In 2015 the government implemented reforms to all main public service pension schemes. Public service pensions are some of the most generous pension schemes available, rewarding those who dedicate their working lives to public service.
The government maintains its commitment to ensuring public servants are rewarded at the end of their careers and the need for schemes to be sustainable and affordable in the future.
The reforms that took place in 2015 did not apply to those closest to retirement. The Court of Appeal found this to be discriminatory against younger members and so the government has since been taking steps to fix this.
The consultation is asking for views on the choices offered to pension scheme members
This consultation is the next stage in the process to remove the discrimination. It sets out options for how the government will do this by providing members with a choice of which set of pension scheme benefits, those under their old scheme or the new scheme, they would like to have for the remedy period (between 1 April 2015 and 31 March 2022). These changes will apply across all the main public service pension schemes.
Who is affected by the consultation proposals
Members of a public service pension scheme on 1 April 2015 who joined on or before 31 March 2012 will be in scope for these proposals. This includes those members who are currently active, deferred or retired.
How the changes could affect pension scheme members
Addressing the discrimination essentially gives members a choice of scheme benefits during the remedy period, increasing the value to some members.
The majority of individuals will see no change in their pensions tax liabilities. A minority of members may see changes, which could be a return of tax already paid or more tax to pay. Where individuals have overpaid tax HM Revenue and Customs (HMRC) will repay this. Where there are tax charges owed the individual must pay these but only for the 4 tax years before their scheme benefits change.
Where a member chooses new scheme benefits for the remedy period, at the point of retirement, their annual allowance tax position will be reassessed. Where an annual allowance tax charge arises from their choice, the scheme will compensate individuals for the tax charge.
How the changes might affect future scheme costs
The pause of the cost control mechanism will be lifted. This is because there is now sufficient clarity to begin the completion of the cost control process for the 2016 valuations. The cost control mechanism was designed to include costs that impact the value of schemes to members, and so these will be included in the cost control process.
By taking into account this increased value as a result of the choice that will be offered to members on their scheme benefits, the process will show greater costs than otherwise would have been expected. The government will consider how best to take forward the cost control mechanism outcomes for each scheme once the details of these are known.
How to respond to the consultation
The consultation ends on Sunday 11 October 2020 and you can find out more about it the public service pension schemes consultation: changes to transitional arrangements to the 2015 schemes document on GOV.UK.
HM Treasury welcomes any responses to the questions posed within the consultation document.
Responses can be submitted by email to: