My Lords, I welcome the Government’s action in promoting this Bill, and I hope it will be enacted without delay. In that regard, I was rather concerned to hear the submissions of the noble Lord, Lord Davies, which indicated that perhaps it will not be as straightforward a process as I would hope.
I refer to the entries on the record relating to my judicial career. Before I retired, the Government had, in my view, made two errors that were having an adverse effect, particularly on the position of members of the senior judiciary. The first was to reduce their mandatory age of retirement to 70 from 75, which it had been earlier in my judicial career. The second was to reduce the value of their pension in real terms because of the tax provisions to which the pension was subject.
A further alteration was made at about this time, which meant that very senior members of the judiciary did not have the privilege that I had, as a consequence of my appointment as a senior judge, of becoming a Member of this House. I know that all members of the judiciary who have had this advantage are very conscious of how important it was. I believe that others who had this advantage have made contributions that have been most important to the workings of this House. However, I accept that this change would be difficult to bring about in the course of this Bill, even though I would like to have seen it included.
However, the changes the Bill does make are sensible. Reducing the retirement age from 75 to 70 did not apply to me because it was not retrospective, but it has been made clear by events that have taken place since that time that we have been deprived of valuable judicial contributions by the reduction in age—without, I would say, any accruing benefit to the public interest. There must be a retirement age for judges; we cannot have a situation such as existed at the time of my earlier career, when some would say Lord Denning’s great powers as a judge were beginning to wane but there was no remedy available to cope with that situation. However, bearing in mind in particular current life expectancy, going back to 75 is a wise and sensible move. I hope it will be enacted as a consequence of this Bill with a great deal of rapidity.
With regard to the other changes affecting the judiciary that are my concern, the position as I understand it is that they have been properly taken into account, and therefore I look forward to their implementation as well. To put it shortly, I wish the Bill a speedy passage.
My Lords, I am in a rather unique position, because I was responsible for the introduction of the changes in 1993 that reduced the retirement age from 75 to 70 for most judicial offices. The proposal at that time was generated I think by a desire to make it clear at what stage a judge might be subject to some kind of consideration in relation to his or her health. The system was that, if somebody was getting a little frail in the mental side of their lives, the Lord Chancellor was expected to tactfully suggest that the time to close their judicial work might be approaching.
I did not much care for that sort of idea, because I thought it was a kind of interference with judicial independence—they had to decide for themselves. Of course, ultimately, they had to decide. It was not the Lord Chancellor’s decision; it was theirs. But anyway, the general view was that the retirement age should be reduced from 75 to 70. That was a fairly considerable change from what it had been years back, when there was no retirement age at all for most. Noble Lords may remember that Lord Denning said that he had a lot of the Christian virtues, but not those of retirement or resignation. So, originally, there was a possibility of being in judicial office for quite a long time. Anyway, that matter had been changed and the retirement age was now 75.
I initiated the Bill that reduced it from 75 to 70, with corresponding changes in the pension system, which are also referred to in this Bill. I had to take into account the point that, where a judicial officer is appointed, he is appointed on a secure tenure until he reaches a certain age—when there was an age limit—on condition of good behaviour. Therefore, it seems unlawful to change the arrangements that were made when the person took that on, contrary to his or her interests, unless they agree to it. So the alteration of the date of pension applied only to those who were appointed after that came into force. I remember my noble friend Lord Baker of Dorking saying to me, “James, that will take a long time to come into full force”—but, of course, judicial turnover is rather quicker than he expected, and it came into practical effect within a quite reasonable time.
Now, I entirely support the view that things have changed since that time, and therefore it is appropriate to move back to 75. Generally speaking, the judiciary enjoy a degree of health at that sort of stage in their lives, so it is a reasonable thing to do, and the change would not act against the judges in any way. As I and the noble and learned Lord, Lord Woolf, said, there were changes in pensions arrangements in 1993, but an option was given to people who were already appointed to opt in to that, because there were certain advantages that could be taken up in the new pension scheme in 1993 that were not available in the former pensions. So I now have the unique responsibility of supporting a reversal of the change I made 28 years ago. It just shows how quickly you learn.
My Lords, I thank the Minister for the clarity of his introduction and express my intense pleasure at being listed to speak between two of my judicial heroes—the noble and learned Lords, Lord Mackay and Lord Brown.
For a long time, the police federations and other unions have been pressing the case that many of their members will suffer pension detriment by reason of some of the proposals found in this Bill. Previous speakers, in particular my noble friend Lord Davies of Brixton, have spoken of some of the unresolved issues, but the point to which I wish to draw the attention of the House is the failure of government to negotiate—or at least to consult with a view to reaching agreement—with the relevant police federations to remove or adequately compensate for the further detriments arising from the Bill.
The Police Superintendents’ Association has been making representations to the relevant Treasury Minister —not the noble Lord, of course—for months. I am told that it has been, in effect, stonewalled. In a letter to the relevant Minister dated a week ago, Chief Superintendent Dan Murphy of the PSA asked for confirmation that the Minister had ignored the PSA’s continuous request for the Government to informally engage with the PSA to resolve the taxation detriment suffered by its members and to formally consult with the PSA to resolve taxation detriment, and listed a number of other failures. He concluded by saying that the Police Pension Scheme advisory board was not satisfying the requirements for full and meaningful consultation, and cited some evidence to support that.
