O’Brien update (6) – By His Honour John Platt

HH John Platt updates readers on the O’Brien/Miller pension and money claims fallout: the final Act.


Introduction

A. This circular should be read in conjunction with my previous circulars. Any new member who has not received the last circular can request a copy from me by private e-mail. May I start by repeating again that the views expressed in this document represent my personal understanding of the meaning and effect of the Regulations, judgments and the various announcements which have been made. I do not accept any general duty of care to my readers and I do not intend to offer encouragement or discouragement to any individual. Important appeals still remain pending (see below) so in some crucial respects we must still await the outcome of those appeals. So once again I repeat and re-emphasise that any individual who wishes either to pursue his or her case further or give up should take independent advice.

B. This circular is concerned only with those who are or were members or prospective members of the scheme established by the Judicial Pensions (Fee Paid Judges) Regulations 2017 (‘the 2017 scheme’) and entitled to pension benefits under that scheme. It does not attempt to deal with those first appointed to part time fee paid office after 1 April 2015 who are members of the wholly different 2015 scheme.    

C. Can I please also remind you all that these circulars are for your personal information and should not be shared with others outside the full time or part time judiciary, serving or retired, without my express consent. Please also respect my privacy by not passing on my e-mail address to those who may have a commercial interest in the information in the circulars without my express consent.

D. Since this is my final circular I have tried to give an overview of the present position which necessarily involves a degree of repetition. My apologies to those who are already fully up to speed. 

Executive summary

1. The vast majority of PTFPJs are now members of the 2017 scheme (paras 15 to 19).

2. The 2017 Scheme contain a number of key concepts which need to be understood by all PTFPJs (paras 13 to 22).

3. A final decision on the year 2000 point and on the time starts to run point is now not expected before late 2019/early 2020. This affects those with fee paid service before April 2000 and may affect those who have held multiple fee paid offices and those who have moved from fee to salaried service (paras 23 to 26).

4. This delay has both practical and legal consequences (paras 27 to 39).

5. The McCloud litigation may have unexpected consequences for PTFPJs (paras 40 to 43).

5. The 2017 scheme is unregistered and is expected to be contracted out (paras 44 to 53).

6. All PTFPJs should immediately give consideration to nominating death in service benefits under the 2017 Regulations (paras 54 to 55).

7. Those who wish to clear their contributions deficit immediately have only until 30 September 2017 to do so (paras 56 to 58).

8. The scheme for calculating personal pension contributions will result in variable deduction rates depending on the sitting pattern of the individual (para 56).

9. For those who are being or have been transferred in to the 2015 scheme accrued service under the 2017 Regulations is frozen at the date of transfer (paras 59 to 60).

10. Multiple office holders now have the option to take partial retirement (paras 61 to 64).

11. Most Part time fee paid judges (‘PTFPJs’) serving or retired do have some opportunities to make Additional Voluntary Contributions (‘AVCs’) (paras 65 to 71).

12. Implementation of the new scheme has not been entirely problem free but most retired PTFPJs are now receiving monthly payments (paras 72 to 88)

The 2017 Scheme - Key concepts

13. The Regulations can be found here.

So far as practically possible the 2017 scheme mirrors the provisions of the 1993 Judicial Pensions and Retirement Act (‘the 1993 Act’) which governs pension benefits for full time salaried judges. In this respect fee paid judges owe a huge debt of gratitude to Shirley Hales, the now retired Head of Judicial Pay and Pensions at the MoJ. She has worked tirelessly and with complete integrity to comply with the spirit of the various judgments, overcoming some formidable obstacles along the way, to achieve a fair and practicable outcome in an extraordinarily short space of time.

14. In order to understand your own position you need to grasp a number of key concepts. These are

Membership
Qualifying pensionable days
Reckonable pensionable service
Appropriate annual salary.

Membership

15. For those who held a part time fee paid office on 2 December 2012 membership of the scheme is automatic under Regulation 8(1)(a) so you are not required to make a claim either to the Tribunal or to the JPCT. If you have issued a Tribunal claim that claim is currently stayed. You remain a member until the first of the following events occur:

You elect to leave the 2017 scheme under Regulation 10
You retire or die in service
You are transferred into the 2015 scheme.

16. If you have retired after 2 December 2012 and have not issued a claim you remain covered by the terms of the pensions moratorium and are entitled to membership for service after April 2000 up to the date of your retirement.

17. Those who were appointed to part time fee paid office between 2 December 2012 and 31 March 2015 are also members up to the date of transfer into the 2015 scheme.

18. But beware. In the case of multiple part time fee paid office holders the position is not quite so straightforward. Automatic membership under Regulation 8(1)(a) only applies to those offices you were holding on 2nd December 2012. The position of those who have given up one fee paid office before 2 December 2012 and either retained or moved to another is less clear, particularly where those offices have overlapped, and it seems possible that this will be affected by the outcome of the Miller time starts to run appeal (see below). 

19. Those who had retired from a fee paid office before 2 December 2012 need either to have made an in time claim to the Tribunal in respect of that office or to have had their claim accepted by the MoJ.

Qualifying pensionable days (‘QPDs’)

20. This is the total number of days or part days for sitting, training, sick leave, and holiday entitlement from April 2000 up the date of retirement or leaving the scheme. First Tier Immigration judges have a special arrangement whereby each actual sitting day counts as 1.8571 sitting days to allow for time spent writing reasons for judgment. First Tier Employment judges also have a special arrangement under which accumulated hours outside the normal sitting day for which the PTFPJ has been paid count towards additional QPDs. The number of QPDs is crucial as it forms the basis of the ultimate pension. The question whether fee paid service before April 2000 will count awaits the outcome of the O’Brien appeal (see below)

Reckonable pensionable service (‘RPS’)

21. The O’Brien judgment of August 2013 accepted that salaried judges accrue pensionable service for each day including weekends and holidays and that consequently a factor needed to be applied to PTFPJ service in order to achieve equivalent benefits. That factor is the annual sitting day obligation for the comparator salaried judge, either 210, 215 or 220 days. The figure for each office is in the Schedule to the Regulations. RPS is expressed in years and fractions of a year to four places of decimals so the total of QPDs is divided by the appropriate factor to arrive at the number of years of RPS.

N.B. All examples which follow assume that the judge remains entitled to full transitional relief from entering the 2015 scheme.

EX 1: On retirement First Tier Immigration Judge A has 297.63 qualifying pensionable days. His factor is 220 which is the sitting obligation of the salaried comparator. His RPS is 297.63 ÷ 220 = 1.3529 years

Appropriate Annual salary (‘AAS’)

22. If you have received a JPCT spreadsheet you may have noticed that it contains a formula which enables the annual salary of the comparator salaried judge to be calculated in exactly the same way as pensionable pay under the 1993 Act. The 2017 Scheme has adopted a different and marginally more favourable method by simply taking the best single day’s fee during the final three years of fee paid service and then multiplying by the appropriate divisor. If the PTFPJ has received London Weighting/Allowance then that is added to the standard daily fee. The provisions of Regulation 7(4) are not easy to follow but the end result is that the AAS is normally the annual comparator’s salary on the last day of fee paid service.

EX 2: Judge B who worked in London retired on 30th april 2015. His final sitting day was on 15th April and the daily fee including London Weighting for that day was £482 + £18.18 = £500.18. The AAS is £500.18 x 220 = £110,039.60.

The O’Brien and Miller Appeals

23. There is both good and not so good news. In March 2017 the Supreme Court heard argument on both the O’Brien (‘the pre-2000 service issue’) and Miller (‘the time starts to run issue’) appeals. On 12 July the Supreme Court decided to refer the year 2000 point to the ECJ. The judgment is here.

24. The competing arguments are clearly set out in the judgment. The good news is that the majority of the court are in favour of Mr O’Brien but since this is not acte claire, the not so good news is that the Supreme Court has decided to make a reference and the ECJ will be asked to rule.

25. It may also be significant that in Walker v Innospec, another case which was argued at the same time as the O’Brien/Miller appeal and dealt with a closely analogous situation, the Supreme Court has ruled in favour of the argument that entitlement is decided at the date of retirement and includes service prior to the coming into force of the relevant EU Directive.

The judgment in Walker is available here.

26. Although not part of the O’Brien judgment Mr O’Brien’s solicitors, Browne Jacobsen, have been informed that the Court does not feel able to rule on the time starts to run point until after the ECJ has ruled on the year 2000 point.

The legal consequences.

27. In the course of consultation on the 2017 Draft Regulations the MoJ conceded that if the appeal on the year 2000 point succeeds then the Regulations will be amended to include service before April 2000 in the number of QPDs.

