The following is NIPSA's response to the consultation on Public Service Pension Schemes:  Changes to the Transitional Arrangements to the 2015 Schemes which was submitted today to the Department of Finance (Pensions Division):

NIPSA, as the leading public service trade union in Northern Ireland welcomes the opportunity to respond to the above consultation and the key elements to the response are set out below.

NIPSA, as an NIC ICTU affiliate fully endorses the response from the Central Consultation Working Group (CCWG) which has been submitted separately.

It is important to recognise that regardless of which option is applied there will be a need for ongoing consultation and negotiation via the CCWG on all common aspects of the applied option. In addition, NIPSA expects to be fully involved in any specific scheme amendments following this initial consultation on a scheme by scheme basis. The schemes relevant to this consultation which NIPSA has a particular interest in is the Civil Service Pension Scheme and the Health Pension Scheme.

As you will be aware pensions is a devolved matter in Northern Ireland and therefore a NI solution needs to be found to the age discrimination elements and the remedies in relation to the McCloud judgement. NIPSA whole heartedly endorses the CCWG position that is total unjustified and unacceptable to bring the cost control mechanism into play as part of the remedy in McCloud and NIPSA will resist any attempts to do so.

Question 1: Do you have any views about the implications of the proposals set out in this consultation for people with protected characteristics as defined in Section 75 of the Northern Ireland Act 1998? What evidence do you have on these matters? Is there anything that could be done to mitigate any impacts identified?

An issue arises as to the potential adverse impact on those who entered the schemes between 1 April 2012 and 31 March 2015. There is also significant gender pensions gap being more than double the gender pay gap in public service employment. More work needs to be done to on the future impact of scheme changes to address these issues.

Question 2: Is there anything else you would like to add regarding the equalities impacts on the proposals set out in this consultation?

The cost of the McCloud judgement should not be included in the cost control mechanism. It will be necessary to submit all schemes to a full equality impact assessment and equality audit not limited to the McCloud judgement but also cases such as Brewster, Walker and Goodwin.

In addition, what about those scheme members who had a 5-year career break, but the employer was unable to place them a post and therefore they had in excess of a 5-year break, which was not of their making. This issue needs addressed to ensure they are not treated with further detriment.

Given the very tight timeframes for the legislative processes and the fact that the NI Assembly term runs out in spring of 2022 NIPSA has some concerns that the 1 April 2022 date can be delivered. If that date cannot be delivered what are the implications and what other issues need to be considered so that scheme members are not further detrimentally impacted.

Question 3: Please set out any comments on our proposed treatment of members who originally received tapered protection. In particular, please comment on any potential adverse impacts. Is there anything that could be done to mitigate any such impacts identified?

Not all schemes had a taper provision and for those that did it was not a uniform application. The detailed arrangement for tapered members should be on a scheme by scheme basis. In addition, given the issues are complex it will be absolutely necessary for scheme members to have access to independent financial advice, paid for by government, to ensure that whatever choice they make they are not detrimentally impacted by something that was not of their making and was proven to be detrimental on the grounds of age.

What arrangements for repayment will be made and will repayments also have interest attached?

There is no doubt that with 130,000 scheme members affected the deferred choice underpin would assist in a more accurate assessment of member’s choice and ensuring financial advice could be made available. There would be a significant problem with a 12-month window for 130,000 scheme members seeking to access independent advice which NIPSA believe should not be borne by the individual.

Para 2.34 does not factor in potential changes to public service pension schemes and pension taxation rules.

Question 4: Please set out any comments on our proposed treatment of anyone who did not respond to an immediate choice exercise, including those who originally had tapered protection.

NIPSA believes that any default solution fails to deliver the approach based on choice which we assume has been adopted to minimise detriment. With a large number of scheme members in scope of the remedy should rule out the immediate choice in favour of the staggered flow of case interventions provided by adopting the deferred choice.

NIPSA would also query if schemes will advise members that certain options will trigger Annual Allowance charge? This is very important because a scheme member could make a choice that ultimately would be financially detrimental to them as each person’s tax issues are exactly that personal to them. NIPSA strongly argues that on retirement each individual should be entitled to financial advice, which is paid for by government.

Question 5: Please set out any comments on the proposals set out above for an immediate choice exercise.

The consultation document sets out the administrative challenges schemes would face in contacting 130,000 scheme members and providing information and support required to make an informed decision. Whilst it may remove long term administrative issues, it is unclear if schemes could conduct such an exercise without significant resource input which is liable to adversely impact on normal service delivery. An immediate choice could mean that scheme members could make a decision that will affect their level of benefits in retirement based on partial or possibly inaccurate information. This has the potential for further litigation by individuals in the future.

Question 6: Please set out any comments on the proposals set out above for a deferred choice underpin.

The Deferred Choice Underpin will make it easier for scheme members to deal with and provides scheme administrators with time to deal with priority issues such as ill-health and death-in-service cases.

Question 7: Please set out any comments on the administrative impacts of both options.

