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Public Service Pensions Bill Explanatory Notes

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Public Service Pensions Bill Explanatory Notes These notes refer to the Public Service Pensions Bill as brought from the House of Commons on 5th December 2012 [HL Bill 67] PUBLIC SERVICE PENSIONS BILL —————————— EXPLANATORY NOTES INTRODUCTION 1. These Explanatory Notes relate to the Public Service Pensions Bill as brought from the House of Commons on 5th December 2012. They have been prepared by the Treasury in order to assist the reader of the Bill and to help inform debate on it. They do not form part of the Bill and have not been endorsed by Parliament. 2. These notes need to be read in conjunction with the Bill. They are not, and are not meant to be, a comprehensive description of the Bill. So where a clause or part of a clause does not seem to require any explanation or comment, none is given. BACKGROUND 3. In 2010 the Chancellor of the Exchequer invited Lord Hutton of Furness to chair the Independent Public Service Pensions Commission (“the IPSPC”). The Commission was tasked with undertaking a fundamental structural review of public service pension provision. 4. The IPSPC published its final report1 in 2011. The report contained recommendations to reform public service pensions to balance the interests of taxpayers in relation to the present and future cost of pension commitments in the public service with the need to ensure decent levels of retirement income for public service workers. In March 2011 the Government accepted the IPSPC recommendations as the basis for consultation with public service workers, trades unions and other representative bodies. 5. In November 2011, following discussions, HM Treasury published Public Service Pensions: good pensions that last2 setting out the Government’s preferred pension scheme design as the framework for further discussions. Trades unions were invited to suggest changes to the Government’s preferred scheme design to ensure it best meets the needs of each scheme’s members, within the cost ceilings set by the Government (set for the four largest schemes on 2th November 2011, for the Firefighters’ scheme on 7th December 2011, 1 Independent Public Service Pensions Commission: Final report, 10 March 2011, http://cdn.hm- treasury.gov.uk/hutton_final_100311.pdf 2 Public Service Pensions: good pensions that last, HM Treasury, 2 November 2011, http://cdn.hm- treasury.gov.uk/pensions_publicservice_021111.pdf HL Bill 67―EN 1 55/2 These notes refer to the Public Service Pensions Bill as brought from the House of Commons on 5th December 2012 [HL Bill 67] and for the Police Pension Scheme on 28th March 2012). Following the discussions, scheme- specific design alternatives to the Government’s preferred pension design were put forward. 6. Key scheme design milestones for the new public service pensions schemes were reflected in the following documents: • The Principal Civil Service Pension Scheme Heads of Agreement, 20th December 2011 • The NHS Pension Scheme Heads of Agreement in England and Wales, 20th December 2011 • The Teachers’ Pension Scheme Heads of Agreement in England and Wales, 20th December 2011 • The Local Government Pension Scheme Principles Document in England and Wales, 20th December 2011 • The Firefighters’ Pension Scheme in England Heads of Agreement, 9th February 2012 • The Principal Civil Service Pension Scheme Proposed Final Agreement, 9th March 2012 • The NHS Pension Scheme Proposed Final Agreement in England and Wales, 9th March 2012 • The Teachers’ Pension Scheme Proposed Final Agreement in England and Wales, 9th March 2012 • The Firefighters’ Pension Scheme in England Proposed Final Agreement, 24th May 2012 • The Local Government Pension Scheme Joint Statement, 31st May 2012 • Armed Forces Pension Scheme Outline Scheme Design, 31st July 2012 • The Police Reform Design Framework in England and Wales, 4th September 2012 • The new Armed Forces Pension Scheme: Final Agreement, 16th October 2012 7. In the Queen’s Speech on 9th May 2012, the Government announced its intention to bring forward legislation, as a result of these discussions, agreements and the recommendations of the IPSPC. 8. The Government began a dialogue with the judiciary about future arrangements for the Judicial Pension Scheme on 20th July 2012. The Government’s preferred option is for the members of that scheme to join the reformed scheme for civil servants. The Bill is drafted on that basis. If as a result of the dialogue a different option is adopted, the Government will put forward appropriate amendments. SUMMARY 9. The Bill sets out the new arrangements for the creation of schemes for the payment of pensions and other benefits. It provides powers to Ministers to create such schemes according to a common framework of requirements. The Bill provides powers to the Treasury to set 2 These notes refer to the Public Service Pensions Bill as brought from the House of Commons on 5th December 2012 [HL Bill 67] specific technical details of certain requirements. It also gives powers to the Pensions Regulator to operate a system of independent oversight of the operation of these schemes. 