28. I will cheerfully admit that along with many others I saw little prospect of Mr O’Brien succeeding on the year 2000 point but it is very clear that I was wrong. I could however see a reasonable basis on which the appeal on the year 2000 point might be dismissed but the Miller appeal on the time starts to run point might still succeed. But if the appeal on the year 2000 point succeeds, it is much more difficult to see a basis on which the time starts to run appeal could fail.

29. Indeed the Walker judgment and the two recent ECJ decisions which are referred to in Walker arguably provide further support for the claimant’s case on the time starts to run point.  This point is mainly of interest to those who have moved from fee paid to salaried service before 2 December 2012 but may also affect those who have moved from fee paid Offices A and B to fee paid Office B before 2 December 2012. In any event there is now bound to be a further delay, probably until some time in 2020, before we reach the point of a final judgment. This will be nearly 25 years after Mr O’Brien commenced his proceedings in the Employment Tribunal. 

30. That is assuming that the ECJ will ever get to rule on the point. On current forecasts the ECJ will not rule on this case before the summer/autumn of 2019 by which time the UK is expected to have left the EU. Judges will be aware that the continued involvement of the ECJ in deciding issues which affect UK citizens is a very hot political issue in the current Brexit negotiations. Indeed as Lord Neuberger has recently pointed out, the question whether the Supreme Court should be bound by or have regard to or take no account of ECJ decisions made after March 2019 is a matter which Parliament needs to decide.

31. It is rather ironic that an issue on which it appears that the Government would have lost in the Supreme Court is now going to the ECJ where the Government is hoping to persuade the ECJ that the Supreme Court has got it wrong. Logic might suggest that there will be some kind of transitional arrangements covering pending cases but who knows what politics may dictate.

32. If both appeals succeed the result will be that those who moved from fee paid to salaried and retired from salaried service after 2nd December 2012 with less than 20 years’ service will have an in time claim to a pension in respect of the whole of their pre-appointment fee paid service but only up to the 20 year limit which applies to the combined total of service under both the 1993 Act and the 2017 Regulations.

33. If the year 2000 appeal fails but the time starts to run appeal succeeds then those who retired from salaried service after 2nd December 2012 with less than 20 years’ service will have an in time claim to a pension in respect of their pre-appointment fee paid service after April 2000.

Ex 3: Judge C was appointed a fee paid judge in 1985 and moved to salaried service in May 2000 having accrued 3.8 years of RPS. He retired in December 2106 having accrued 16.6 years RPS under the 1993 Act. The total of his RPS is 16.6 + 3.8 = 20.4 years but the total of the two pensions is limited to 20/40ths of his final salary if the Miller appeal succeeds.   

Ex 4: Judge D was appointed a fee paid judge in April 2000 and moved to salaried service in 2006 having accrued 0.8 years of RPS . He retired in October 2016 having accrued 10.5 years of RPS under the 1993 Act. If the Miller appeal succeeds the total of his RPS is now 10.5 + 0.8 = 11.3 years and he will be entitled to a further pension from October 2016 under the 2017 Regulations based on his 0.8 year’s service in that scheme.

Practical consequences

34. There are at least two serious practical consequences of this delay and what follows is not necessarily an exhaustive list. These are:

Accurate records or service
Surviving adults and children’s pensions

Records of pre April 2000 fee paid service

35. Back in 2014 the Employment Tribunal was taking the view that the burden of proof rested on claimants to establish how many sitting and/or training days a claimant had attended while making it clear that if MoJ records produced a more favourable result that figure was to be taken as correct. Pragmatic common sense intervened and the MoJ assumed the initial burden via the Judicial Pay Claims Team (‘JPCT’) of working out what their records showed in terms of sitting and training days which judges are then free to accept or challenge. The reality is that the MoJ has really struggled, and in some cases simply been unable to produce accurate records for sittings or training days covering the whole period back to April 2000 for all part time fee paid offices. However, so far as I am aware, sensible compromises have been reached in all individual cases.

36. For any period prior to April 2000 the MoJ position on records can almost certainly be described as highly unreliable to non-existent. The JPCT have been using HMRC PAYE records but we know that these do not date back earlier than the 2001/2 tax year so that avenue is not available. But on the MoJ side there are possible solutions. For example at worst any appointment as a Recorder carried an obligation to sit for a minimum number of days a year although it is clear from paragraph 15 of the Supreme Court’s judgment of 28th July 2010 in O’Brien that at least for Recorders the precise number has varied over the years since 1978.

37. It seems a reasonable assumption that any PTFPJ with a sitting commitment would have sat for at least the required number of days. The alternative, which the JPCT has used for some post 2000 sittings, is to take a yearly average of the period for which sitting records are available and use that average figure to cover the gaps.  For training days it seems a reasonable assumption that after the JSB was set up in 1979 any Recorder would have attended at least induction training, and later annual sentencing seminars and tri-annual refresher courses. Induction training for other offices followed on later.

38. Mr O’Brien may well be unique among part time fee paid judges in having kept meticulous records of all his part time sittings and training days from his appointment in 1978. But some Chambers certainly do have good historical records so if you do have pre-April 2000 fee paid service it would seem sensible to make enquires now. If you have old tax returns or diaries in your attic do not throw them away. If you have old P60s they will be particularly valuable assuming that you had no other source of income taxed under PAYE. These records may be worth literally thousands of pounds. Given that it may be more than two years before we finally know the true position the advantages of doing what you can now to verify your position are obvious.

Surviving adults and children’s pensions

39. The MoJ has confirmed that surviving adult’s and children’s pensions are covered by the terms of the existing pensions moratorium. So long as the moratorium remains in force there should be no limitation issues arising following a death in service or retirement. But surviving adults and executors should be made aware that following a judge’s death there may be a claim to a further pension under the 2017 Regulations based on pre- April 2000 fee paid sittings which may have to wait until 2020 until it can be resolved.

The McCloud litigation

40. The transitional provisions of the 2017 scheme are intended to give PTFPJs the same rights to remain in the 2017 scheme as their salaried colleagues enjoy in relation to the 1993 Act scheme. You will be aware that a number of serving salaried judges have challenged the lawfulness of the parallel provisions for transitional relief under the 1993 Act. They have succeeded at first instance before the Employment Tribunal in the case called McCloud and others v MoJ.  

41. However in another discrimination claim brought by the Fire Brigades Union and decided in February 2017 a similar scheme of transitional relief for members of the Fire Service pension scheme has been held to be lawful, so we have conflicting decisions at first instance. I understand that both decision are being appealed to the EAT but no date has yet been fixed for hearing.

 42. If the transitional relief scheme is ultimately ruled to be unlawful there would appear to be only two logical alternatives. Either everyone gets full transitional relief so all those who are members of the 2017 scheme remain members after April 2015 until death or retirement OR no one gets any transitional relief in which case any fee paid service after April 2015 is pensionable under the 2015 scheme which is of course a registered scheme.

43. The latter scenario could present a huge problem for those whose private pension pots exceed the lifetime limits and who have already been granted special enhanced protection by HMRC. It is a condition of such protection that the individual makes no further contributions to any registered scheme. The loss of all transitional relief would result retrospectively in those individuals being in breach of that condition and incurring a tax liability which would almost certainly run into tens of thousands of pounds. This problem has already been forcefully pointed out to the MoJ. A possible solution would be to allow these individuals retrospectively to elect out of the 2015 scheme but this in turn would cause problems for those who have already retired after April 2015 .                

Registration

44. Like the 1993 Act pension scheme, the 2017 scheme is unregistered for the purposes of the 2004 Finance Act. This means that while you remain a member your contributions do not count towards the annual allowance and benefits are excluded from the lifetime limits.

Contracting out

45. This is one of the very few issues outstanding but the MoJ expect to make an announcement shortly. There is no doubt that the scheme set up by the 2017 Regulations will meet the financial standards required for contracting out. The problem arises over backdating the contracting out certificate to April 2000.  In order to understand the implications you need to have some knowledge of the rules governing what is now the second state pension formerly SERPS.

46. The State Earnings Related Pension Scheme (SERPS), originally known as the State Earnings Related Pension Supplement, was a UK Government pension scheme, to which employees and employers contributed between 6 April 1978 and 5 April 2002, when it was replaced by the State Second Pension (‘SSP’) which itself ended on 31 March 2016.

47. Employees who paid full Class 1 National insurance contribution between 1978 and March 2016 have earned a SERPS/SSP. Members of occupational pension schemes could be ‘contracted out’ of SERPS/SSP by their employer, in which case they and the employer would pay reduced NI contributions, and they would earn virtually no SERPS/SSP pension which would be replaced by an occupational pension.

