175.There are a number of defined benefits pension schemes for those in public service aside from the main schemes for civil servants, local government workers, NHS, teachers, police, fire and rescue services, the armed forces, and the judiciary. Many of these are pension schemes run for the staff and office holders of non-departmental public bodies, non-ministerial departments, arms length bodies and similar bodies and offices (‘public bodies’).
176.The Government’s policy is to reduce the number of different pension schemes that operate across the public service. It is anticipated that most of these pension schemes will be reformed by moving the staff and office holders into one of the new schemes established under section 1 of the Act. However, where that is not possible or appropriate public bodies may be allowed to reform their current schemes or to set up new bespoke pension schemes along reformed lines. This section deals with the latter situation.
177.This section imposes constraints on the design of new pension schemes that may be created under the power in section 31(7) for those bodies and offices whose pension schemes are closed for future accrual by section 31(2) and whose members cannot join one of the schemes established under section 1. It also governs the design of pension schemes that are set up in the future or established under future legislation for public bodies (unless future legislation makes specific, different provision).
178.Subsection (1) identifies the provisions of the Act which apply to new public body pension schemes. These provisions ensure that such schemes contain the same core design, cost control and governance features of the schemes established under section 1.
179.Subject to that, the rules of such schemes can make such provision as the public authority establishing the scheme considers appropriate, because section 3(1) is applied to them by this subsection.
180.Subsection (3) requires the Treasury to consent to the establishment of a new public body pension scheme after this section is commenced, or the subsequent variation of the rules of such a scheme.
181.Subsection (5) sets out the meaning of ‘public body pension scheme’ and ‘new public body pension scheme’. See also the definition of “public authority” in section 37.
182.Many public authorities have the power to make pension schemes for their employees and office-holders. These include schemes for employees and office holders of non-departmental public bodies, non-ministerial departments, arms length bodies and similar bodies and offices (public bodies).
183.Section 31 requires the authority responsible for a body listed in Schedule 10 to close the pension schemes of those bodies to future accrual. Where possible, it is intended that pensions for the body’s employees in future will be provided through one of the reformed, unfunded public service pension schemes, the likely default being the civil servants’ pension scheme.
184.In exceptional cases public authorities will be permitted to establish new schemes of their own. For example, where there are special considerations that make it inappropriate for their employees to join one of the major unfunded schemes. In such cases, a new scheme may be set up but must include the core standards of the reformed unfunded schemes as set out by section 30.
185.Subsection (1) provides that the section applies to a pension scheme which relates to members or staff of a body, or the holder of an office, listed in Schedule 10.
186.Subsection (2) places a duty on the public authority which is responsible for such a scheme to close the scheme for future service after a date determined by the authority. The precise date in each case will be a matter for discussion and consultation, but it is anticipated that all schemes covered by this subsection will have closed to future service by 5th April 2018.
187.Subsection (3) sets out that subsection (2) does not apply to defined contributions schemes or injury and compensation schemes. The obligation to secure that no further benefits are accrued beyond the date set will only apply to defined benefits schemes.
188.Subsection (4) allows pension schemes which are required to be closed under subsection (2) to continue to provide benefits by way of exception for certain members who are eligible for transitional protection. Where transitional protection is offered, it is expected to be offered on the same basis and timing as transitional protection in the schemes that are closed to future accruals under section 18. This will mean that the transitional protection is expected to be based upon a starting date of 1st April 2012, rather than any later date, despite the later progress of reform to public body pension schemes. Subsections (6) and (7) of section 18 apply to transitional arrangements in the public body schemes closed to future accruals.
189.Subsection (5) allows for the obligation to prevent future accrual of rights in public body defined benefit schemes, and exceptions to that, to be achieved by amending the existing public body defined benefit schemes.
190.Subsection (6) explicitly sets out that subsection (2) also applies to death in service benefits.
191.Subsection (7) allows the public authorities responsible for existing public body schemes to establish new pension schemes for staff or office-holders where it is not possible for those persons to become members of one of the major schemes established under section 1. Section 30 provides details of the types of scheme that may be established in such cases. It is expected that most of these persons will, in practice, join one of the major schemes. This would provide consistency of treatment to all public service staff and offers the potential for savings on administration.
192.Subsection (8) prevents a public authority which closes a scheme in accordance with subsection (2) from exercising any existing statutory function or other power so as to establish a new defined benefits scheme. Its purpose is to ensure that replacement schemes will only be made using the power in subsection (7).
193.Subsection (9) provides that where an existing public body scheme was established by trust deed, subsections (2) and (4) supersede any conflicting provision of the deed or of the law relating to trusts.
194.Subsection (10) allows the Treasury by order to add public bodies and offices to Schedule 10, and to remove public bodies and offices from Schedule 10 (excluding devolved bodies or offices, as defined by section 37).
195.Subsection (11) provides that a Treasury order under subsection (10) may also make consequential and supplementary provision, including amendments to legislation.
196.Subsection (12) provides that Treasury orders under subsection (10) are subject to the negative procedure (as defined in section 38(3)).
197.Subsection (13) allows subsection (1) to be used to close to future accrual schemes made before or after section 31 comes into force.
198.Subsection (14) indicates that the provisions of Schedule 7, which provides for a “final salary link”, apply for the benefit of members of public body schemes closed under this section.
199.This section allows an existing public body pension scheme to reform itself by including a provision that the normal pension age and deferred pension age of members of those schemes is to be the same as their state pension age (subsection (1)(a)). The link may only apply to benefits accrued under the scheme after the provision to establish that link took effect.
200.Subsection (1)(b) allows any changes to normal or deferred pension age that occur as a result of a change in state pension age to apply to the calculation and payment of all benefits earned in a scheme; including, as set out in subsection (2), benefits accrued after the creation of the link but before the relevant change in state pension age.
201.The effect of this section is to allow existing public body pension schemes (which are not mandated to reform by their inclusion in Schedule 10) to include a provision to link normal and deferred pension ages, so they change in line with any change to state pension age. If state pension age increases by one year, the normal and deferred pension ages would automatically increase by one year, and the increase would apply to all benefits earned in the scheme from the point at which the link to state pension age was created.
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