I do not wish to contest the merits of these allegations with the Minister, but they are serious. Pensions are not a matter for unilateral employer determination. International obligations to bargain collectively and to consult are engaged. I cite Article 11 of the European Convention on Human Rights as interpreted by the court in Demir and Baykara v Turkey. The same right is found in Convention 8 of the International Labour Organization, and Article 6.2 of the European Social Charter 1961 imposes on states the duty
“to promote, where necessary and appropriate, machinery for voluntary negotiations between employers or employers’ organisations and workers’ organisations, with a view to the regulation of terms and conditions of employment by means of collective agreements”.
Article 6.1 requires the promotion of consultation as well.
The UK has ratified all these provisions. It is true that each contains an exemption in respect of workers, such as the police, engaged in the administration of the state, but that is a limited exemption and does not extend to the right to bargain collectively. That was made clear in a judgment of the European Committee of Social Rights adopted by the Committee of Ministers of the Council of Europe on 8 October 2014, in a case called European Confederation of Police v Ireland, which held that the Irish police association could not be excluded from public sector pay bargaining. In fact, collective bargaining and consultation are rights of particular importance for our police, who are prohibited by the Police Act 1964 from joining trade unions or going on strike, and whose freedom of association is limited to the police federations established by statute.
I am sure it will not be said that pensions are not pay and not, therefore, susceptible to collective bargaining. Pensions are of course merely deferred wages—part of what lawyers call the “consideration for work done”. They are a classic focus for bargaining. The international provisions that I refer to are of particular relevance because, by Article 399(5) of the EU-UK Trade and Cooperation Agreement—the Brexit deal—the Government bound the UK as follows:
“Each Party commits to implementing all the ILO Conventions that the United Kingdom and the Member States have respectively ratified and the different provisions of the European Social Charter that, as members of the Council of Europe, the Member States and the United Kingdom have respectively accepted.”
I hope the Minister will commit to an amendment that requires full collective bargaining with the police federations to meet the pension concerns of their members, before committing the House to regulations to implement the Bill.
My Lords, it is a great pleasure to follow the noble Lord, Lord Hendy. I am sorry that he is not noble and learned; he is very learned, except in this House, and it is a great pity that he has never adorned the Bench himself. He must have appeared before generations of lawyers and in supporting the Bill, as I do, particularly the extension of the mandatory retirement age, I can hope only that his experiences of the more elderly generations have not been too disobliging for him.
I spent a total of 28 years on the Bench, although I held none of the great legal offices of state. Finding here the noble and learned Lord, Lord Mackay of Clashfern, an erstwhile Lord Chancellor, my noble and learned friend Lord Woolf, erstwhile Lord Chief Justice and Master of the Rolls, the noble and learned Lord, Lord Etherton, another Master of the Rolls, and the noble and learned Lord, Lord Hope, Lord President in Scotland and a Deputy President of the Supreme Court, I wonder why I am speaking. But here I am and I support the Bill, both its provisions as to judicial pensions, which I truly believe were necessary to cure the resentments and deep unhappiness felt in the judiciary over some years, but also on the mandatory judicial retirement age—what the erstwhile senior Law Lord, Lord Bridge of Harwich, called the age of “statutory senility”.
There is nothing that I really want to say about pensions. I am not expert in that field, and certainly not in a position to advise on any of the technical amendments suggested to be necessary by the Minister. As to the mandatory retirement age, I seriously think, together with my noble and learned friend Lord Woolf, that this will assist in the process of judicial recruitment, which has been a real problem over recent years. The fact is that in 1993, when the noble and learned Lord, Lord Mackay, introduced the change at one and the same time, if I remember right, he increased from 15 years to 20 years the time to be served as a judge necessary to earn one’s full pension. Overnight, it became necessary to be appointed by the age of 50 if you were to earn a full judicial pension, whereas I, like the noble and learned Lord, Lord Woolf, and most others here, was appointed long before 1993 and it was not retrospectively effective. I had the privilege and great pleasure, in fact, of serving until I was 75. I had done 28 years. I am not asking for nearly twice the judicial pension that I then did get but, in fact, I could have retired after 15 years and got it.
I know that there are arguments both ways on this and on judicial diversity and matters of that character. It seems to me that appointment eventually to the Bench becomes an altogether more attractive prospect if, when you are in your late 40s or perhaps early 50s, and if you are in a good way of practice and probably making quite a lot of money but know that you can continue that beyond 50 and still do your stint on the Bench—which I believe for most people is a contribution due to the public weal by practitioners who have been advantaged by the process—after the Bill proceeds, as I trust it will, then you would get a full pension by doing so, quite likely rather later than you would otherwise have had to make your decision.
Nowadays, of course, there is an ever longer expectation of life. There is a longer expectation, too, of good health in one’s later years; there is also, I believe, a parallel inclination on the part of many older people who would like to continue working rather than have imposed upon them ever longer periods of retirement and idleness. Surely it is an attraction to be allowed to continue in judicial office as of right for the additional proposed five years. Those words “as of right”, as the noble and learned Lord, Lord Mackay, suggested, are of great importance here. Once appointed to the office, now until 75, I hope, by an independent Judicial Appointments Commission that secures the position, you are not thereafter—after 70—at the whim of those who have power periodically to extend day by day, or whatever it may be, your judicial life.
The Judicial Appointments Commission, chaired as it has been for the last five years by the distinguished Cross-Bencher, the noble Lord, Lord Kakkar, has fierce independence and an unswerving adherence to the principle of merit above all else. We have a splendid body of independent judges. We currently retire them when most, or perhaps nearly all, of them are at the very height of their powers at 70. Many would want to serve longer and I believe we should let them.