48. Fee Paid judges while under the age of 65 have historically paid Class 1 National Insurance Contributions on their fee paid earnings for the whole of their service from 1978 at the higher ‘contracted in’ rate and in return since reaching age 65 have been receiving an enhanced state retirement pension.

49. If, as expected, the MoJ obtains ‘contracted out’ status for the 2017 scheme retrospective to 1 April 2000 entitlement to the SERPS/SSP will stop and will effectively be replaced by the pension under the 2017 Regulations. Strictly speaking the DWP will be entitled to reclaim all the SERPS/SSP payments which have been made since the date on which a judge started receiving payment of the State Retirement Pension. This could have serious tax consequences for individuals since the figure for taxable state pension in each tax year after payments started would have been overstated in the judge’s tax return.

50. My understanding, and this has not been officially confirmed, is that the DWP/HMRC will not seek to recover SERPS/SSP payments which have actually been made. This is good news for those who have been receiving their SSP but not so good news for those who have elected to defer and take a larger pension at a later date.

51. The MoJ stand to benefit significantly from contracting out since they will be refunded the substantial difference between the employers’ ‘contracted in’ and ‘contracted out’ rate for up to sixteen years of members’ service. The difference between the employee’s rates has been a comparatively modest 1.5%. Judges will therefore be entitled to have this difference refunded, that is 1.5% of the total fees received for qualifying part time service under age 65 initially from April 2000 and possibly from 1978.

52. What is not clear is how judges are to be compensated for the fall in the value of money over the period of up to 16 years. According to the Bank of England inflation calculator you would need £154 in 2016 to buy goods you could have bought for £100 in 2000. Here is the link to the calculator.

53. Another way of resolving this problem is to use the Preston formula which has been accepted by the Employment Tribunal as a proper way to compensate judges for late payments of fees and pension. I have asked for clarification on this issue but in principle it seems logical that those who have been overcharged over many years should receive some compensation for this.  

Nomination

54. I understand that PS have recently issued nomination forms to all PTFPJs who are still in service. Hopefully you will all take advantage of the right to nominate death in service benefits under the 2017 Regulations. The advantages are twofold. First the death in service lump sum, which is enhanced for those dying in service under age 65, is paid to the nominees on production of the death certificate and does not have to wait for a grant of probate or letters of administration. Second the lump sum does not form part of the deceased’s estate for Inheritance Tax. The opportunity for some sensible IHT planning is clear but the details will vary according to your individual circumstances and are beyond the scope of this paper.

55. For those with pre-April 2000 service the current form of nomination may require amendment to make clear that it covers not only death in service benefits to which an individual is entitled but also any death in service benefits to which an individual may be found to have become entitled as a result of the O’Brien/Miller appeals.

Contributions

56. As with the 1993 Act scheme you have to make contributions in respect of your dependents pension benefits during the period since appointment while you have been accruing QPDs, and also towards your personal pensions for the period from 1 April 2012. The rate for dependents’ benefit contributions is fixed at 1.8% of fees received. The rate for personal pension contributions has varied each year. Since 1 April 2015 it has become even more complicated in that different rates may apply depending on the amount earned in each pay period during the year. I do not pretend to understand how this system works but I understand that the MoJ have just issued the official scheme guide which has some further information on this.

57. Until the Regulations came into effect you had no right to pay contributions for service up to that date so every judge who is a member of the scheme has a deficit in his or her contributions record. The Regulations give you three options to make up the deficit in your contributions record.

You can pay off the deficit by a single payment by 30 September 2017; or
You can pay off the deficit by fixed monthly deductions from your fees for part time service; or
In default or options a or b the deficit will be paid out of your gross retirement lump sum.

58. Since no interest is charged on the amount of the deficit I have not been able to think of any circumstances under which it would be to your advantage to elect for options a or b.

Transfer out of the 2017 scheme

59. Those of you who were under 51 ¼ on 1 April 2012 were compulsorily moved into the 2015 scheme on 1 April 2015. Those of you who were between 51 ¼ and 55 on 1 April 2012 were entitled to tapering relief and were told early in 2015 the date on which that tapering relief ends and transfer takes place.

60. On the date on which you leave the 2017 scheme your QPDs will be crystallized. When you reach your eventual retirement date your QPDs will be converted to RPS and you will be entitled to pension benefits under the 2017 scheme using the AAS at the date of your retirement. All this is of course subject to the eventual outcome of the McCloud appeal. There is no obvious solution to the problem for those whose tapering relief ends before then.

