Clarity on public sector pensions

Hidden in the budget material published yesterday was a technical and necessary update for members of public service pensions affected by the outcome of the McCloud case, which found changes introduced in 2015 to be unlawful on the grounds of age discrimination.

We were particularly interested to see that these legislative measures are to be  introduced with effect from 6 April 2022, because our very own Gill Tallon and Michael Lapham provided expert witness evidence on the tax and pension implications, in what has turned out be a leading case in the pension arena.

The aim of the new legislation is to provide protection retrospectively to any individual affected by age discrimination who was a members of a public service pension scheme on or before 31 March 2012 and at any time between 1 April 2015 and 31 March 2022.

All of the measure are helpful to ensure that the promised remedies can be provided with proper effect and retrospectively.

What the Budget clarified:

• Very importantly, it will be made clear that any compensation received by an individual following the reversal of the unlawful discrimination will be tax exempt and cannot be treated as being related to the employment.
• Any individual will be able to protect their pension rights from lifetime allowance charges calculated on the higher of the two pension choices available to them.
• Similarly, as expected, an individual will not pay more annual allowance charge than they would have done if they had accrued their chosen benefits in the relevant tax years.
• Any authorised payments made out of the scheme will be reallocated as necessary to ensure that accruals for an affected member are not adversely impacted

It has been a testing time for public services workers to meaningfully reflect on their position and make informed decisions in relation to their retirement plans going forward.  With our detailed knowledge of the McCloud case and having already represented a number of individuals affected by it, we would be happy to help anyone facing the same issues.

Please get in touch with Gill Tallon, Private Client Partner and Michael Lapham, Director of Financial Planning.