My Lords, I intend to touch on matters concerning police pensions, but I stress that I represent no one but myself in the words I say. I do not have a financial interest in this matter, although I do have a police pension from my time in the service of 35 years, reaching the rank of chief superintendent, and from three years as president of the Police Superintendents’ Association.
It was with great sadness in my heart that I heard that the Police Federation had publicly declared that it had lost confidence in Priti Patel, the Home Secretary, and that on 27 July this year, only days afterwards, it felt compelled to write to the Prime Minister and the Chancellor. In that letter, it set out the growing anger among 130,000 police officers of all ranks caused by a number of grievances—not just financial, although the last straw was the offer of a 0% pay increase. It is ironic that this letter was sent on the very day that a reception was being held in Downing Street to thank police officers injured in the pandemic for their selfless work, given the complicated and far from clear legislation, often without proper PPE. As well as a pay freeze as a thank-you, they rightly complained of mixed messaging and a lack of understanding of the police role by the Home Office which put them in an invidious position, leading to them being abused and attacked.
This is about false claims by the Home Secretary that the police were fully consulted on some of the more controversial elements of the new legislation. It is also about the failure, despite ministerial promises, to take seriously their request for early priority for vaccination. Police officers are tired of warm words at conferences with no show of genuine support for the police. In essence, they feel not just a lack of respect but that they are treated with contempt. This is a serious matter because the police are a unique public service who, along with the Armed Forces, are legally prevented, as has been said earlier, from taking industrial action.
Having set the context of where we are, I briefly come to the Bill before the House, which is another source of grievance. The matter of police pensions has of course been touched on by the noble Baroness, Lady Janke, and by the noble Lords, Lord Davies of Brixton and Lord Hendy. Police of all ranks feel that it reduces their pension entitlement. It is seen as yet another change with little consultation, which police officers passionately believe worsens the conditions of service under which they joined. All this at a time when the Government are trying to recruit thousands more police officers in order to hold the thin blue line. When I was president of the Police Superintendents’ Association I had excellent relationships with the noble Lord, Lord Howard of Lympne, and the Home Secretary who followed him, the right honourable Jack Straw. One of the best recruiting sergeants when I joined the service was the excellent police pension scheme. I recall the sergeant addressing the recruits at the training school, imploring all those present to join the scheme— I certainly never regretted it.
We cannot put the clock back, but we can respect those who have risked their health and lives in the line of duty. It is so important for the Home Office to have a business-like relationship with the police staff associations, but the current Home Secretary seems to have difficulty in developing and maintaining cordial relations with those with whom she has to work. I implore the Prime Minister to instruct his right honourable friend the Home Secretary to do what he apparently enjoys doing: to build bridges with the police staff associations, the representative bodies of those who keep us all safe.
I hope that the Minister passes on my message today. A good place to start would be by genuinely listening to the concerns of police officers of all ranks with a proper consultation on this Bill, in an attempt to mitigate their deep concerns with it in its present form.
The provisions in the Bill for reform of judicial pensions, intended to rectify the scheme introduced in 2015, which applied only to younger judges, are welcome. The April 2015 pension provisions were held by successive courts to be unlawful and discriminatory on grounds of sex, race and age. I can say from my own experience, when I was head of the Chancery Division of the High Court, that they were a disincentive for practitioners to apply to become High Court judges. The proposed provisions will ultimately permit and require all members of the judiciary to be on the same new scheme and terms, which is highly desirable.
However, I regret that unlike the distinguished other former judges and judicial officeholders who have spoken—the noble and learned Lords, Lord Woolf, Lord Mackay of Clashfern and Lord Brown of Eaton-under-Heywood—I regard the raising of the judicial retirement age from 70 to 75 as very much a mixed blessing. On the one hand, it will enable experienced judges, as the noble and learned Lord, Lord Brown, said, to continue in office when they still have so much to contribute to a high standard of justice. It will also allow for applicants for judicial appointment to apply later in their careers—again, as emphasised by the noble and learned Lord, Lord Brown. That may be attractive to some practitioners. On the other hand, to raise the retirement age in one step from 70 to 75 rather than, say, 72, is highly likely to have an adverse effect on diversity, especially in the Court of Appeal and the Supreme Court.
There are far too few women and people from minority ethnic backgrounds in the Court of Appeal and, especially, the Supreme Court. There is universal recognition of that shortcoming. It is possible to progress diversity only if the ranks of those in the top courts are open to new members. However, both courts are relatively young: in the Court of Appeal, for example, the current average age is under 63, which means that potentially there could be a very long freeze, of possibly 12 or 13 years, for any substantial influx of new members. Will the Government think again about that issue, and the potential adverse outcome of raising the age of retirement in one go to 75 rather than to 72, at least in the first instance?
Will the Minister also confirm that, if at all possible, the retirement age increase, whatever it might be, will come into operation on 1 January, as there are judges—including one in the Supreme Court—whose 70th birthday falls between the beginning of January and April next year, when all judges will be moved to a single reformed scheme? If the retirement age increase does not come into effect until April 2022, when the new pension provisions come into effect, such judges, whose 70th birthday would have accrued between January and 1 April 2022, will be able to apply again for appointment. That would complicate the appointments process when they will be competing against other applicants. Alternatively, will the Government give consideration to introducing transitional provisions to address that problem?
My Lords, the Bill affects many people in public service, but I hope that I may be forgiven for concentrating, like others, on the branch of the public service with which I am most familiar: the judiciary. So far as they are concerned, it seems to me that the Bill seeks to do two things that are to be welcomed.
