Consultation outcome

Equality statement

Updated 12 May 2023

A. Introduction

1. This equality statement accompanies the Ministry of Justice (MoJ) regulations ‘The Judicial Pensions (Remediable Service etc.) Regulations 2023’. In line with the public sector equality duty, under section 149 of the Equality Act 2010 (EA 2010), it considers potential equality impacts of the regulations required to implement the McCloud remedy.

B. Background

2. In July 2020, MoJ consulted on proposals to address discrimination in the judicial pension scheme identified in the case of McCloud v MoJ. The Court of Appeal held that the 2015 reforms to the judicial pension scheme constituted unlawful direct age discrimination, as well as indirect race and sex discrimination. ^{[footnote 1]}

3. The official response to the consultation in February 2021, confirmed that affected judges will participate in a formal ‘options exercise’ where they will be offered a choice of pension scheme membership for the relevant period,1 April 2015 until 31 March 2022^{[footnote 2]} . The choice is between ‘legacy’ scheme membership (Judicial Pensions and Retirement Act 1993 and the fee-paid equivalent, Fee-Paid Judicial Pension Scheme, or Judicial Pensions Act 1981) and ‘2015 scheme’ membership (Judicial Pension Scheme 2015 or Northern Ireland Judicial Pension Scheme).

4. The government has since enacted primary legislation, the Public Service Pensions and Judicial Offices Act 2022 (PSPJOA), which provides the framework for delivering the options exercise. Further regulations were required to address certain technical aspects of the remedy and MoJ consulted on these in December 2022. Minor adjustments to the regulations have been made to reflect the consultation responses. Where these have an equality impact, they have been detailed throughout.

5. Equality statements have been published to accompany both consultations and the primary legislation. Since the purpose of the remedy is to address unlawful discrimination, we considered at each stage the positive equality impacts. To the extent that the design of the remedy had the potential to treat individuals differently, we maintained that such treatment could be objectively justified.

C. Public sector equality duty

6. Section 49 of the EA 2010 requires public authorities, in the exercise of their functions, to have due regard to the need to:

• eliminate discrimination, harassment, victimisation and any other conduct prohibited by or under the Act;
• advance equality of opportunity between persons who share a relevant protected characteristic and persons who do not share it; and
• foster good relations between persons who share a relevant protected characteristic and persons who do not share it.

7. There are nine protected characteristics in the Act: sex, race, disability, age, sexual orientation, religion and belief, gender reassignment, marriage and civil partnership, and pregnancy and maternity.

8. For the purposes of this equality statement, we are primarily concerned with age, sex and race, due to the nature of the McCloud discrimination.

D. Summary of the regulations

9. The Judicial Pensions (Remediable Service etc.) Regulations 2023 contains features that ensure that the technical aspects of the McCloud remedy are implemented as follows:

• a remedy in respect of technical member options, such as voluntary contributions, transfers-in and partial retirement;
• provision for judges where an immediate detriment has been obtained;
• repayment mechanisms where judges owe sums to the scheme or MoJ, including the ability to pay via deductions from lump sum and pension on retirement;
• the application of interest to amounts owed to, or by, judges, for example under or overpaid pension benefits, as well as the powers to waive or reduce liabilities;
• provision in respect of pension sharing orders in the case of divorce; a legislative basis to resolve outstanding issues for McCloud claimants and non-claimant judges who have retired or died (referred to as ‘immediate detriment judges’) so that they can receive the correct benefits on retirement and
• a legislative basis to resolve the pension entitlement of certain fee-paid judges (referred to as ‘gap judges’).

10. The regulations also address associated amendments to existing legislation. We have identified the following areas of the regulations as having potential equality impacts:

Added Pension

11. The regulations provide that judges who make a legacy scheme election and who have purchased added pension in the 2015 scheme should be offered a choice of either:

1. receiving compensation for the net value of their contributions, i.e. the gross added pension value less any tax relief; or
2. having the contributions ‘regularised’, i.e. preserved in the 2015 scheme.

12. The first option returns the judge to the position they would have been in, so far as possible, had they never purchased added pension. The second option provides for judges to return to legacy scheme membership but be deemed to have been an active member of the 2015 scheme in respect of their added pension payments only.

13. We recognise that the second option treats judges in scope of the remedy differently from judges who are not in scope, specifically protected judges who remained in the legacy scheme in 2015. This is because the latter group, while in the legacy scheme, are not able to purchase added pension in the 2015 scheme.

