Clause 77 - Meaning of “remediable service”

Public Service Pensions and Judicial Offices Bill [Lords] – in a Public Bill Committee am 12:30 pm ar 27 Ionawr 2022.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Question proposed, That the clause stand part of the Bill.

Photo of Virendra Sharma Virendra Sharma Llafur, Ealing, Southall

With this it will be convenient to discuss:

Clauses 78 and 79 stand part.

Government new clause 3—Meaning of “remediable service”.

Government new clause 4—Power to pay final salary benefits.

Government new clause 5—Section (Power to pay final salary benefits): transitional provision.

Government new clause 6—Pension credit members.

Government new clause 7—Further powers to make provision about special cases.

Government new clause 8—Power to pay compensation.

Government new clause 9—Indirect compensation.

Government new clause 10—Interest and process.

Government new clause 11—Treasury directions.

Government new clause 12—Interpretation of Chapter.

Photo of Simon Clarke Simon Clarke The Chief Secretary to the Treasury

This group of amendments relates to chapter 3, concerning the remedy to the discrimination for local government workers. Let me begin by setting out why there are separate provisions in the Bill relating to local government schemes.

In line with the reform processes applied in other parts of the public sector, local government schemes were reformed by the Government following the review undertaken by the Independent Public Service Pensions Commission. In the local government schemes, however, trade unions, employers and the Government agreed to implement transitional protections for members nearing retirement in a different way. Under that approach, all local government scheme members moved to the new and reformed career average schemes from 1 April 2014 in England and Wales and from 1 April 2015 in Scotland and Northern Ireland. That differed from the approach in other public service pension schemes, where protected members stayed in their legacy schemes.

In their reformed schemes, protected local government workers were given the benefit of underpin protection, providing them the value of their legacy final salary pension if that would have been higher than their reformed scheme pension. Following the Court of Appeal’s judgment, which held that transitional protection unlawfully discriminated against younger workers in the judicial and fire schemes, the Government accepted the wider implications that the judgment had for all schemes, including local government.

Policy consultations were undertaken for local government in 2020. Chapter 3 of the Bill provides the necessary powers to address the discrimination in those schemes, which will be done by extending the statutory underpin to younger members who did not originally have protection. The new clauses in this grouping are designed to ensure that a comprehensive remedy is in place for local government workers. The changes include replacements for clauses 77 and 78, which set out the main principles of the remedy as it will apply in local government.

As many of the new clauses are of a technical nature, I will not explain each in detail, but I hope that the Committee will find it helpful if I explain their themes. I will of course be happy to turn to specific new clauses if members of the Committee have any questions. The first theme is to ensure that, where appropriate, there is a consistent approach with other public service pension schemes. The new clauses will therefore provide equivalent powers to those that already exist in respect of the other public service pensions schemes covered in chapter 1. The new clauses cover technical matters, including compensation, special cases and interest payments. They are necessary to ensure that the complexities arising can be addressed robustly across all workforces.

New clause 3, which is a replacement for the existing clause 77, makes an important change to broaden the scope of eligibility for remedy in local government to align it with all other public service schemes. Under the amended approach, members who were in pensionable service on, before or after 31 March 2012 would be in scope of remedy if they leave local government and return within five years, as well as meeting qualifying criteria. The change ensures that, for example, women are not disadvantaged by their increased likelihood of having breaks in employment, which may be due to childcare.

The second theme is to ensure that the powers reflect the particular circumstances of the local government schemes and the differences in how remedy works there. New clause 4, which is a replacement for the existing clause 78, permits scheme regulations to require that separate periods of pensionable service are aggregated or joined up for underpin protection to apply. That is an important principle in the local government pension scheme, which is locally administered. In England and Wales alone, there are 86 administering authorities. To avoid administrative complexity, established policy is that where scheme members have multiple periods of pensionable service, those are each treated separately unless they are aggregated together. Allowing scheme regulations to require aggregation will ensure that underpin protection can be provided in line with that policy, and that substantial administrative complications in the coming decades are avoided.

New clause 3 also ensures that scheme regulations can reflect another aspect of remedy that is unique to local government schemes. When transitional protections were originally negotiated in the sector, it was agreed that the period of protection should cease when a member reaches their legacy scheme normal pension age, usually 65. In line with the Government’s 2020 consultation proposals, it is proposed that that approach is retained, subject to an overall requirement that underpin protection must cease for all members by 31 March 2022. That is crucial to ensure that, going forward, all LGPS members accrue pension on the same career average basis. The amended clause 77 would ensure that underpin protection reflects this policy intent.

The new clauses also make amendments to ensure that the remedy applies correctly to local government staff who were compulsorily transferred from their employer as a result of outsourcing and were entitled to pension protection. That change is consistent with that made in chapter 1, as we discussed earlier. For those members, the time they spent in a private sector pension scheme will not count towards a “disqualifying gap in service”, which we discussed earlier, when assessing their eligibility for the remedy.

Turning to the final theme, some clarifying changes have been made to ensure that the Bill works as intended. In particular, new clause 5 sets out transitional arrangements making it clear that existing scheme regulations providing for underpin protection are to be treated as being made under the powers in the Bill. That change ensures that it is clear that the same legislative framework applies to the members originally protected and those who have been subject to the discrimination found by the courts. It means that scheme regulations can fully remove the differences between the two groups.

Finally, clause 79 provides important definitions for the terms “local government new scheme” and “local government legacy scheme” as they are used in chapter 3. They are important to the meaning and effective application of the clauses in the chapter, so I recommend that that clause stands part of the Bill. I hope that my explanations regarding the new clauses, which ensure a full and robust remedy for the local government workforce, have been helpful to the Committee.

Photo of Tulip Siddiq Tulip Siddiq Shadow Minister (Treasury)

I am grateful for the explanation given by the Minister. We support the changes to the local government pension scheme and the other technical amendments, in particular those that aim to broaden the scope of members’ eligibility for the proposed remedy.

Photo of Louie French Louie French Ceidwadwyr, Old Bexley and Sidcup

I rise to declare an interest. Although I have no financial interest in the local government pension scheme, I am still a sitting councillor until May this year, and I sit on the pensions committee. I apologise if I should have made my declaration sooner.

Photo of Matt Rodda Matt Rodda Shadow Minister (Work and Pensions) (Pensions) 12:45, 27 Ionawr 2022

I am grateful to the Minister for expanding on those points. I reiterate the importance of listening to the views of women workers in the public sector. They are obviously a large proportion of workers in the public sector, as he well knows. In particular, with this group of new clauses on the local government pension scheme, it is important for the Government to get that right. I urge him to continue to talk and listen carefully to the relevant unions. I should declare an interest as a member of the GMB, which is one of the relevant unions. I believe there is a great deal of knowledge in the local government profession and in the unions on such matters. Please will the Minister consult widely and listen on the fine detail, to ensure that we get it right for the many workers in local government? It is perhaps worth adding that there are a number of other issues with women’s pensions as a whole and a wider context of ensuring that pensions for women are protected and funded properly.

Photo of Simon Clarke Simon Clarke The Chief Secretary to the Treasury

I thank the hon. Gentleman for what he said. As a former Minister for Local Government, I absolutely agree with everything he says about the value of local government workers and that women form a disproportionately substantial part of the local government workforce. They make up more than 70% of the scheme’s membership, so it is vital that their voice is listened to, and I commit that it will be.

Question put and negatived.

Clause 77 accordingly disagreed to.

Clause 78 disagreed to.

Clause 79 ordered to stand part of the Bill.