The four noble and learned Lords who have spoken before me have said almost everything that could be said one way or the other, but I should like to stress one or two points. The first is the correction of the mistake that was made in 2015, when the new pension scheme was introduced, that applied to all members of the judiciary still in service, apart from those within 10 years of retirement. That scheme was significantly less advantageous because it was registered for tax purposes. That had very unwelcome consequences for those who had contributed to their own pension schemes while in practice. The prospect of the large and wholly unplanned-for tax bills that would be the result of becoming subject to that scheme was a severe disincentive.
I have experience of this—although the Bill certainly does not apply to me because I retired eight years ago. I made provisions at a very early stage in my career as a self-employed member of the Bar, with no prospect of becoming a judge at that stage, and indeed for a long time in my career. I sacrificed money that might have been used for other things to build up a reserve for myself and my family. This is what people had done, and now they were faced with these very unwelcome tax consequences—so it is no surprise that it was a disincentive, and it is right that the Government should seek to remove it. I also welcome the fact that the Government have decided, in this respect, to treat all members of the judiciary equally.
The legislation that we are presented with in the Bill is not an easy read, but the policy background is very clearly set out in the Explanatory Notes and the impact assessment, and I am also grateful to the Minister for his very helpful introduction. There is one aspect of the judicial scheme—the only one that will be available for everyone after 31 March 2022—which is especially welcome: the fact that the scheme will be unregistered for tax purposes. As I understand it, compensation is also being offered to those who incurred tax liabilities under the previous scheme—and that too is very welcome.
As has been pointed out, all eligible members will be able to opt for the scheme that is most beneficial to them under the options exercise that is to take place in the autumn of 2022. I hope that the Minister can assure the House that guidance will be offered to all those who are involved in that exercise in good time so that they may be fully informed before they take this decision. Guidance of that kind was offered in the past when I had to make that kind of choice, and it would be very helpful if the Government were to assure us that that will be done in this case.
I see this argument about pensions as the end of a long and, for some, very uncomfortable debate about how to balance the public interest against the reasonable expectations of those who have chosen to serve as members of the judiciary. I have been only on the fringes of these debates, but I wish to pay tribute to all those members of the Bar and the judiciary who have contributed to it, spending many hours, in many cases, in doing so.
The other thing that the Bill seeks to do—I follow the noble and learned Lord, Lord Mackay, and my noble and learned friends Lord Woolf and Lord Brown of Eaton-under-Heywood in welcoming this—is the reduction of the judicial retirement age to 70. The noble and learned Lord, Lord Mackay of Clashfern, may remember that some argued that it should be reduced to 65, but that step was fortunately not taken. But it was to overlook the benefits that come with experience.
I was one of those members of the newly formed UK Supreme Court who was able to continue to the age of 75. We tried very hard to persuade the then Government that that age should be retained for the Supreme Court justices—but without success. We pointed out that the new age limit would severely limit the time that some of our newer members could contribute to the work of our court, as was indeed the case, and that the rapid turnover that it would lead to was undesirable.
I noted with great care what my noble and learned friend Lord Etherton said about this, and his suggestion that there should be a phased increase in the retirement age. Perhaps I may continue for a moment or two to reply. The problem we have with legislation of this kind is that often one has only one opportunity. This is an opportunity that may not recur, and there will be consequences whatever happens. I give one example, which is now in the past: my noble and learned friend Lord Neuberger, who became president in 2012, had to retire in 2017, just before his 70th birthday, when he was still very much at the height of his powers. He was succeeded by my noble and learned friend Lady Hale of Richmond, who was already 70—but, because she had been appointed to the judiciary before the change, she could go on until she was 75. One can only guess at what might have happened if the change had been made before my noble and learned friend Lord Neuberger was due to retire.
There is just one other anomaly. There were different retirement ages depending on which part of the judiciary you were serving in. This Bill produces a single retirement age for everybody. As one who had to grapple with complaints about the differences in retirement age and the opportunities for service after retirement when I was Lord President of the Court of Session in Scotland, I very much welcome the uniform approach that this Bill now takes.
My Lords, I am absolutely no expert on pensions, and I have been absolutely delighted to listen to the speeches today, because there is obviously an expertise in this House that makes up for my very serious lack. I shall look forward also to receiving briefings from relevant groups as we move to Committee, because the Bill has so many technical aspects that I think we will need the help of relevant interests, including the trade unions, to negotiate our way through the remaining phases.
The history of public service pension change is rather littered with unanticipated consequences, and indeed we are here today because of the judgment in the McCloud case on discrimination, which was itself an unintended consequence. I also pick up the point made by the noble Lord, Lord Davies, that if we look at the broader context of public service pensions, we see a whole lot of issues that are not covered by this Bill—I think that some of them are meant to be addressed in the next Finance Bill—which makes it very difficult to shape the legislation before us today.
I had the privilege of being at the briefing that the Minister kindly offered to all Peers yesterday and I want to pick up on an issue raised by the noble and learned Lords, Lord Etherton and Lord Judge—although I would never want to put words into the mouth of the noble and learned Lord, Lord Judge; I think he will speak for himself in Committee. The issue is the impact on diversity of the change in the retirement age of the judiciary. I think that everybody in this House would say that it is important that our senior judges in the Court of Appeal and the Supreme Court reflect the society that we live in if they are to be respected and seen as part of our current era. At the moment, they do not. I am very concerned about the block that will be created. The noble and learned Lord, Lord Etherton, essentially said that we would not see a lot of turnover in the Court of Appeal for some 12 to 13 years, so the possibility of people from ethnic minority backgrounds and of women being seen in the Court of Appeal will be significantly impacted by the increase in the retirement age—and I do think that matters.
