Implementation

On 4 February 2021 the government published its consultation response on how it intends to remove the discrimination identified by the courts in the 2015 pension reforms through changes to primary legislation and Firefighters’ Pension Schemes regulations.

The discrimination will be removed in two parts; the first is prospectively for future benefits from 1 April 2022, the second is retrospectively for benefits built up during the period of discrimination 1 April 2015 to 31 March 2022 (the remedy period). 

Prospective remedy

From 1 April 2022 all those who continue in service will do so as members of the reformed schemes, regardless of age, meaning all members will be treated equally in terms of which pension scheme they are a member of.

All currently protected members will be placed in the FPS 2015 for service after 1 April 2022 (the end of the remedy period).  As per the basis of protection implemented in 2015, all protected members will have reached normal retirement date in their legacy scheme by 1 April 2022 and will be eligible for immediate retirement if they wish to do so; for those who wish to continue to accrue benefits they will do so as members of the FPS 2015.

The normal retirement date across the final salary legacy schemes are:

• FPS 1992 = 55
• FPS 2006 = 60
• FPS 2006 Special members = 55

Benefits accrued in the final salary schemes to 31 March 2022 will remain protected in the same way that current former final salary members are protected.

• The final salary link - benefits at retirement will use the pensionable pay at retirement rather than the pensionable pay 31 March 2022 unless it is better
• The double accrual guarantee applicable for benefits accrued in FPS 1992 - this proportions the pension benefit appropriately to recognise the expectation of double accrual when service is over 20 years. This effectively means if a person would have been entitled to 30 years’ service on retirement from FPS 1992 and moves to the FPS 2015 scheme with 28 years accrued service, the pension is calculated as 28 years ÷ 30 years multiplied by the full amount of pension they would have expected (calculated at 40/60ths).  The guide to how double accrual currently works will be updated to reflect moving to the FPS 2015 scheme at 1 April 2022.
• Retirement age - the retirement age of the legacy benefits is protected which means members still have the right to retire on reaching the retirement age of their legacy scheme. 

No changes to current pension arrangements will happen until April 2022. 

Retrospective remedy

For the remedy period (i.e. the period of discrimination 1 April 2015 to 31 March 2022), eligible members will be able to choose to receive legacy pension scheme benefits or benefits equivalent to those available under the reformed pension scheme. This choice will be offered at retirement on what is known as Deferred Choice Underpin (DCU)

The DCU approach means the member does not need to make a choice until they reach retirement age.

Benefits accrued under the reformed scheme for all eligible members will be converted to legacy scheme benefits (their former final salary scheme) for the whole of their service in the remedy period.  The benefits accrued in the reformed scheme will be kept and treated as an underpinned record.

At retirement, they will then be offered a choice of the legacy benefits or the reformed benefits for the remedied period. 

Because the process of converting reformed benefits to legacy benefits for the remedy period will take some time to do and require building systems and automated processes, we welcome the HMT decision that this process of conversion to put members in the legacy schemes should be implemented by October 2023.

It is expected that pension administrators will not be able to provide individual remedy figures for the great majority of scheme members impacted by remedy until implementation in 2023.

Next steps 

We understand that firefighters will no doubt have several questions with regards to how these changes affect them, especially those due to retire before 2023.  It may be possible for schemes to offer members a choice before the DCU is implemented, however, the legislation that allows schemes to do this is limited in effect. It allows schemes to return eligible members who retired from the reformed schemes to the legacy schemes in relation to service after 1 April 2015 but does not allow for all consequential matters to be dealt with satisfactorily in all cases. So, for example, in cases where there are interactions with the tax system, perhaps where members have incurred or will incur tax charges or where contributions differ between the schemes, it might not be possible to address all these issues before new legislation is made to implement the DCU.  We are continuing to work with the government departments as a priority to address these complex issues.

There are still many more policy decisions needed to give effect to the HMT planned changes that will enable a fuller understanding of what the changes will mean to individuals' pensions.

Over the coming months we will be working with the relevant government departments to review all the implications of today’s announcement and further information will be published as it is available. 

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