S ome members will be aware that a recent court decision on public service pensions and age discrimination has resulted in a large-scale pension exercise for all those who were in a public service pension (including civil servants) at some point during the period 31 March 2015 to 1 April 2022.

Civil servants who were in service during that period will get a letter from the scheme giving them the option to move some of their service to the Alpha scheme. All current civil servants, even those partially retired, will move to Alpha in April this year.

Background
In April 2015 the government introduced reforms to public service pensions, affecting civil servants, teachers and health workers among others. In the civil service, this meant moving most civil service scheme members to a scheme called Alpha. Members who were closer to their normal scheme pension age were ‘protected’ from moving to the reformed Alpha scheme, instead remaining in their existing scheme. They were called ‘protected’ members.

The dates used to determine closeness to pension age were 2012 when planning started, although the change did not occur until 2015. So members in Classic, for example, whose scheme normal pension age was 60 years, remained in Classic if they were 50 years old or older in March 2012.

This was seen as beneficial to the member as although benefits built up more slowly, older schemes did have a lower pension age, so people could retire earlier.

People who were slightly younger moved across to Alpha gradually. This was called tapered protection. Although those working past their scheme pension age often lost the advantages of the older scheme, most people welcomed the chance to stay in their existing scheme. No-one had a choice.

However, younger members of the Judges pension scheme and Firefighters thought that this protection for older pension scheme members was unfair to younger people and went to court.

This resulted in a recent Court of Appeal decision on public service pensions, generally known as the McCloud or Sergeant cases on age discrimination.

It was determined that this applied across the public sector despite evidence from some schemes that younger members were advantaged from the reforms. The ruling means those who were left in legacy schemes such as Classic have unfairly benefited due to age and that discrimination against younger scheme members needs to be remedied.

A few years of work by the schemes have followed, in conjunction with member representatives, and there have been public consultations on how a remedy could be put in place without causing more discrimination.

This led to the Public Service Pensions and Judicial Offices Bill, putting in place regulations to enable the closure of the legacy schemes such as Classic, Premium, Classic Plus and Nuvos and move all current scheme members actively building up a pension into Alpha or their scheme equivalent. This will be from 1 April 2022.

This has meant a large-scale pension exercise for all those who were in service building up a public service pension (including civil servants) at some point during the period 31 March 2015 to 1 April 2022 – known as the Remedy period.

It means that everyone who is affected – most of those who were building up public service pensions during all or part of the period from 31 March 2015 to 1 April 2022 will get a ‘remedy’. This relates to young and older scheme members. The solution, known as the Remedy, to remove the age discrimination means that on 1 April 2022 all active scheme members (those still working and building up civil service pension), including partially retired members, will be in the Alpha scheme.

This will place everyone on an equal footing for how pensions will be built up from April 2022 going forward and will therefore bring an end to the ‘discrimination’. 

To rectify the discrimination during the Remedy period, all affected will be offered the choice to move that portion of service only from the legacy scheme to Alpha or vice versa.

How will this affect pensioners?
There will be a separate exercise to offer all those affected members who are now retired a choice of how their benefits will be calculated for the period from 2015 to 2022, which will commence in 2023.

Civil servants who were in service between the relevant dates will get a letter from the scheme giving them the option to move some of their service to the Alpha scheme. This means that any service within that seven-year period can be calculated either as the legacy scheme you are currently in, such as Classic, Classic Plus, Premium or Nuvos, and your pension will remain as it is now. For many of you, that will be an obvious choice.

You will be given another calculation for the same period of Public service service in the Alpha scheme and you can choose that scheme for that relevant bit of service if you think it is better.

Alpha is a very different scheme. There is no automatic lump sum and most importantly it involves the same pension age as the state pension, so leaving earlier than that will result in a reduction.

No one is asking you to make a decision until 2023, but the sorts of things you may need to consider are:

• Age you retired?
• Did you take a lump sum?
• Was there any contributions
  difference?
• Was there a difference in ‘partner’
  benefits?
• Was there a difference in ill health
  retirement arrangements?

These are just some of the factors you need to take into account. You will also need to be clear about what the ‘do nothing’ option means. At the moment, that could differ depending on your circumstances. If the difference is marginal and you are generally not sure, what default will apply?

Another issue to consider is tax. If you change scheme for that period, your tax-free amount may change or you may hit a cap. In the last Budget, the chancellor allowed for tax exemptions on compensation.

You may be able to protect yourself on annual allowance charges. Most people will find no change and some will benefit. However, in some cases it may be a good idea to get financial advice.

The Remedy is there to put people in the position they would have been in if they had been in a different scheme during that period.

The CSPA is being consulted on the letters going out and will try to ensure that they are as clear as possible and that you get enough information to make your choice.