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Public sector pension update

Date: 09/02/2021

McCloud Latest; Government Decide on Deferred Choice Underpin (DCU)

The main public service pension schemes were reformed in 2015 and everyone except those closer to retirement was placed into them. Those members were allowed to remain in the schemes they were in prior to 2015 (their legacy schemes), this was known as ‘transitional protection’.

In December 2018 (following the McCloud judgement) this transitional protection (not the schemes themselves) was found to be age discriminatory and in July 2020 the government launched a consultation seeking views on proposals to address the discrimination.

The consultation set out a procedure whereby

  • For the purposes of pension calculation only, all affected members would be returned to their legacy schemes for the period 1st April 2015 to 31st March 2022 (the recovery period).
  • Then, with effect from 1st April 2022, all members, including those previously protected, would be returned to the 2015 reformed schemes.
  • Members would then be given a choice as to how they wish the pension they have accrued in the recovery period to be calculated – either on the basis of their legacy scheme or on the basis of the 2015 scheme

When should members make that choice?

  1. immediately i.e. as soon as possible after the 1st of April 2022
  2. or at the point their pension becomes payable (the deferred choice underpin (DCU))

Following consultation GMB supported the DCU option. DCU recognises the GMB view that members will have more certainty around their personal circumstances at the point they need to make their choice and this considerably reduces the need for members to make assumptions around their future career, their retirement, health and dependants, which would increase the risk of member making an incorrect decision.

On 4th February 2021 the government announced that it will implement the deferred choice underpin (DCU) and that it will bring forward new primary legislation, when parliamentary time allows, to provide requisite powers to deliver these changes to public service pension schemes.

Any questions on the above can be referred to the Pensions department in the usual manner.

 

Posted: 17th February 2021

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