When we discussed this yesterday, the Government took the position that a blockage for somewhere between five and 12 years would advantage women—for example, those who have taken maternity leave will be able to make up the experience to make them more eligible to be put on the court. My answer was, “Have you talked to those women? Have you talked to the ethnic minorities?”—the people who will be impacted by what will be effectively a block on the turnover of appointments.
I understand that there were questions on diversity in the relevant consultation, but we all know that consultations are dealt with by the usual suspects—those are the people who reply. It is incumbent on the Government, if they are going to put in place what effectively is a very significant block on seeing diversity among our senior judges, to go back to that pool of people and talk to them about their views on the impact this will have. That is not a very difficult thing to do, and I hope we will see it.
There are quite a number of issues in the Bill. Again, I wish I had greater expertise, but from looking at the various briefings I have been able to lay on my hands on and replies to the consultation, it appears that there are a number of pension traps. People who find themselves in both the legacy system and the new system may be trying to make career decisions and find that they are disadvantaged in one scheme but advantaged in another and they have no idea how to put the various pieces together. The Police Federation is particularly concerned. It raised the issue of women in the police force who take maternity leave and have been able to work for additional years to make up the lost pension under their scheme. That is now not going to work. People who work part-time will be paying much more into the scheme, pound for pound, than full-time workers.
There is a whole series of flaws here and I would like the Minister to deal with them. There is no point repeating another Bill that has a lot of unintended consequences. I join very much with my colleagues, particularly with my noble friend Lady Janke’s comments. With a system that is now so complex, many people will need advice to know what to do. Surely there ought to be some provision to fund that or at least give them reasonable access.
The noble Lord, Lord Davies, raised on the cost control mechanism. I am appalled that the 2016 valuation is still hanging fire. I know that it will be resolved, but, like him, I am very concerned about how a rational 2020 valuation scheme will be put in place. We are in such economic flux. This is a really difficult time to put in place frameworks for something like a valuation. If you add to that the fact that the change in the scheme presumably means that people will be making all kinds of pension choices which will put pressure on any kind of set ceiling, the notion that the members will all have to pick up the cost strikes me as extraordinary. We need the Minister to elaborate on that and to understand what the consequences will be.
At the meeting yesterday, the Minister said that as a new scheme is developed for 2020 and the review that is currently under way is completed, it will require primary legislation to bring it into effect. I would like some confirmation of that, because if something that significant is going to come to us, either through Treasury direction as the noble Lord, Lord Davies, described, or even through a statutory instrument, it will be very hard for us to get a grip on the way the system works.
Lastly, I will tackle an issue that I have raised many times in this House, which is very relevant to this Bill. The problems judges faced following the changes in 2015 were a consequence of the annual and lifetime pension relief allowances and the taper system included with those changes. When they were initially put in place they were not a problem because of where the thresholds were set, but as those changed over the years they have become a major problem. Indeed, lawyers found that if they became judges, they would lose not only any additional income, but pension as well. That is an impossible situation.
This did not apply just to judges: consultants in the NHS faced exactly the same problem if they worked for a weekend. Because of the way the NHS pension scheme is set up they would have to pay tax that not only wiped out the additional income but went way beyond that. In our Armed Forces—to me this is utterly outrageous and got me involved in this issue in the first place—two-star colonels are basically refusing to become three-star because the consequences would be so bad. They would either have to pay very large tax bills, wiping out any additional income by, or take severely reduced pensions. That is insanity.
The Government dealt with some of that for the NHS and the armed services by changing the thresholds in the last Budget, but it is a sticking plaster, and what we see now for the justices is a permanent way to resolve the problem. Essentially, the scheme will no longer be tax registered and therefore the problem goes away for the justices, but we should be using this Bill to fix the problem for everybody else. If it is not going to be fixed in this Bill, when is it going to be fixed? It is insanity to say to our senior military, “You’re going to be on the battlefield, you’re obviously not going to leave after you’ve done so many hours and come home, and the consequence is that you will find yourself with a huge tax bill that will, frankly, cause havoc for your family.”
We have lost most of our two-star colonels—they have refused to go to three-star and have gone to civvy street—and we have consultants who worked during the pandemic knowing that they would essentially be paying a very large price as a consequence because it would impact on their taxes or pensions, depending on the way they set up their arrangements.
I believe that it is vital to this country that our public servants are properly and fairly compensated with both pay and pensions. The Government really made a hash of reforming these schemes in 2015; the Bill is part of the clean-up, but let us make sure that it brings clarity and fairness to all parts of the public service pension arrangement.
My Lords, I thank the noble Viscount, Lord Younger, for introducing the Bill. I think I am right in saying that both he and I are laymen on this subject in that we are not lawyers or pension experts.
On the public sector pensions, clearly there is a problem which needs to be addressed following the findings of the McCloud ruling. I note that the Supreme Court denied the Government leave to appeal the finding. The Public Accounts Committee has called the Government’s problem a
“£17 billion mistake on pensions reform”.
I recognise that the remedy the Government have opted for, to be included in this Bill—the deferred choice underpin, the DCU—was preferred by a significant majority of respondents to the government consultation, including main trade unions such as UNISON and GMB. The DCU remedy would give people the choice at retirement as to how their pension should be calculated during the period 2015 to 2022. What measures will be in place to ensure that individuals affected will have the information they need at the point of retirement to make an informed decision? This important question was put by the noble Baroness, Lady Janke, and repeated by the noble Baroness, Lady Kramer, and it deserves an answer.