Partial retirement

61. This only affects those who hold or have held more than one part time fee paid office. At a very late stage in the consultation process the MoJ accepted that a PTFPJ might wish to retire from one part time fee paid office, Office A, and start drawing a pension for service in office A, while remaining in service in one or more other offices, Office B, C and D etc. The original proposal was that a judge would have to wait until final retirement from all part time fee paid judicial offices before drawing any pension for any of them.

62. The Regulations now allow a PTFPJ an option which may have significant benefits to those who wish to wind down their judicial career. and also to those who have moved from office A at one salary level to office B at a higher salary level office. The MoJ response to the final consultation exercise sets out a number of examples in the section headed Retirement Benefits which can be found here.  

63. PTFPJs who have held consecutive fee paid offices at different salary levels may now benefit from opting to defer taking the pension for the lower paid office A until retirement from the higher paid office B. Individuals will have to balance the advantage of receiving a higher pension for office A based on the AAS for office B at that later date against the disadvantage of not receiving any pension benefits from office A in the period between becoming entitled to those benefits and ultimate retirement from office B.  Otherwise opting to defer is only likely to be beneficial if there is a significant pay increase between the two retirement dates.

A correction 

64. Some of you will have received information from me earlier to the effect that holders of overlapping offices at different salary levels could benefit significantly from staging their retirements so that they retired from the lower paid office before the higher paid office. The MoJ have now corrected their previous advice to me. This benefit will only apply where a PTFPJ moves from a lower paid to a higher paid office so that the offices are held consecutively. This now mirrors the position under the 1993 Act scheme.

Additional Voluntary Contributions (‘AVCs’)

65. The provisions covering AVCs can be found in Part 12 of the 2017 Regulations. Because individual circumstances are infinitely variable it would be fruitless to try and offer any detailed explanation of any of the schemes. What follows is a simply the barest outline and anyone who wishes to explore this further should look at the two consultation papers issued by the MoJ and the scheme guide which has just been issued by the MoJ and/or take independent professional advice.

66. There are three separate schemes which may be available to those who wish to obtain extra pension benefits either for themselves or their dependents. These are

a. the JAVCS scheme

b. the JAYS scheme

c. The JASAPS scheme

JAVCS

67. The JAVC scheme is open to all members of the 2017 scheme who hold part time fee paid office. It is a registered scheme so contributions form part of the annual allowance and the value of the fund forms part of the lifetime limit. Members get tax relief on their contributions. Contributions may be made either by regular payments out of fee income or by way of lump sum. Members have 3 years from 1 April 2017 to make lump sum contributions covering fee paid service before that date.

68. Contributions are invested by the authorised provider, currently the Prudential, and retirement benefits can be taken in a number of different ways as with a private pension scheme.

JAYS

69. This scheme like the parallel JAYS scheme for salaried judges closed to new members on 6 April 2006 so it is only available to those who held a part time fee paid office on that date. Subject to certain conditions members may purchase extra years of service which on retirement form part of the judicial pension including providing benefits for surviving adults and dependents. The scheme is registered so tax relief is available on contributions but the annual allowance and lifetime limits will apply.   

70. Those who have already retired from part time fee paid service before 1 April 2017 have one year from that date to join the JAYS scheme. These fortunate individuals will by definition have reached assumed retirement age so can be likened to those who have the chance to back the winner of a horse race after the race is over. 

JASAPS

71. This scheme like the parallel JASSPS scheme for salaried judges closed to new members on 6 April 2006 so it is only available to those who held a part time fee paid office on that date. Members may purchase additional benefits for surviving adults and dependents in units of £1,000 which are not included in the annual allowance or lifetime limit.

Implementation

72. This has turned out to be rather a bumpy road for some of those who have already retired. Shortly before the Regulations came into effect I was assured by the MoJ that all the information on the JPCT spreadsheets had been passed by the JPCT to Punter Southall (‘PS’) who is now administering all judicial pensions on behalf of the MoJ. I have also been assured by the JPCT that individual letters had been sent to all PTFPJs whose money claims have been accepted specifying that person’s figure for QPDs and inviting a formal confirmation of acceptance.

73. The theory which seemed very sensible, is that PS would simply rely on the work done by the JPCT and incorporate these figures into their own pension calculations. The reality has turned out to be rather different. It turns out that what the JPCT sent PS was not the actual spreadsheets but a digest of information extracted from them and in some case human errors have occurred. Equally it turns out that figures supplied by HMCTS to the JPCT for QPDs after 1 January 2014 have not always been accurate.

