Armed Forces Pensions -Mcloud Consultation Update
The following information has been forwarded by the White Ensign Association, including links to all relevant documents. Armed Forces Pensions – McCloud Update - Removing discrimination arising from transitional protection
In April 2015 all public service pension schemes were reformed – for the members of the Armed Forces this was through the introduction of the Armed Forces Pension Scheme 2015 (AFPS15). As part of the 2015 reforms, those within 10 years of normal retirement age remained in their legacy pension schemes (AFPS 75 and AFPS 05). This “transitional protection” was provided following negotiations with member representatives and was intended to protect and give certainty to people who were close to retirement. In December 2018 the Court of Appeal found that this part of the reforms unlawfully discriminated against younger members of the judicial and firefighters’ pension schemes (who were the first public bodies to mount a legal challenge against the pension reforms) as transitional protection was only offered to older scheme members. The Courts required that this unlawful discrimination be remedied by the government and the government subsequently accepted that this discrimination applied to all those in the public sector including the Armed Forces.
The government has now published its proposals to compensate for the discrimination that occurred and to ensure that it is not continued for public consultation and comment between now and 11th October 2020. The published proposals are not scheme specific and apply to all pensions schemes introduced in 2015 across the public sector and effect all members who were in service on or before 31 March 2012 and on or after 1 April 2015 including those that have left the services after 1 April 2015. The link to the full consultation information and process is below but a short summary follows:Public service pension schemes consultation: changes to the transitional arrangements to the 2015 schemes
Whilst the simplest option would be to put public service pension members back in their legacy schemes (AFPS 75/05), the Government has been clear that it will not do this as a significant number of personnel will be better off in the reformed (AFPS15) scheme. Therefore any solution needs to allow members a choice of which scheme is better for them. Members who were originally covered by the transitional protection will also be provided with a choice of which scheme benefits they would prefer to receive for the remedy period.
The remedy period is the time period for which members will be able to retrospectively choose which scheme benefits they will receive. It will run from 1 April 2015 which is when the reforms were introduced, until 31 March 2022 which is the point when treatment will be equalised going forward. This is because the government also proposes that, with effect from 1 April 2022, all those who continue in service will do so as members of the AFPS 15 irrespective of whether they previously had transitional protection or not. Thus the government’s proposal is:
- To allow effected individuals to have the choice of remaining on the AFPS 15 scheme or returning to their legacy scheme (AFPS 75/05) for service from 1 Apr 15 to 31 Mar 22.
- All serving members of the Armed Forces remaining on legacy scheme (AFPS 75/05) to be transferred to AFPS 15 on 1 Apr 2022.
In regard of the choice of returning to legacy schemes or not the government is considering two possible approaches
- An immediate choice.
- A deferred choice – called deferred choice underpin (DCU).
Both approaches would give members a choice whether to receive benefits from the legacy or reformed pension schemes in respect of their service during the period between 1 April 2015 and 31 March 2022. But they differ in the point in time at which the decision is made by the member.
Under the immediate choice exercise, AFPS members would make this decision in the year or two after the point of implementation in 2022. For many, this will be some years prior to retirement, and at a time when there is still some uncertainty over the precise benefits that would accrue to them in the alternative schemes.
In contrast, under DCU, this decision would be deferred until the point at which a member retires (when they take their pension/immediate benefits). Until that deferred choice is made, all members would be deemed to have accrued benefits under their legacy scheme, (AFPS 75/05) rather than the reformed scheme (AFPS 15), for the remedy period. Under either approach, those who have already retired and/or received a pension award will be asked to make their choice as soon as practicable after the changesare implemented. The position they choose would be applied retrospectively back to the date the award was made.
The MOD has published more detailed guidance including Q&A – the links to both documents are below:McCloud Consultation updateMcCloud Update with additional guidance
There is a great deal more information available in the consultation documents – particularly dealing with the anticipated effected on tax liability, divorce settlements etc but at the moment the Government is really interested in your views on the proposals so if you feel strongly about the actions they wish to take now is the time to make your contribution.
post edited by FPS Digital - 2020/07/22 17:43:09