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Police Mutual

Pension Judgement

Judges’ pensions Employment Tribunal: who wins?
The Employment Tribunal on judges’ pensions has been reported as a victory. But who wins?
Andy Fittes, PFEW General Secretary, said today: “The ET ruling was on a narrow part of pension legislation, and ruled against a provision that unions across the public sector had fought for. The PFEW believes that the success of this challenge could have unintended consequences to the detriment of public sector workers.”

So, what was the case about?
The case was solely about transitional protections, and whether these caused direct discrimination by age, and indirect by gender and ethnicity.
• There was no challenge to the legality of the introduction of a new judges’ pension scheme.
• The judge acknowledged that there is no statutory ban on reducing pensions and pay.
• The judge was very clear that he was not ruling on wider public sector pensions’ reform, as this is a matter of public policy.

What are transitional protections?
Transitional protections are a mechanism that was lobbied for by unions – including PFEW - across the public sector to protect members. The aim is to ensure those members who cannot remain entirely in “old” schemes, but who have fewer years to serve before retirement, are given special arrangements to help them adjust. The rationale was that these members would already have based future plans on an expectation of a certain pension pot.

There are three types of scheme members:
• Those solely in the old scheme
• Those in the new scheme but with transitional protections
• Those solely in the new scheme

What does the judgement say?
The judgement does not state that either judges only subject to the new scheme (without protection) or in the old scheme have been treated illegally. It only states that those judges afforded transitional protection have been treated in a way that causes discrimination. In fact, the judge goes further, and states that those with transitional protection have been treated better than they could have been. When considering whether transitional protections were a proportionate means to achieve a legitimate aim, the judge considers whether they may have been “excessive” and states that an option might have been to simply follow Hutton’s recommendation that accrued rights under the old scheme be protected. The judges’ schemes both protected old rights and offered transitional protection. (As do the police schemes).
The judge states that in conceding to unions that transitional protections were needed, the employer (the Ministry of Justice) failed to seek or providence sufficient evidence of need.

What might be the next steps?
There are a number of things that may happen:
• The Ministry of Justice may appeal. However, if it does, it will actually be forced to adopt the position the unions initially argued for – i.e. that transitional protections are a good thing.
• The Ministry may not appeal, and instead seek to remove the unfairness.

There are a number of ways the Ministry might do so:
1. The Ministry could offer all judges the same protection that members with transitional protection get – but that would cost more money from the public purse – possibly an additional £80,000,000 for judges alone. (The same across the public sector would cost billions of pounds).
2. Bearing in mind that the unfairness has been deemed to be insofar as those with transitional protections have been treated better (in the judge’s view) than they might have been, one option may be to remove transitional protections completely.
This would reduce the cost to the public – possibly by £28,000,000.
Unfortunately if this latter course is taken, some members of the pension scheme lose out. Ultimately it would mean no member of the pensions’ scheme will gain from the claimants’ win, in this ET. What is the PFEW doing?

“We continue to monitor the situation,” said Mr Fittes. “We continue to believe that transitional protections are a good thing, and are deeply disappointed that this case may have consequences that the litigants did not anticipate, and that would cause pension scheme members to lose money.
“We believe it is important that we act in the best interests of as many of our members as possible. We believe transitional protections offer a better pension for more members.
“The ET decision is only binding on the judges, not on any other employers - although it may be referred to in other ET cases. If the Ministry for Justice appeals, then that Employment Appeal Tribunal (EAT) decision would have to be followed by other ETs, (albeit it would not be binding if it could be proved the facts of the case differed sufficiently).
“The judges’ position is different in many respects from the police position. However, it remains to be seen whether – in fighting the one common element of schemes, the transitional protection – the litigants have opened the door to poorer pension provision in the public sector.”

Auto-enrolment – the rationale

Every three years all employers in the UK – including police forces – are obliged to re-enrol workers who have previously opted out back into their pension scheme. The intention behind this is to safeguard pensioners and ensure they are provided for in their old age, and don’t overlook the opportunity to build up a pension. For officers, this means those who have opted out of any of the police schemes will be enrolled into the Police Pension Scheme 2015 (2015 CARE Scheme).

We are aware that some officers have opted out of the schemes. These officers will be re-enrolled, and if they do not opt out again then they will have pension contributions deducted from their salaries. Clearly this may cause hardship if the deductions are sizable, or if the officer is not alert to the possibility, and fails to act.

We understand there are relatively few officers who have opted out. However, because of the possible impact on these officers we are keen to ensure that they understand the auto-enrolment process and take whatever action they feel appropriate.

Process
The aim of this communication is to ensure that officers know what to look out for. We would not encourage officers to opt out without taking independent financial advice. However, if an officer is certain that he or she wishes to remain opted out of the CARE Scheme then the following applies:
• There is an opt out period. The local employer (force) may specify this, but if not then the statutory provision applies under (Reg 9(2) or (3) of the Occupational and Personal Pensions Scheme (Automatic Enrolment) Regulations 2010. This means the opt-out period will start on the date statutory re-enrolment information is given
• The employer MUST give the following information to the officer
o A statement that the officer has been or will be re-enrolled
o The date for this
o The value of any pension contributions, and a statement that these will be deducted
• The contributions must be deducted from the next payroll after re-enrolment

What should I do if I previously opted out and wish to do so again?
• Any officer who is certain that he or she wants to still opt out will have to make that known to the employer and pension provider as soon as possible after receiving the statutory letter or email notifying them that they are being re-enrolled
• The officer has one month to complete an opt-out notice (provided by the pension provider) and leave the scheme,
• An opt –out notice cannot be submitted prior to the officer becoming an active member
• After receipt of this, the employer must stop deducting contributions, and refund any already deducted since re-enrolment

Clearly for some officers it is possible that the initial deductions from salary will occur before the opt-notice is actioned by the force. This will depend on local payroll timetables. If you have previously opted out and intend to do so again, then we suggest you contact your force HR (or scheme administrator) to check the timings.

Be alert to the need to complete an opt-out notice as soon as possible.