74. PS has also been receiving information direct from HMCTS of QPDs and in a number of cases these figures have turned out not to agree with the JPCT figures, generally to the benefit of the individual concerned.  It is therefore not surprising that significant errors have occurred in the course of transmission of information to PS. To complicate matters further PS has also chosen to construct its own spreadsheets in order to encompass not only the pension benefits but also the financial reconciliation required for those who have been receiving interim payments. This has undoubtedly caused problems (see below).

75. So far as I am aware these errors have appeared most commonly with Immigration judges and other Group 7 judges entitled to London Weighting.  The only good news is that almost all of the 700 odd who retired before 31 March 2017 are now receiving monthly pension payments and so far there have been no problems with the pensions of those who have been sitting in retirement as DCJs. I have no information for other offices.

Checking the PS figures

76. On retirement you will be entitled to three amounts in respect of your qualifying fee paid service:

(a) an annual index linked pension;

(b) a lump sum

(c) a service award.

77. What the Regulations and the Lord Chancellor’s statement say about how these figures are calculated is set out in a worked example at Appendix A. At the moment if you retire will receive a retirement statement from PS which simply sets the end results for these three amounts. Having seen an example of the PS spreadsheet I am clear that PS has chosen to go about its calculations in their own way. That is their business so long as the end result is the same. If it is different then I suggest that ultimately the Regulations must prevail.

78. The MoJ have taken the precaution of having the PS methodology checked and verified by the Government Actuary’s Department against the Regulations before payment to any particular group starts. It seems very likely that this will ultimately turn out to be a problem of presentation rather than a matter of substance but it is less than satisfactory for those who would like to know how the figures for their pension benefits have been arrived at.

79. A separate and major problem has arisen for PTFPJs who have retired since December 2012 and have received payments on account of pension benefits. Firstly these payments did not include any amount for the service award. Secondly retired judges will recall that the deduction for contributions has been made at 3% of pensionable pay whereas the formula in the Regulations is 1.8% of fees received for dependent’s pensions plus contributions at a variable rate from 1 April 2012 for personal pensions.

80. Consequently on the one hand retired PTFPJs owe a revised amount for their contributions deficit and on the other they are owed a service award and an appropriate and greater amount of compensation/interest for late payment allowing for of any payments on account. The end result must be a significant additional payment due to any retired PTFPJ who has suffered this deduction for the contributions deficit.

81. PS says that it has carried out this complicated exercise for retired PTFPJs but the current PS summary statement makes no separate reference to the exercise of reconciling the amounts actually due from and to each individual nor are any figures given apart from the contributions deficit. The result is that for those who have received payments on account it is impossible to reconcile the figures on the PS retirement statement with the formulae in the Regulations.

82. PS has been asked to move to a form of retirement statement which looks more like the worked example at Appendix A for its basic pension, lump sum and service award statement and we await a response. A separate set of calculations would then be needed for the reconciliation exercise but I see no reason why a PTFPJ should not be entitled to a breakdown of these figures.  

83. If you choose to trust the PS summary figures you have no problem unless you have retired and received payments on account and you come to complete your tax return at which point you may have some difficulty identifying precisely what is declarable taxable income and whether tax has been deducted from any element of the reconciliation exercise. If you wish to know how PS have arrived at their figures you must be entitled to a breakdown which does not simply refer you to a spreadsheet which I certainly cannot understand.   

84. You will see from the worked example that the starting point for all three amounts is the figure for your Reckonable Pensionable Service. This underlines the point that it would be very prudent for judges who may become entitled to a pension under the 2017 Regulations to have the figure for QPDs and consequently RPS for each fee paid office calculated as accurately as possible up to 31 March 2017 in advance of the Supreme Court decision in O’Brien.

85. Calculating the amount of the contributions deficit necessarily involves arriving at an accurate figure for each individual’s QPDs. Serving PTFPJs should receive a letter from Punter Southall (‘PS’) in October giving details of their qualifying pensionable days up to 31 March 2017. This vital document should not be ignored. You should previously have received a similar letter from the JPCT giving a figure for your QPDs usually made up to 31 March 2015, but in some cases later.

