Public Service Pensions and Judicial Offices Bill [HL]

Explanatory Notes

Compatibility with the European Convention on Human Rights

465 Viscount Younger of Leckie has made a statement under section 19(1)(a) of the Human Rights Act 1998 that, in his view, the provisions of the Bill are compatible with the Convention rights.

466 Chapter 1 of the Bill will allow schemes (other than judicial schemes and local government schemes) to restore eligible individuals’ membership of their legacy scheme retrospectively for the remedy period. This in turn will have various consequences, most of which will have retrospective effect. Any retrospective changes made to pensionable entitlements already accrued will, prima facie, engage Article 1 Protocol 1 (protection of property) of the European Convention on Human Rights (A1P1), as it is generally accepted that pensionable benefits that have already been accrued are "possessions" within the meaning of A1P1, and this also extends to the legitimate expectation of obtaining effective enjoyment of a possession. Because certain members are excluded from the remedy due to their age, Article 14 (protection from discrimination) may be engaged in conjunction with A1P1. However, this interference with the peaceful enjoyment of possessions can be justified. The Bill limits the extent of retrospective changes to the purpose of voiding membership of the new schemes, establishing rights under the existing legacy schemes for the remedy period, and requiring schemes to implement the deferred choice exercise (or an immediate choice in the case of pensioner and deceased members). Moreover, regulations made under the Bill will be subject to the provisions set out in section 21 PSPA 2013 (consultation). The retrospective changes themselves have a legitimate aim in the general interest, as they will remove the discrimination identified by the Court and allow all eligible members the choice between legacy and new scheme benefits for the remedy period. The measures also strike a fair balance between the rights of the owner of possessions and the public interest: the Bill has been designed to ensure that appropriate steps are taken to try to minimise or compensate for negative consequences for particular individuals (with compensation payable in respect of losses arising due to the retrospective remedy), in order to ensure that any interference with possessions under A1P1 and/or breach of legitimate expectations is justified and proportionate. It is also justifiable to align members’ tax position to the pension position they would have been in had they not been treated as a member of the new scheme from 1 April 2015 so that their resulting tax position is consistent with their pension position following implementation of the remedy, particularly as this can be done by making payments in instalments (Clause 23(2)(a)).

467 Members who have tapered protection will be entitled to choose benefits under one scheme only for the entire remedy period; they will not be able to retain the mixed service they accrued under tapered protection. This is because allowing tapered protection to continue would in effect be perpetuating the discrimination. Any detrimental effects on members can be mitigated by the provision of compensation on a case-by-case basis, adopting a proportionate approach to the recoupment of any overpaid benefits and allowing regulations to make further provision about the benefits payable in relation to tapered protection cases.

468 In respect of the judiciary, Chapter 2 (Judicial schemes) will provide judges in scope of the remedy with a retrospective choice of benefits (either legacy or 2015 scheme) for the remedy period. As with the wider public service pension remedy, this will have various consequences, most of which will have retrospective effect. Any retrospective changes made to pensionable entitlements already accrued will, similarly, prima facie, engage A1P1 but be limited to the extent necessary to implement the remedy and put members, so far as possible, back in the position they would have been in but for the discrimination. The justifications that apply to the wider schemes apply equally to the judiciary. Because judges with full transitional protection are excluded from the remedy due to their age, Article 14 (protection from discrimination) may be engaged in conjunction with A1P1. However, these judges have always had the certainty of entitlement to legacy scheme benefits which, in most cases, will be more generous for these judges than the 2015 scheme. Further, the remedy has been designed to extend the terms offered to these protected judges to others, enabling both unprotected and taper-protected judges to be treated in the same way as protected judges. Any interference with the peaceful enjoyment of possessions can therefore be justified, as it is for a legitimate aim in the general interest and strikes a fair balance between the rights of the owner of possessions and the public interest. Members who have tapered protection will be entitled to benefits under one scheme for the entire remedy period; they cannot retain the mixed service they had accrued under tapered protection. This is the same approach as taken in the wider public service remedy and the same legal analysis and justifications apply as described in respect of the Chapter 1 provisions. Importantly, the Bill provides for mitigation of any detrimental effects on members in scope, including members who have tapered protection.

469 Clause 17 and Clause 54 make provision where an eligible member has or will in future divorce or dissolve a civil partnership. They allow a pension credit to be adjusted on the assumption that the corresponding pension debit member does, or does not, make an immediate or deferred choice, or in the case of the judiciary, a legacy or 2015 scheme election (regardless of whether they in fact do so). This affects the status of ex-spouses or ex-civil partners who have divorced, and therefore has the potential to interfere with Article 8 (right to respect for private and family life). However, the powers are designed such that schemes have flexibility to ensure interference is avoided entirely (by allowing the pension credit member to continue to receive at least the same benefits they have been receiving despite the pension debit member’s choice or lack thereof) or kept to a justified and proportionate minimum (by permitting schemes to make payments to pension credit members on a discretionary basis, in the form of compensation, and to make provision in relation to benefits, in cases where tapered protection is removed) to address the retrospective consequences of the remedy, and are therefore compatible with the European Convention on Human Rights (ECHR).

