New Regulations – Consultation

Consultation

Revisit option to convert to lump sum?

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1124480/The_Public_Service_Pensions__Exercise_of_Powers_Compensation_and_Information__Directions_2022.pdf

INTEREST on BACKDATED PAYMENTS

These are pretty much the Bank of England base rate amounts.

However, these interest rates do next to NOTHING in giving back the VALUE of the missing money. Inflation running at 10% this year alone means the value has been significantly eroded.

Part 2 – Remediable service statements.
3(2) No requirement for deferred members to have annual statements

3 (5) For further provision about— (a) what a remediable service statement must include, see— (i) section 29(5) of PSPJOA 2022;

PSPJOA 2022: 29(5) A remediable service statement must include—
(a) a description of the benefits currently available under the scheme in respect of the relevant service (if any),
Note that this will mean that statements must now include benefits derived from hypothetical calculations should they exceed the normal calculations since the law states that the statement include “currently available”, which hypothetical calculations would be. There should be no way for these secondary regulations to circumvent this legal obligation imposed by the primary legislation.

 
PART 3 – Decisions about the treatment of remediable service
CHAPTER 1 – Opted-out service elections

Election in relation to relevant opted-out service

5.(3) Where a person (“P”) other than the scheme manager is the opted-out service decision-maker, an opted-out service election may only be made after the scheme manager determines an application which is—
(a) made by or behalf of M,
(b) in a form and manner determined by the scheme manager,
(c) received by the scheme manager during the period beginning on 1st October 2023 and ending at the end of 30th September 2024, and

This does not comply with PSPJOA 2022 5(4)(a)(b) unless all members receive their remediable service statements on 1 October 2023:

PSPJOA 2022
(5) In subsection (4) “the end of the election period” means—
(a) the end of the period of one year beginning with the day on which a remediable service statement is first provided in respect of the member, or
(b) such later time as the scheme manager considers reasonable in all the circumstances.

Given that earlier in these draft regulations the provision of the RSS doesn’t have to be made until the “relevant date” as defined in PSPJOA 2022 29(10) and that this date is likely to be significantly later than 1 October 2023 part 5(3)(c) should be removed or replaced. As an RSS can be provided up to 18 months (or later) after 1 October 2023 it is wrong to impose an earlier cut-off date of 30 September 2024.
PSPJOA 2022 Parts 4(a) and (b) should be included in place of the remediable regulation 5(3)(c).

I would suggest that guidance should be given on what latitude is given to the scheme manager in determining what is a reasonable “later time” for individuals.

There is no reference to how applications may be formed in respect to different periods of opted-out remediation. Applications may cover all or part of the period as factors other than the changes to the scheme may have been in effect at the time. For example, if a member opted out because of the scheme change from April 2015 to April 2016 but then, because of a need for funds – or other reason unrelated to the type of scheme in effect – would have opted out from April 2017 to April 2018. They should be allowed to apply for remediable reinstatement of 2015-2016 but not allowed to do so for 2017-2018.
There is also the question of affordability of paying for the remediable reinstatement of this 7 year period. Where a member decides they cannot afford to pay for their entire remediable period they should be permitted to elect to pay for shorter periods. It may also be the case that, in these 7 years, they were in receipt of different pay scale amounts and may wish to opt in for some and not others.

 
PART 5 – Voluntary contributions
CHAPTER 1 – General

Requirement to determine the value of flexibilities in a member’s alternative scheme

27.—(1) The scheme manager must, as soon as is practicable after 1st October 2023, determine—
(a) where a remedy member paid remediable voluntary contributions to secure additional pension under the legacy scheme—
(i) the equivalent value of additional pension that would have been secured under the reformed scheme if the remediable voluntary contributions had been paid to that scheme, and
(ii) the amount which is equal to—
(aa) the aggregate of the remediable voluntary contributions paid to secure the additional pension under the legacy scheme, less
(bb) an amount in respect of the value of tax relief in accordance with directions 5(5) to (9) of the PSP Directions 2022;

(b) where a remedy member paid remediable voluntary contributions to secure reformed scheme flexibilities—
(i) the rights to additional pension under the legacy scheme that would have been secured under that scheme if the remediable voluntary contributions had been paid to that scheme, and
(ii) the amount which is equal to—
(aa) the aggregate of the remediable voluntary contributions paid to secure the reformed scheme flexibility, less
(bb) an amount in respect of the value of tax relief calculated in accordance with direction 5(5) to (9) of the PSP Directions 2022.

