O’Brien update (4) – By His Honour John Platt

Latest developments in the O’Brien/Miller pension and money claims.

There is much good news to report and the end if not definitely in sight, is certainly significantly closer.

Money claims

The Judicial Pay Claims Team (‘JPCT’) has now responded to almost all of the 5,000 claims made to it either by rejecting claims or by making offers with a payment on account. A small number of claims remain under negotiation as to the proper amount. Consequently the MoJ fixed 31 May 2016 as the end of the money claims moratorium and this was announced on the Government website. From 1 April 2016 the MoJ started paying all part-time fee-paid judges an exact fraction of the comparator’s annual salary so that is the final date for any possible argument that pay discrimination had been continuing up to then for some offices.

The JPCT has also started work writing to successful claimants to try and agree their service record up to 31 December 2013 which has, of course, been an essential element in the maths for calculating money claims. Once this figure is agreed it will be passed to Punter Southall who are the new administrators of the judicial pension schemes. Agreeing these figures now will make it substantially easier for the administrator to get your pension payments started at the correct rate when you eventually retire.

The year 2000 point

This point affects those whose part-time fee-paid service includes service before 7 April 2000. Both the EAT and the Court of Appeal have held that EU Directive does not have retrospective effect in terms of permitting service before that date to count as pensionable service.

Mr O’Brien stands as an extreme example of the point in that 25 of his 30 years’ service as a Recorder was carried out before April 2000 so that there is a very significant difference in the amount of the pension and compensation for the delay in payment to which he and others may be entitled.

Permission to appeal to the Supreme Court was granted to Mr O’Brien after an oral hearing in July on both the year 2000 point and the time starts to run point (see below) and it is hoped that the appeal may be heard before Christmas. If the appeal is dismissed the regulations governing the new scheme will correctly provide for service only after April 2000 to count as pensionable. If the appeal succeeds then it appears that continuous service in one, or each of more than one part-time fee-paid offices will count as pensionable from the date of initial appointment and the draft regulations will be amended to reflect this. The question whether the offices of Assistant Recorder and Recorder are separate or count as one may then have to be decided as a separate issue.

It is, of course, open to the Supreme Court to decide that this point is not acte claire and to make a second reference to the EC. This could delay any final decision for up to two years. It is hoped that in that event the MoJ would proceed with introducing the new Regulations covering only service after April 2000 without waiting for the EC decision. If the appeal ultimately succeeds then a simple amendment to the definition of pensionable service would be needed to give effect to the decision.

However, there is a serious practical problem if service before April 2000 becomes pensionable and that is the absence of sitting and training day records. Various sources exist with varying degrees of reliability to enable the MoJ to work out how much pensionable service a part time fee paid judge has actually accrued. The most reliable have been HMRC PAYE records but these only go back to April 2001. The MoJ has very little if anything in the way of earlier records and the JPC team has already been using career average figures to fill in any historic gaps. In the absence of individual diary records this may be the only solution.

The time starts to run point

This point only affects those who have already moved from part-time fee-paid to salaried judicial; service before 2 December 2012. Readers may be aware that that we have two conflicting decisions at first instance. In Wright it was held that time in respect of the fee paid office only started to run from the date of retirement from the later salaried office. In Miller it was held that time in respect of the fee paid office started to run from the date of taking up salaried office.

If Miller is correct then salaried judges appointed before 2 December 2012 will not be entitled to any pension for their pre-appointment part time fee paid service unless they have either lodged a tribunal claim within three months of taking up a salaried appointment or obtained an extension of time in which to make a claim. The only exception would be a judge who holds a part time fee paid office and then takes a part time salaried office and continues to sit in the part time fee paid office on the days when he is not engaged in salaried judicial work. There is at least one individual who falls into this category.

If Wright is correct the position is completely different. Almost all current salaried judges will have sat as part time fee paid judges before taking a salaried appointment. Part-time fee-paid service at least from April 2000 in any office which an individual was holding at the date of taking up salaried office will now be pensionable. The fundamental principle of the Judicial Pensions and Retirement Act 1993  is that all judicial service in any Schedule 1 office counts equally towards both the 20 years required for a full pension and the requirement to make contributions for 20 years. Under the new scheme both fee-paid and salaried service will count as one for the purpose of calculating both the 20-year service and the 20-year contribution requirements so the point is certainly strongly arguable.

Tax and National Insurance

The only change from my previous article (http://bit.ly/2aM8N7s) is that HMRC has now conceded that there is no statutory authority for deducting tax at source from the compensation element of the money claim payments. Payments are now being made gross but HMRC still regards this as taxable income of the recipient. A separate article will follow shortly giving more detail and setting out the options open to those who have received payment of their money claims. The position is not entirely straightforward.

Special arrangements for those who have already retired or retire before March 2017

Salaried judges who retire are entitled to a lump sum equal to 2.25 times the annual pension and a service award which is equal to the tax on the lump sum. The MoJ has confirmed that in principle part-time fee-paid judges will be entitled to the same. At the moment all that is being paid is the lump sum less tax and HMRC requires the MoJ to deduct tax at 45% regardless of the tax status of the recipient. Payment of the service award will be made once the new pension scheme is established. The target date for this is now set for March 2017 and the latest government announcement can be found at http://bit.ly/2aFwb1J. To avoid those who retire having to wait until March 2107 for the first pension payment the MoJ is making ex gratia payments on account of the basic pension for the period from retirement to 31 March 2017. The intention is to pay the service award and any bereavement award and any adjustment of the pension due when the new scheme is established  

The new pension scheme

Work has proceeded on drafting the new regulations which will establish a pension scheme for part time fee paid judges which mirrors so far as possible the 1993 Act scheme. The major problem has not been so much lack of resources as the extraordinary difficulty in introducing retrospective entitlement to make additional voluntary contributions, a problem to which there is simply no easy or wholly satisfactory solution.  

A further short consultation process will start almost certainly in September 2016 which will have the draft regulations attached. The MoJ has clearly taken on board representations made in response to the initial consultation and are doing its best to adhere to the spirit of the various judgments. I am optimistic that we should be able to proceed to parliamentary approval in time for a 31 March 2017 start date.

There are a few instances where it is simply impossible for the new scheme to mirror exactly the terms of the 1993 Act. A good example is death in service where it is impossible to predict how many days the judge would have sat between the date of his death and his 65th birthday. I am satisfied that the MoJ proposals on this and other such issues are as fair as can be achieved.

The Brexit issue

The entitlement of part-time workers not to be unfavourably treated when compared to their salaried comparators arises from the requirement to comply with the EU Part-Time Working Directive of 1997. If the UK government is no longer obliged to give effect to EU directives on workers’ rights, it would seem to be perfectly legal for the government to decline to provide any pension for part time fee paid judicial service either at all (very doubtful) or at least from the date upon which the UK finally leaves the EU. Part-time fee-paid service would then only be pensionable from April 2000 (subject to the pending appeal) up to the date of departure from the EU.

Everything therefore depends on the terms which the UK succeeds in obtaining in order to maintain a favourable trade relationship with the remaining EU member states. Thankfully there is nothing at the moment to suggest that the MoJ has any intention of playing the Brexit card as a reason for delaying or denying pension rights for part-time fee-paid judges.

His Honour John Platt is a retired Circuit Judge who worked on the drafting of both the Judicial Pensions and Retirement Act 1993 and the various accompanying Regulations and is the author of a handbook Judicial Pensions - A Guide to the 1993 Act.

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