In June 2010 the coalition government established an Independent Public Service Pensions Commission (IPSPC) chaired by Lord Hutton of Furness, to look at the long-term affordability of public sector pensions.
On 10 March 2011, the IPSPC published a report recommending the replacement of the existing public service pension schemes with new ones, with benefits based on career average earnings rather than final salary.
“A Career Average Revalued Earnings (CARE) scheme is a type of defined benefit pension scheme where the benefits at retirement as based on the value of your pensionable earnings each year during your NHS career.”
On 25 April 2013 the IPSPC’s recommendations were legislated in the Public Service Pensions Act 2013.
In April 2015 most public service pension schemes were reformed, the NHS Pension Scheme included. Members who were within 10 years of their normal retirement age on 1 April 2012 were given transitional protection, and were permitted to remain in their final salary scheme. In addition, some members more than 10 years away from retirement were eligible for tapered protection, which allowed them to remain in their original scheme for an extended period of time. Younger scheme members received no protection.
Following claims brought by judges and firefighters, in December 2018 the Court of Appeal ruled that transitional protection was unlawful on the grounds of age discrimination.
In June 2019, the Supreme Court refused the Government permission to appeal the Court of Appeal’s December 2018 judgment.
In response, on 15 July 2019 the government announced its intention to remedy the difference in treatment across all the main public service pension schemes.
A government consultation was released on 16 July 2020 with proposals on changes that could be made to the scheme to remove the discrimination.
The government’s proposals will apply to all pension scheme members who were in service on or before 31 March 2012 and on or after 1 April 2015, including those with a qualifying break in service of less than 5 years.
The government will provide affected members with the option to choose between their old (final salary) and new (career average) pension scheme benefits for service between 1 April 2015 and 31 March 2022.
The consultation outlined two possible ways this might work:
1. Immediate Choice
Members will need to make an irrevocable decision of accruing benefits in either their legacy or new pension scheme, likely being given 12 months to make their decision.
2. Deferred Choice Underpin
Members would stay in their legacy scheme but could opt at retirement for the alternative scheme if this would produce a larger pension.
The consultation closed on 8 October 2020.
On 4 February 2021, the government published its consultation response and confirmed its intention to proceed with the Deferred Choice Underpin (DCU) option, as the preferred approach to remedying the unlawful age discrimination in the 2015 reformation of public service pension schemes. This means that scheme members will be allowed to make a decision between legacy and reformed scheme benefits shortly before benefits are paid from the scheme.
Find out more about where things stand now, and how it affects you.
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