I believe there is a lack of clarity about who will bear the costs of these measures. The noble Baroness, Lady Janke, quoted from the Public Accounts Committee, which has also raised this point about who will bear the costs. Can the Minister explain how these costs will be met, and what impact this will have on future public spending decisions?
Before I move on to the cost control mechanism, I should say how grateful I am for the expertise demonstrated by my noble friend Lord Davies. I also found it particularly interesting that my noble friend Lord Hendy spoke of the context of the police in these proposed changes and how that is impacted within international law. My third noble friend, the noble Lord, Lord Mackenzie, also gave a very interesting and quite alarming explanation of the treatment of the police force regarding these proposed pension changes.
As far as I understand it, there are two problems: the original design of the CCM made it too volatile and the McCloud judgment has created a significant uncertainty, which members have now been living with for more than two years. The Government ran a consultation on the CCM mechanism, which closed on 19 August. When does the Minister anticipate that they will be able to respond to this consultation? Is he in a position to express any view on the key views expressed to the Government in that consultation process?
Clause 80 provides that the breach of the cost cap ceiling in the 2016 valuation will be waived. Trade unions are concerned about where the cost of that waiver will eventually fall and the impact of the McCloud remedy on the 2016 valuation. The impact of the valuation, when we get it, was a point raised by my noble friend Lord Davies and the noble Baroness, Lady Kramer. Separately, can the Minister confirm the Government’s commitment that any benefits improvements due to the breach of the cost floor will be honoured, and further—this was also a point made by my noble friend Lord Davies—that the increased use of Treasury directions for matters that should be subject to parliamentary scrutiny should be at a minimum, because Parliament should be involved as the CCM evolves? Clearly, we will want to scrutinise these things carefully as the Bill proceeds.
I turn to the proposed changes to the judicial retirement age, and here I declare an interest as a serving magistrate. We know that the existing provisions have been in place for 27 years, and we have had a great deal of personal expertise from the noble and learned Lords who have contributed to today’s debate. I will put forward a different view from the one proposed; it is more in line with the views expressed by the noble and learned Lord, Lord Etherton.
In the consultation, the overwhelming number of respondents—some 84%—supported raising the mandatory age of retirement. However, a large body of respondents preferred the age of 72 rather than 75. The people who preferred 72 were the Lord Chief Justice of England and Wales, the Lord Chief Justice of Northern Ireland, the President of the Supreme Court, the Lord President in Scotland, the Magistrates’ Leadership Executive, the Chief Coroner of England and Wales, and the President of Tribunals. All these individuals and bodies favoured 72, not 75. There are debates on this, but it is worth exploring a couple of the reasons why 72 is preferable to 75. Diversity is an important issue; I agree with the points made by the noble Baroness, Lady Kramer, on that. I also agree with her point about the importance of consultation. I do not know whether the Minister can say anything about whether members of the black community have been consulted on these proposed changes; they are liable to disadvantage their prospects for promotion within the judiciary.
I also want to raise a different subject, and here I speak as somebody who appraises magistrates. There are occasions when a small number of people—judges—may experience some level of mental decline. Clearly, there is an appraisal system for trying to deal with this, but it is a sensitive issue. I have probably appraised getting on for hundreds of magistrates over the last few years. One has to be frank: the prospect of mental decline accelerates over the age of 70. There needs to be a mechanism for sensitively dealing with these issues. That also argues in favour of a retirement age of 72 rather than 75, so that these issues of mental decline are not exacerbated.
We in the opposition party support the Bill. We will work constructively with the Government to look at the detail of it, and we wish it well.
My Lords, this has been a somewhat short debate but, as always, the experience and knowledge in this Chamber has been extremely insightful on what I think we all agree is a pretty complex subject. I thank all noble Lords for their contributions, not least acknowledging the specific experience of the noble Lord, Lord Davies. I have also counted that out of the 11 or so speakers in this debate, there were no less than five noble and learned Lords—so no pressure there. I will give proportionately a little more time to touching on judiciary matters, because I think it is fair to say that the mood, tone and indeed content of the debate was more steered towards that direction. That is not to say that there are not a number of other questions that need to be answered, which I will attempt to do. There have been some technical and specific issues raised, and I will endeavour to answer as many questions as I can, but it may be that a letter—maybe a longer one than normal—is required to follow up on the technical issues.
I start by answering probably the first question raised by the noble Lord, Lord Davies, on the timetabling for the Bill. To reassure the House, we aim for the Bill to have Royal Assent in early 2022, so that Chapter 4 can come into force on 1 April 2022, as set out in Clause 113, on commencement. However, noble Lords may recall that the Government set out in their consultation response in February this year that schemes would have until 1 October 2023 to introduce retrospective changes, in order to balance bringing the discrimination identified by the courts to an end as soon as possible with giving schemes and administrators the time needed to establish systems to deliver the necessary changes. Clause 113 therefore provides that Chapter 1 will enter into force on 1 October 2023, or earlier if specified in regulations. I hope that goes a little way to answering the question raised by the noble Lord, Lord Ponsonby.
Before I address the themes and questions raised, I wanted to use this occasion to give a little more background to what we are trying to do in the Bill; in particular, this might help to address some of the concerns the noble Baroness, Lady Kramer, expressed about the 2015 reforms. By 2010, the cost of providing public sector pension schemes had increased significantly over the previous decades, with most of this increase falling to the taxpayer. At the same time, occupational pension provision in the private sector had changed significantly; employers were increasingly moving away from offering defined benefit pension schemes.