14. While this could arguably be considered less favourable treatment of protected judges on the grounds of age, we consider that such treatment can be objectively justified. First, unlike judges in scope of the remedy, protected judges were not discriminated against in 2015; they have had certainty regarding their pension provision throughout by remaining in a scheme with objectively favourable terms not afforded to others at the time. Additionally, protected judges were able to make additional contributions through other schemes such as the Judicial Additional Voluntary Contributions Scheme (JAVCS). Therefore, protected judges had similar opportunities to unprotected judges albeit in the legacy scheme. Second, purchasing added pension is a pure member cost, with no contributions made on behalf of the judge by their employer (in this case, MoJ). We will therefore not be offering this to protected judges.

Scheme Pays

15. Retrospective provision of Scheme Pays is available for judges who make a 2015 scheme election and incur an annual allowance tax charge (AATC) in respect of a tax year in the remedy period. Scheme Pays allows the judge not to pay the charge upfront, but request for the scheme to pay it on their behalf and have a reduction in pension benefits on retirement accordingly.

16. In administering the McCloud remedy, a retrospective AATC could arise in two scenarios where judges make a 2015 scheme election:

• where judges received tapered protection in 2015 and therefore remained in the legacy scheme for a period before joining the 2015 scheme at a later date, and
• where judges received tapered protection in 2015 but did not taper to the 2015 scheme (because MoJ stopped tapering judges when the outcome of McCloud was clear), i.e. they remained in the legacy scheme during the whole remedy period.

17. Where a retrospective AATC arises in either scenario, the regulations provide that Scheme Pays should be available to allow the judge to request for the scheme to pay the charge upfront to HMRC. Without such provision, there would be differential treatment between the following two groups:

• Group A: judges in scope of the remedy who make a 2015 scheme election and who incur a retrospective AATC, who would have to pay the charge upfront to HMRC, and
• Group B: judges not in scope of the remedy (because they took up office after 31 March 2012) who are members of the 2015 scheme for the same period and were able to use Scheme Pays to pay the AATC on their behalf.

18. The differential treatment might arguably amount to indirect age discrimination against group A. This is because these judges are likely to be older than group B judges, since younger judges are less likely to be able to satisfy the requirement to have been in office by 31 March 2012.

19. Therefore, making retrospective provision in the regulations for Scheme Pays ensures, so far as possible, equal treatment on the grounds of age.

Interest

20. The PSPJOA 2022 provides the power for schemes to make regulations to apply interest to amounts owed to, or by, judges in the context of McCloud remedy.^{[footnote 3]} While the regulations apply interest to such amounts, the relevant rates and details concerning calculation periods are set out in His Majesty’s Treasury (HMT) Directions.

21. The application of interest ensures, so far as possible, equal treatment between those in scope of the remedy and all other judges. The latter group will have made payments to the scheme, for example pension contributions, or received payments from the scheme, e.g. lump sum and pension benefits if they have retired. Therefore, when it comes to implementing the remedy for those in scope, an amount of interest will be applied to such payments to recognise the real term value of amounts at the time of payment. This aims to avoid differential treatment on the grounds of age or any other protected characteristic.

Dependant Contributions

22. The regulations amend existing legislation to retrospectively change the rate of dependant contributions payable by salaried judges with income above £150,000. This will be backdated to 2016. This is to ensure equal treatment between judges in scope of the McCloud remedy and those not in scope who remained in the legacy scheme in 2015 (protected judges).

23. Judges in the latter group with income above £150,000 have not been charged the correct rate of dependant contributions since 2016. Effectively, protected judges were charged total contributions of 4.43%, rather than 6.23% as required by the relevant legislation (which would have included dependant contributions).

24. The regulations set out that by resolving McCloud discrimination, MoJ would be required to charge the full 6.23% to judges in scope of the McCloud remedy with income over £150,000 for the years in the remedy period. This would treat judges in scope of McCloud less favourably on the grounds of age, since they are younger than protected judges. Therefore, the relevant contributions legislation is amended in the regulations with retrospective effect, to ensure McCloud salaried judges are charged at the same rate as protected judges, and to regularise the rates that protected judges have been charged.

25. Following consultation, the relevant legislation will also be amended retrospectively for the fee-paid judges’ legacy scheme where applicable to ensure that they are charged the same rate of dependant contributions as salaried judges. This ensures that salaried and fee-paid judges are treated equally for the purposes of dependant contributions.

E. Conclusion and next steps

26. We consider that the regulations achieve positive equality impacts since they are designed to remedy unlawful discrimination identified in the case of McCloud. Where there is the potential for differential treatment, we consider that such treatment can be objectively justified.

27. We will continue to monitor potential equality impacts following the regulations and options exercise coming into force.

1. Though indirect sex discrimination is framed as equal pay where it concerns remuneration ↩

2. Judicial Pensions: Response to McCloud - Response to consultation ↩

3. See section 61 Public Service Pensions and Judicial Offices Act 2022 ↩