I beg to move,
That the Committee has considered the draft Judicial Pensions (Amendment) Regulations 2024.
It is an honour to serve under your chairmanship, Mr Betts. This is my first Delegated Legislation Committee as a Minister. In fact, this is my first speech in this House since the general election. It is somewhat of an unexpected pleasure to be speaking on the subject of judicial pensions.
The draft statutory instrument amends a number of the judicial pensions regulations, and specifically the Judicial Pensions (Fee-Paid Judges) Regulations 2017, referred to as the FPJPS regulations; the Judicial Pensions (Fee-Paid Judges) (Amendment) Regulations 2023, referred to as the 2023 FPJPS amendments; the Judicial Pensions Regulations 2022, referred to as the JPS22 regulations; the Judicial Pensions Regulations 2015, referred to as the JPS15 regulations; and the Public Service Pensions Act 2013 (Judicial Offices) Order 2015, referred to as the judicial offices order. I hope the Committee is keeping up.
The judicial pension scheme is made up of a number of historical pension schemes. Since April 2022, the only scheme open for pension benefit accruals is the judicial pension scheme 2022. All preceding judicial pension schemes closed to further accruals on 31 March 2022, but the older schemes are still relevant, as the majority of judges have service extending across multiple schemes.
The FPJPS regulations established the fee-paid judicial pension scheme. The JPS15 and JPS22 regulations established the judicial pension scheme 2015 and the judicial pension scheme 2022 respectively. The amendments in the draft regulations will make a range of changes to improve and, where necessary, correct the running of those schemes, in line with statutory requirements and actuarial advice.
By their nature, the draft regulations are highly technical. In essence, the amendments to the existing schemes do the following. First, they provide for an employer cost cap in the judicial pension scheme 2022, following the completion of the scheme valuation in February 2024. Secondly, they add further eligible judicial offices to the appropriate pension scheme, where that eligibility has now been determined. Thirdly, they extend a number of deadlines for member elections under the fee-paid judicial scheme. Fourthly, they extend powers to reconcile amounts that were paid to judges whose pre-2000 service must now be taken into account as a result of the O’Brien 2 litigation, in respect of those new, pre-2000 entitlements, with their formal entitlements for that period. Finally, a number of technical changes are required to facilitate the smooth running of the pension schemes. I shall cover each of those points in more detail.
The amendments provide for inclusion of a cost control mechanism—CCM, for short—in the JPS22 regulations. That is a statutory requirement under the Public Service Pensions Act 2013 for all public sector pension schemes. That must be included by 6 February 2025, one year on from the first actuarial valuation of the scheme by the Government Actuary’s Department.
The CCM is designed to ensure a fair balance of risk with regard to the cost of providing public service defined-benefit pension schemes between members of those schemes and the Exchequer. That is partly achieved through setting an employer cost cap. If, when the overall CCM is tested, costs have increased or decreased by more than a specified percentage of pensionable pay compared to the employer cost cap, member benefits and/or member contributions in the relevant scheme are adjusted to bring costs back to target. That could mean, for example, that a member’s contribution rate could go up or down. However, the mechanism is designed with the intention that that would be triggered only by “extraordinary, unpredictable events”.
The amendments also add a number of judicial offices into the FPJPS, JPS15 and JPS22, where their eligibility for a judicial pension has been determined. That will allow those members to accrue pensions in the correct scheme for their office and, where applicable, to have access to retrospective entitlements in JPS15 and JPS22, enabling members with service in those offices to access the benefits they are entitled to and to make the correct contributions to the scheme.
A number of deadlines are also being extended for member elections in the FPJPS. Following the O’Brien 2 judgment, the scheme was amended in 2023 to take into account eligible service prior to 7 April 2000, in order to mirror pension entitlements for the salaried judiciary. The 2023 amendments set deadlines by which eligible members must make an election concerning their FPJPS pension provisions and purchase additional pension benefits that they were entitled to following the O’Brien 2 judgment. We are now extending those deadlines to allow more time for the scheme to engage with eligible members, in order to give members the time and information needed to make an informed choice.
In advance of the FPJPS regulations’ being made, the Ministry of Justice made interim payments in lieu of pension, known as PiLs, to eligible judges, to provide an approximation of the remedy they would likely receive once the legislation was in place and operationalised. The regulations included a power to reconcile those payments with the actual amounts of pension owing. The power allowed the MOJ, once the regulations were in force, to either recover any excess PiLs payments made, or pay out further pension where PiLs had been underpaid.
Following the O’Brien 2 litigation, this power was extended by the 2023 FPJPS amendments to permit the MOJ to reconcile PiLs paid to judges in relation to their pre-2000 service, where those amounts were paid before 1 April 2023, the date on which the 2023 FPJPS amendments came into force. However, exact pension entitlements could not be calculated immediately from 1 April 2023, due to operational constraints, so payments continued to be made on an approximated basis after that date, albeit that they were paid as pension rather than PiLs. Therefore, the amendment regulations before us extend the reconciliation powers to permit MOJ to continue to reconcile the approximated pension payments made to judges from 1 April 2023 in respect of their pre-2000 service.
Finally, a number of further technical amendments to the FPJPS and to JPS22 correct typographical errors and cross-references to ensure that the regulations reflect the policy intention. Additionally, the FPJPS regulations included a voluntary fee-paid judicial added benefits scheme when it came into force; this was amended in 2023 to reflect the O’Brien 2 remedy. The scheme is highly technical, and in operationalising it we have identified the need to amend the scheme again to simplify its structure, make some clarifications and corrections, and include updated actuarial factors for determining cost and conversion values for added units of benefit. This will allow the scheme to run more smoothly and will better reflect the original intention to mirror the provisions available to relevant salaried comparators
I turn now to the consultation that we have undertaken on these amendments. On 19 February 2024 the MOJ opened a consultation on the proposals, which closed on 14 April. There were six responses, which were of a technical nature, with no objections to the content of the amendments. On 14 October the Government response was published, setting out that no further changes to the amendments were needed to address the responses.
Officials in the devolved Administrations in Scotland, Northern Ireland and Wales have been kept apprised of the development of the amendment regulations, in particular in relation to the offices whose jurisdictions are in those countries, and their views have been reflected in the drafting. The Secretary of State for Scotland was also consulted.
Subsequent to the consultation, the MOJ identified the need for additional amendments to extend the reconciliation powers and to further extend certain deadlines. It engaged the senior judiciary on these matters, which also resulted in no objections to the amendments.
In conclusion, I assure Committee members that the amendments set out in this statutory instrument are necessary to improve and correct the running of the judicial pension schemes, to meet our statutory duty to insert a cost cap mechanism and, together with other measures on judicial pay and pensions, to help ensure that we can continue to support our outstanding independent judiciary.