470 Chapter 3 (Local government schemes) allows retrospective amendments to the Local Government Pension Scheme (LGPS) which will remove the discriminatory provisions. LGPS transitional protection was provided through an underpin. All active scheme members moved to the reformed LGPS England and Wales pension scheme on 1 April 2014 (April 2015 for LGPS Scotland and Northern Ireland), but protected members were provided with a guarantee that their pension at retirement, or at their legacy scheme Normal Pension Age if earlier, would not be any lower than it would have been in the legacy scheme. Because of this difference in transitional protection, there are separate measures in the Bill which allow the extension of the underpin. The engagement with A1P1 is proportionate and justified, as it will remove the discrimination and allow all eligible members to receive the higher of legacy or new scheme benefits for the remedy period.

471 Chapter 4 (General) of Part 1 closes the legacy schemes to all members from 31 March 2022 which potentially engages A1P1 rights. However, A1P1 does not guarantee an open-ended right to acquire further possessions such as benefits in the legacy pension schemes. Any expectation that members may have had that they would be able to continue in their legacy scheme until retirement is no longer legitimate given the Court of Appeal’s decision that transitional protections were discriminatory. Moreover, when changes to pension schemes are introduced, there will always be differences in the overall pension provision for different members across the course of their careers, depending on the point at which pensionable service began. Accordingly, these provisions are considered to be compatible with A1P1.

472 With regard to waiving any ceiling breaches of the cost control mechanism that arise from the 2016 cost control valuations, this provision needs to be retrospective because the valuations will be completed before the Bill is enacted, meaning that the rectification process will be triggered before it is possible to stop the process through the Bill. Accordingly, the initial trigger will need to be stopped retrospectively. Whilst this technical measure will have an effect on members’ pensions, it will be to prevent the potential reduction of member benefits. Any interference with property rights is therefore expected to be beneficial to members and is, as such, justifiable. In addition, the Bill ensures that the actuarial valuation carried out in relation to the Northern Ireland Local Government Pension Scheme is retrospectively voided, since this was completed before the pause of the cost control mechanism and needs to be reassessed consistently with other public service pension schemes.

473 The measures in Part 2 (Pensions and Banking (Special Provision) Act 2008 Bodies) have the potential to engage A1P1. However, these measures do not of themselves mandate any particular action but confer powers on the Treasury to make regulations. Compliance with A1P1 would have to be considered by the authority exercising the power to make the regulations at the time those regulations were made. This in itself provides a safeguard against the beneficiaries of the BBS and NRAM pension schemes and other parties to the transfer being adversely affected, as the exercise of these powers will need to ensure that any interference with property rights is justifiable and a proportionate means of achieving a legitimate aim. In order to further protect the interests of the members of the schemes, the Bill requires the authority exercising the power to ensure that the provisions of the new public scheme for payment of pensions or other benefits are, in all material respects, at least as good immediately after the regulations are made as they were before that time, or in the case of Money Purchase Benefits that the value of a person’s right to Money Purchase Benefits under the new scheme is at least equivalent to the value of their accrued rights prior to the transfer. This requirement will have to be met in relation to each person who has qualifying accrued rights. Furthermore, the authority exercising the power to establish a new public scheme and transfer rights is required to consult with the relevant trustees before making regulations that would transfer qualifying accrued rights to the new public scheme or which make provision for the transfer of assets or liabilities of the BBS or NRAM Pension Schemes. Further protection is provided by requiring regulations that are subject to consent requirements under the Bill or which make provisions that have retrospective effect to undergo the affirmative resolution procedure.

474 The measures in Part 3 (Judicial Offices) regarding payment of judicial allowances and mandatory retirement age of judges engage Article 6 of the ECHR (right to a fair trial). These measures which relate to the terms and conditions of appointment for judicial office holders are to be considered in the context of the important constitutional principle of judicial independence. The powers of remuneration have already existed in relation to numerous judicial offices in statute and at common law. Judicial allowances are intended to be paid temporarily and in addition to the payment made to them by way of salary which will continue to be protected by the existing salary protection mechanism. Putting the ability to make temporary allowances onto a statutory footing supports the effective functioning of the justice system by ensuring that judges may be appropriately remunerated for additional responsibilities that are likely to be temporary in nature, or to respond to a temporary recruitment and retention requirement. The existence of a mandatory retirement age promotes and preserves judicial independence by not requiring an assessment of a judge’s suitability to continue in office, thus maintaining public confidence in the judiciary; it is not considered that this will be undermined by the increase to 75. It is accordingly considered these provisions are compatible with Article 6.

475 The provision on raising the mandatory retirement age of judges also engages Article 8 of the ECHR (right to respect for private and family life). Any interference with Article 8 caused by the existence of a mandatory retirement age for judicial office holders is in accordance with the law and in pursuit of one or more of the legitimate aims set out in Article 8(2) ECHR. There are strong public policy reasons for having a statutory MRA for reasons of judicial independence, as set out above. It is considered that this underlies all of the legitimate aims set out in Article 8(2) ECHR and that any interference would be a proportionate means of achieving those aims, given their importance. Article 8, together with Article 14 of the ECHR, is engaged by the transitional provision allowing reinstatement of magistrates aged between 70 and 75 on commencement; however, it is considered that the difference of treatment on the grounds of age is in pursuit of legitimate aims, and is proportionate to those aims, given the limited time for which the transitional provision will apply. It is considered that these provisions are compatible with Article 8.

 

19 July 2021