While both options involve major administrative challenges NIPSA believe the Deferred Choice Underpin offers the best prospects of a solution that scheme members can live with. Normally administrative costs are factored into scheme valuations, McCloud costs should be excluded on the basis that this is something outside of the control of scheme members and came about by a decision of Government which was found by the courts to be discriminatory on the grounds of age.

Question 8: Which option, immediate choice or DCU, is preferable for removing the discrimination identified by the Courts, and why?

Out of the two options put forward in the consultation the deferred choice option is clearly preferable for the reasons outlined above. It provides the better prospect of facilitation informed decisions.

Question 9: Does the proposal to close legacy schemes and move all active members who are not already in the reformed schemes into their respective reformed scheme from 1 April 2022 ensure equal treatment from that date onwards?

Whilst application of the reformed scheme from 1 April 2022 would appear to provide greater equal treatment NIPSA remains opposed to the Hutton changes especially with regarding to NPA linkage to SPA. Also NIPSA does not accept the inclusion of McCloud costs as employee benefits for the 2016 valuations.

Question 10: Please set out any comments on our proposed method of revisiting past cases.

This is a matter that will need dealt with at scheme level.

Question 11: Please provide any comments on the proposals set out above to ensure that correct member contributions are paid, in schemes where they differ between legacy and reformed schemes.

This is a matter that will need dealt with at scheme level.

Question 12: Please provide any comments on the proposed treatment of voluntary member contributions that individuals have already made.

This raises scheme specific issues and in particular the Effective Pension age provision in the Civil Service Pension Scheme. These are complex issues and will need detailed consideration and explanation to scheme members.

Question 13: Please set out any comments on our proposed treatment of annual benefit statements.

The Annual Benefit provision is a statutory requirement with a set timeline, it will be essential that Pension Boards are fully consulted on the Annual Benefit Statement implications and that the process is introduced quickly and made as easy to understand as possible.

Question 14: Please set out any comments on our proposed treatment of cases involving ill-health retirement.

NIPSA agrees that Ill Health Retirement pensions within the Remedy Group must be treated as high priority cases and resources allocated to rectify their pensions as soon as possible at scheme level.

Question 15: Please set out any comments on our proposed treatment of cases where members have died since 1 April 2015.

As with Question 14 this will need sensitive handling. It is also likely to be the case that dependents are even less likely to be able to reach decisions on options and will require to be supported in obtaining independent financial advice. The Scheme Advisory Boards should have a role in deciding and monitoring how the administrators tackle the back log of cases.

Question 16: Please set out any comments on our proposed treatment of individuals who would have acted differently had it not been for the discrimination identified by the Courts.

NIPSA agrees that complex cases will arise due to contingent decisions. This issue will require full engagement at scheme level.

Questions 17 & 18: If the DCU is taken forward, should the deferred choice be brought forward to the date of transfer for Club members? Where the receiving Club scheme is one of those schemes in scope, should members then receive a choice in each scheme or a single choice that covers both schemes?

Retention of the transfer club provisions are important; however, it would be important to ensure such members are not disadvantaged to any degree over those not covered by club transfer provisions.

Question 19: Please set out any comments on our proposed treatment of divorce cases.

Divorce is a matter to be settled by the divorcing couple. The Scheme’s role is to implement pension sharing or earmarking orders. There could be potential sex discrimination should a pension credit member be adversely impacted by a decision of the pension debit member.

Question 20: Should interest be charged on amounts owed to schemes (such as member contributions) by members? If so, what rate would be appropriate?

Members should not be disadvantaged by having to pay interest.

Question 21: Should interest be paid on amounts owed to members by schemes? If so, what rate would be appropriate?

Yes, there are options e.g. at SCAPE Discount rate or RPI.

Question 22: If interest is applied, should existing scheme interest rates be used (where they exist), or would a single, consistent rate across schemes be more appropriate?

A single rate across schemes should be applied.

Question 23: Please set out any comments on our proposed treatment of abatement.
This is liable to be a scheme specific issue and therefore will need dealt with at Scheme level in due course.

Question 24: Please set out any comments on the interaction of the proposals in this consultation with the tax system.
Aspects of the tax implications were discussed at the CCWG on 30 October 2020, in particular the following questions. The responses for the HMT official were helpful and NIPSA would wish to see assurances confirmed.

Question Response
What guarantee can Government give on either option but in particular the DCU option that when individuals are at their retirement date Government will apply the current annual allowance (including the retrospective 3 year unused provision) and LTA provisions especially if by then changes have been made to the tax provisions on pension?
  • The tax system is kept continuously under review.
  • We will need to ensure that the McCloud remedy is resilient against changes in the tax system to prevent any perpetuation of the existing discrimination.
  • (TUS stated that this was helpful but more information is needed on how this would be accomplished)
If additional tax charges arise and assessed via the DCU option will Government guarantee that interest will not be charged for the period which is likely to be many years in a lot of the cases?
  • The rates of interest charged by HMRC are set out in Finance Acts.
  • The consultation document sets out situations where individuals suffer inappropriate tax outcomes they will receive compensation.
  • (TUS stated that changes to the schemes to achieve this could result in higher costs and that it would not be acceptable for members to incur these).
  • HMT is still working through this aspect and is interested to hear any proposal or views.