The commission set up in 2010 found that the existing structure had been unable to respond flexibly to workforce and demographic changes that had occurred over the previous few decades, and that this had led to rising value of benefits due to increasing longevity, the unequal treatment of members within the same profession, the unfair sharing of costs between members, employers and taxpayers, and barriers being put up to increasing the range of providers of public services. The final salary design of schemes was criticised for creating unequal treatment of members within the same employment. The commission’s final report, in March 2011, therefore recommended moving public service scheme members to reformed schemes with benefits calculated on CARE—the House will know that this is career average revalued earnings—rather than based upon final salary.
To control against the risk of rising longevity—which we know is there—the commission recommended increasing the normal pension age to 60 for the Armed Forces, police and firefighters, and to state pension age for all other schemes. In line with wider changes to the use of price indexation in government, changes were also made to the measure of inflation used to uprate pensions, from the retail prices index to the CPI—the consumer prices index. Member contribution rates were also increased across the schemes, other than that relating to the Armed Forces, by an average of 3.2% of pay. The House may well know this, but I think it is helpful to produce this rather complex background as to why we are where we are today.
Overall, the reform schemes were designed to ensure that members would have good pensions which, at a minimum, met the target levels identified by the pension commission of the noble Lord, Lord Turner, for the income needed in retirement. The reform designs should provide many low and middle earners working a full career with pension benefits at least as good as, if not better than, those under the previous arrangements.
I will move on to some of the issues that were raised. The first was the so-called differential treatment of judges. This was raised particularly by the noble Lord, Lord Davies, and touched on by the noble and learned Lord, Lord Hope. In addressing the point, I will highlight the difference in the recruitment and retaining of judges in particular, which distinguishes them from other public servants. Judges follow a unique career path. They often have long careers in the private sector and take up judicial office at a later stage in life. Many take a pay cut when joining the Bench. Therefore, appointment as a salaried judge in the UK is seen as the culmination of a barrister’s or solicitor’s career, rather than a career path in and of itself. This contrasts with the position in countries such as France, Germany and Italy, which all have career judiciaries, and where the judicial profession is separate from practising as a lawyer. The House may not know that salaried judges in this country may not return to private practice as a barrister or a solicitor.
Reflecting this difference with other public sector workers is important. When we return judges to a tax-unregistered scheme—which is the position that they were in prior to 2015—without these changes there would be continued issues with recruiting judges, threatening the effective functioning of our justice system and its reputation. While the scheme will be unregistered, it is important to note that other aspects of the scheme will be consistent with the principles of the 2015 pension reforms, to ensure its long-term affordability and fairness to the taxpayer.
This matter was raised by the noble Baroness, Lady Kramer, who asked why this could not be extended to other groups. I hope that I have helped to put our view on that. The noble Baroness raised the matter of military generals and touched on doctors, but I stress, on that point, that the manifesto committed to addressing recruitment and retention issues for doctors through the pensions tax system. At the Budget in 2020, the Government spent £2.175 billion on increasing the annual allowance taper threshold and adjusted income limit. These measures apply to all individuals across the UK and are a significant step in resolving this issue. These changes mean that any public servant whose sole income after deducting pension contributions is less than £200,000 has been taken out of scope altogether. We estimate that these changes have taken up to 90% of GPs and up to 98% of NHS consultants outside the scope of the tapered annual allowance. I am sure that there is more that I can say on that, but I hope that it provides some explanation to the noble Baroness, and to the noble Lord, Lord Davies, who raised the same point.
Moving on to the subject of what might rather loosely be termed judicial diversity, there was quite an interesting debate on this. Many noble Lords touched on diversity, linking it to the mandatory retirement age. I will perhaps give a more expansive response to this. I was pleased to hear the initial debate raised by the noble and learned Lords, Lord Woolf and Lord Brown, and my noble and learned friend Lord Mackay. I was particularly interested that he was the one who originally lowered the age from 75 to 70 and that he is now behind our move to raise it again to 75—that was a very interesting reflection from my noble and learned friend.
To give a little background on this, the Government are absolutely clear on the importance of judicial diversity and of having a judiciary that is representative of society. That is why the Ministry of Justice, as a member of the Judicial Diversity Forum and of the magistrates’ recruitment and attraction steering group, is committed to continuing the work to improve diversity across the judiciary and the recruitment pipeline.
I recognise that concerns have been expressed over the impact on judicial diversity of a higher retirement age. Let me start by saying that we acknowledge that the retention of older officeholders could have an impact on the flow of new appointees to judicial office, which may impact on the rate of diversity change. However, as some noble Lords have recognised, there is another side to the story. As many judicial officeholders do not continue to sit until 70 now, we do not expect that all will wish to continue in office until 75. For that reason, and because of the ongoing demands on our courts and tribunals, we will continue to recruit a high number of new judges and magistrates for some time, so we expect that the overall diversity will continue to improve, reflecting the greater diversity of new appointments. The Government also believe that there will be positive diversity impacts from mandatory retirement at 75, and we expect it to encourage applications from a more diverse range of candidates, including those who may have had extended career breaks to balance professional and family responsibilities, or from lawyers who feel ready to apply to the judiciary later in their career.
I should have mentioned the noble and learned Lord, Lord Etherton, and I noted, particularly from him, that he declared that he was—how should I put it?—less than impressed with the decision that we have taken and has asked us to think again. That came also from the noble Baroness, Lady Kramer. However, I do not believe that we will be doing that, and I hope that this explanation will help.