All 3 of the reformed flexibilities appear to be converted to legacy AP on the basis of what they would have purchased at the time the payments were made.

 
PART 5
CHAPTER 4
Remedial arrangements to pay voluntary contributions to the legacy scheme
Remedial arrangements to pay voluntary contributions to secure legacy scheme additional pension

41.—(1) This regulation applies to a remedy member (“M”) who is not a deceased member.
(2) M may elect to enter into an arrangement (a “remedial arrangement”) to pay contributions for additional pension under the legacy scheme in accordance with—
(a) Schedule 4 of the 2010 Regulations, and
(b) this regulation.
(3) M may only enter into a remedial arrangement—
(a) in respect of a period of M’s remediable teacher service,
(b) if the scheme manager is satisfied that it is more likely than not that, but for a relevant breach of a non-discrimination rule, M would, during the period of M’s remediable teacher service, have entered into the same or a similar arrangement,
(c) before—
(i) the end of the period of one year beginning with the day on which a remediable service statement is first provided in respect of M, or
(ii) such later time as the scheme manager considers reasonable in all the circumstances, and
(d) after an application made in accordance with paragraph (4) is approved by the scheme manager.
(4) An application is made in accordance with this paragraph where—
(a) it is in writing in a form and manner determined by the scheme manager,
(b) it is accompanied by any information the scheme manager reasonably requires to be provided for the purposes of—
(i) determining the matters mentioned in paragraph (3)(b);
(ii) complying with any requirement imposed by Schedule 4 of the 2010 Regulations in connection with making an election to pay voluntary contributions for additional pension, and
(c) it is received by the scheme manager—
(i) before the end of the period of six months beginning with the day on which a remediable service statement is first provided in respect of M, or
(ii) such later time as the scheme manager considers reasonable in all the circumstances.
(5) The scheme manager may treat an application made in accordance with paragraph (4) as if it were a notice under paragraph 2 of Schedule 4 to the 2010 Regulations.
(6) Where M enters into a remedial arrangement, M owes to the scheme manager an amount equal to—
(a) the aggregate of the voluntary contributions which M would have owed had M entered into the remedial arrangement at the time M would have entered into the same or a similar arrangement but for a relevant breach of a non-discrimination rule, less
(b) tax relief amounts calculated in accordance with direction 12(2) to (7) of the PSP Directions 2022.
(7) Where a determination is made in accordance with direction 12(6) of the PSP Directions 2022, the following apply—
(a) direction 12(8) (provision of explanation);
(b) direction 12(9) and (10) (appeals).

The primary legislation on making remedial arrangements to pay voluntary contributions to the legacy scheme sets a time limit of 1 year from the time the RSS is provided for the member to enter into arrangements. This would comply with 41(3)(c)(i).
However, the intention of the primary legislation in PSPJOA 2022 section 25 subsection 6 appears to be to give members up to 1 year to initiate that process. Draft regulation 41(4)(c)(i) would restrict that intention to half the time indicated in the primary legislation. Having this arbitrary reduction to 6 months for an application set out in the draft regulation is likely to lead to confusion and an increase in requests, or appeals, to invoke the option permitted in both primary legislation and the draft regulations for the scheme manager to permit a later time. PSPJOA 2022 25(6)(b) and draft regulation 41(4)(c)(ii) “such later time as the scheme manager considers reasonable in all the circumstances.”
Indeed, the legislation permits the scheme manager to go beyond the year limit at their discretion and this can be utilised to give members the time allotted by the primary legislation.

 
PART 8 Liabilities and payment
CHAPTER 2 Interest, compensation and netting off

Indirect compensation
67.
(2) M is not to be paid an amount under section 23 of PSPJOA 2022 by of compensation in respect of the relevant loss.

Missing word, “by of” should be “by way of”