10. It is intended that the powers in the Bill will supersede powers, including those contained in the following legislation, to create schemes for the payment of pensions and other benefits: • Superannuation Act 1972, for civil servants, people employed in local government service, teachers and persons engaged in health services; • Fire and Rescue Services Act 2004; • Armed Forces (Pensions and Compensation) Act 2004; • Police Pensions Act 1976; and • Judicial Pensions and Retirement Act 1993. 11. The Bill protects the benefits already earned by members of existing public service pension schemes and allows continued membership of those schemes for certain categories of person who are closest to retirement. TERRITORIAL EXTENT 12. This Bill extends to England and Wales, Scotland and Northern Ireland. 13. This Bill contains provisions that trigger the Sewel Convention in Scotland. The provisions relate to the pensions of certain stipendiary magistrates and other individual tribunal members and a power to require the reform of pension schemes in public bodies for which the Scottish Parliament has legislative competence. The Sewel Convention provides that Westminster will not normally legislate with regard to devolved matters in Scotland without the consent of the Scottish Parliament. The UK Government has sought “in principle” agreement from Scottish Ministers to seek a Legislative Consent Motion for these provisions. However, Scottish Ministers announced on 28th November 2012 that they did not intend to bring forward a Legislative Consent Motion. The UK Government therefore intends to remove these elements from the Bill in due course. If there are further amendments relating to such matters which trigger the Convention, the consent of the Scottish Parliament will also be sought for them. The Scottish Parliament also has legislative competence for Members of the Scottish Parliament and Members of the Scottish Executive (including the junior Scottish Ministers). The Bill also makes provisions for a number of Scottish schemes (for teachers, NHS workers, firefighters, police, and local government) where the Scottish Ministers have executive but not legislative competence. These provisions do not trigger the Sewel Convention in Scotland. 3 These notes refer to the Public Service Pensions Bill as brought from the House of Commons on 5th December 2012 [HL Bill 67] 14. The Bill as currently drafted contains provisions to make schemes for pensions and other benefits that are within the competence of the Northern Ireland Assembly. For those pensions which are within the Northern Ireland Assembly’s competence (relating to the civil service of Northern Ireland, some members of the judiciary in Northern Ireland, and local government workers, teachers, health service workers, fire and rescue workers, and members of a police force in Northern Ireland), the Northern Ireland Executive has decided to bring forward its own legislation to reform such pensions based on Lord Hutton’s recommendations. Accordingly, the UK Government will be putting forward amendments to remove those provisions. The Bill will, however, continue to make provision for pensions for the armed forces and senior judiciary in respect of Northern Ireland, as legislative competence for these pension schemes sits with Westminster. References to provisions relating to Northern Ireland later in these Notes should be seen in this context. On the basis that material relating to matters within Northern Ireland devolved competence is to be removed, it is thought that no Legislative Consent Motion for Northern Ireland will be necessary. 15. The consent of the National Assembly for Wales will be sought in relation to provisions in this Bill which apply to new pension schemes for some Welsh public bodies and statutory office holders, for which the Welsh Assembly has legislative competence. The National Assembly for Wales also has competence in relation to pension schemes for Assembly Members, Welsh Ministers and members of local authorities. COMMENTARY ON CLAUSES AND SCHEDULES Establishment of new schemes Clause 1: Schemes for persons in public service 16. This clause contains the main enabling power for new public service pension schemes and schemes providing other benefits, such as injury and compensation benefits, made under this Bill. The schemes are to be made in regulations, which will contain detailed provisions for the payment of pensions or other benefits. These schemes are required to be made in compliance with the framework conditions set out in the rest of the Bill. The creation of a consistent legal framework for all public service pension schemes was a recommendation of the IPSPC. 17. Subsection (1) enables schemes to be established which provide pensions or other benefits to the main categories of persons in public service listed in subsection (2). The definition of those main categories is further set out in Schedule 1 (to which subsection (3) cross-refers). 18. The detail of specific pension and other benefits schemes is to be set out in regulations. These regulations are called “scheme regulations”, as set out in subsection (4).
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