I will move on to the consultation, which was also raised by a few Peers, including the noble Baroness, Lady Kramer, and the noble Lord, Lord Ponsonby. I reassure the House that the decision to raise the mandatory retirement age to 75 was taken after careful consideration. The consultation in 2020 received over 1,000 responses and—as was raised this afternoon—84% supported an increase. I acknowledge that there were mixed views on the age at which it should be set: 67% supported an MRA of 75, recognising that the limited diversity impact was outweighed by the retention benefits and the flexibility afforded to judicial officeholders to sit longer. The Government are confident that an MRA of 75 will provide the right balance—and it is a balance—between protecting the need to have a mandatory retirement age and the benefits to the justice system from retaining such valuable expertise for longer and attracting a wider range of applicants. However, as I said in the briefing yesterday, I have pledged to write, particularly to the noble Baroness, Lady Kramer, and I will do so to all noble Lords who have taken part in the debate today, with some further detail on the feedback from the consultation, particularly in relation to feedback from women, which was raised by the noble Baroness, and from the black community, as raised by the noble Lord, Lord Ponsonby.
Another important subject is the cost control mechanism—the so-called CCM—which was raised by the noble Lord, Lord Davies, and the noble Baroness, Lady Janke; the noble Lord, Lord Ponsonby, also touched on this. As was mentioned, the Government’s consultation on changes to the cost control mechanism closed on 19 August. The Government are considering all responses received and will publish their conclusions shortly. The aim is to implement any changes in time for the 2020 valuations, and the Government will legislate for any changes once they have responded to the consultation and when parliamentary time allows. However, I want to give a little more detail on this, because it is an important subject—particularly the 2016 valuations.
The cost control element of the 2016 valuation process was paused, as we know, in light of the McCloud judgment regarding transitional protection. The potentially significant and uncertain impact arising from the court’s judgment made it impossible to assess with any certainty the value of schemes to members. In July 2020, the Government announced that this pause would be lifted and the 2016 valuations completed. HMT will, when possible, set out in directions the technical detail of how the restarted 2016 valuations will operate. Outcomes for individual schemes will not be known until the results have been finalised. The noble Lord may not find this answer satisfactory, but I am afraid that it is the only answer I can give this afternoon.
The related issue of member cost was raised, not least by the noble Lords, Lord Davies and Lord Ponsonby. The Government have announced that the legislative remedy should be taken into account when completing the cost control element of the 2016 valuations. This is because, when the cost control mechanism was established, it was agreed that it would consider only costs that affect the value of schemes to members. Addressing the discrimination, giving members a choice of scheme benefits for the remedy period, involves increasing the value of schemes to members. The usual way these costs are managed is through the cost control mechanism. However, as I mentioned in my opening speech, this Bill will waive the impact of any ceiling breaches that may occur, so that no member will see a reduction in benefits as a result of the 2016 valuations—although any floor breaches will be honoured.
I move on to another important subject, the Police Superintendents’ Association, which was raised by a number of Peers, including the noble Lords, Lord Hendy and Lord Davies, the noble Baroness, Lady Janke, and the noble Lord, Lord Mackenzie. As the House might expect, I cannot comment too much on the specifics of any live, ongoing litigation. However, I confirm that this Bill will ensure that all eligible public service workers have access to high-quality defined benefit schemes on a fair and equal basis. From 1 April 2022, all those who continue in service in the main underfunded schemes will do so as members of the reformed schemes, regardless of age. Legacy schemes will close to future accrual, which means that from this point onwards all members will be treated equally in terms of which pension scheme they are a member of. I noted very strongly the points raised in particular by the noble Lord, Lord Mackenzie, and, while I cannot comment too much, I shall pledge to pass his comments on.
I want to say a little more on this point. The Government consulted on proposals to remedy the discrimination identified by the courts in July 2020. Officials met with the scheme advisory boards for the public service schemes, including the scheme advisory board for the police pension scheme. The Government published the response in February this year, and officials have arranged a further meeting tomorrow to discuss the Bill with stakeholders, including the Police Superintendents’ Association. The Home Office will undertake further consultation with employee representatives of the police pension scheme in relation to the scheme regulations, which will set out the detailed changes to the scheme. I hope that gives some comfort that some progress has been made.
I have not really managed to answer properly some of the questions raised by the noble Baroness, Lady Janke. Can I say something about trust? She raises a very important point—that trust between the Government and all the public service sector workers and the operators of the scheme is incredibly important. She made the point that perhaps the trust is not there and, okay, I have noted that and will pass it on. Perhaps we need to work hard on that, but it may be linked to the fact that these matters are extremely technical; there are a number of matters that we need to sort out, as she knows. She herself mentioned that this Bill and this area are quite complicated.
In the same breath, may I answer a point raised by the noble Baroness and by the noble and learned Lord, Lord Hope, about giving information to members to inform them on decisions that they might care to make as a result of the transitional period decisions? As I said at the beginning, statements will be provided so that individuals can weigh up the choices. By the way, that is the case for the judiciary as well, just to reassure the noble and learned Lord on that.
I shall check Hansard, as there were probably a number of other questions, but I hope that I have covered the main themes from this important debate. I finish by thanking all noble Lords for their contributions. It is very important to say that we must ensure that those who deliver our valued public services continue to receive guaranteed benefits on retirement on a fair and equal basis and in a way that ensures that pensions are affordable and sustainable. I commend the Bill to the House.
Bill read a second time and committed to a Grand Committee.