Government must help workers understand pensions, says ACA

The ACA has published its response to a government consultation which aims to find remedies to age discrimination issues

The government must help public sector workers understand their pensions due to mounting complexity, a trade body says.

The Association of Consulting Actuaries (ACA) has published its response to a recently closed government consultation.

The consultation aims to find remedies to age discrimination issues that stem from the McCloud judgment.

The government was defeated in the courts on the issue of age discrimination in public sector pension reform.

The courts found transitional protections for members moving out of legacy schemes in 2015’s public sector pension reforms were wrong.

This was because they had unlawfully discriminated against younger members.

The consultation, which closed on 11 October, tabled two proposals to give members a choice on which pension they would accrue benefits from during a “remedy period” (from 1 April 2015 to 31 March 2022).

This meant members will either have to decide on their scheme within 12 or 24 months after 31 March 2022, or they will be asked to decide when they access their benefits.

The ACA says members will need to be given considerable guidance to help them make the best decision for their personal circumstances.

That guidance should include modelling tools to help members explore their options.

It adds those with the most complex affairs such as high-earning NHS staff need tailored financial advice to understand the tax implications of their choice.

ACA pensions in public services committee Bart Huby says: There is a real danger that this could become a stressful and worrying decision for key public sector workers to make.

He said, even after the 2015 reforms, public service pensions remain relatively generous for members, and therefore costly for the taxpayer, particularly in comparison with what’s now generally provided by the private sector.

And the McCloud remedy, however it is structured following the consultation, will only serve to enhance members’ pensions earned between 2015 and 2022 in addition to their baseline benefits, Huby said. It will be important therefore that this is clearly understood by members so that they fully value the pensions they are earning while in public sector employment.

Huby said, given the complexity of the issues, it will be vital that the communications and guidance for this exercise are well structured and carefully drafted. Indeed, an effective communications exercise may in fact help members in public service schemes better appreciate what their schemes provide.