86. For the reasons mentioned above you may be unable to reconcile these two figures even after adding the QPDs in the gap between the JPCT date and 31 March 2017. So far experience has shown that after further investigation, the PS figure for QPDs is ultimately greater than the JPC figure plus the intervening service. That must be good news but it does suggest that the initial PS figure should be viewed with some caution. This is not because PS have got the figures wrong but because they have received information either from HMCTS or the JPC which is not always completely accurate.

87. In fairness to PS it has had a huge task to cope with in a limited space of time and some cases have been very complex. The only group which remains outstanding are surviving adults and children whom one might have expected to be at the head of the queue, but I understand their payments should start from the end of September.

88. Ultimately one of the major differences between the 1993 Act scheme and the 2017 scheme will be that the 2017 scheme calls for a degree of co-operation between the administrator and the individual PTFPJs which is wholly absent from the 1993 Act scheme. I understand that at some future date PS will be sending each member an annual statement of QPDs. It is vital to the operation of the 2017 scheme that if there is a query over your QPDs you resolve it immediately. If you fail to do so the danger is that you may not eventually receive the benefits to which you are entitled.

Envoi

89. I do not pretend that this is more than a quick tour round the major issues still facing PTFPJs but I hope it also gives you a sense of what has been achieved. Following the Supreme Court O’Brien decision in early 2013 I have spent the past four years dealing with the consequences of that decision and my task has been to ensure, with a fair degree of success, that the 2017 Regulations provide a pension scheme for service by fee paid judges which is as close as possible to the scheme enjoyed by salaried judges under the 1993 Act. The level of co-operation from the MoJ has been exemplary and I am very satisfied with the result.

90. The MoJ now estimate the ultimate cost of that pension provision at £3.5 billion and that figure does not appear to include any figure for the consequences of success in O’Brien or Miller. Of the two Miller with around 2000 salaried judges being added as members of the 2017 scheme will be significantly more expensive. £500 million may turn out to be a conservative estimate.

91. Implementation of the 2017 Regulations has not surprisingly proved to be a huge challenge and not everything has gone according to plan. Ultimately PTFPJs need be confident that they are actually getting what they are entitled to. Persuading PS to express themselves in terms which align with the wording of, and the formulae in, the Regulations remains a work in progress.

72. My own involvement in judicial pensions started a long time ago back in 1990 with the response of the District Judges to the Green Paper which ultimately led to the 1993 Act. I remained actively involved until after deregistration in April 2006. When I resumed active service four years ago I was hoping that I could leave you with a clean slate and no loose ends to tie up. Sadly that is not to be but my 20 years are up so I bid you farewell and leave you in younger and safer hands. If you spot any major errors in this document please let me know, but quickly please. A proper study of the Beethoven Piano Sonatas has waited for long enough.

John Platt August 2017, jpjudgeretired@gmail.com

Appendix A

The Judicial Pensions (Fee-Paid Judges) Regulations 2017

Worked pension calculations for

Recorder W who has been married through his judicial service and who has made an in time pension claim.

Personal details

Born 6th March 1955

Appointed Recorder 1st April 2001

Retirement 6th April 2020.

Assumed CJ salary on 6th April 2020 = £145,650.

Step 1 calculating the reckonable pensionable service (‘RPS’)

Qualifying pensionable service under Regulation 4 is say 576 days

RPS under Regulation 5(1) is 576 ÷ 210 = 2.7429 years

Step 2 calculating the appropriate annual salary (‘AAS’) under Regulation 7

Daily fee payable for Recorder sittings on 6th April 2020 is £145,650 ÷ 210 = £693.57

AAS under Reg 7(2) is £693.57 x 210 = £145,650

Step 3 Calculating the pension under Regulation 13(3)

Pension is RPS ÷ 40 x AAS, so

Pension is 2.7429 ÷ 40 x £ 145,650 = £9,987.58 rounded up to £9,988.00

Step 4 Calculating the lump sum under Regulation 25

Under Regulation 25(3) Initial Lump sum is 2.25 x pension £9987.58 = £22,472.06

Step 5 Calculating the contributions liability

Judge W is liable to pay contributions under Regulation 53 for his pre-commencement service for both the amount of any personal pension contributions under Regulation 54 and dependant’s pension contributions under Regulation 55.

This will be a percentage of fees in each salary period but the dependant’s pension contributions have been fixed at 1.8% for the whole period of his service so we do not need to break this down into each salary period.

The total of his fees received during his Recorder service is say £316,850 so the amount due for dependent’s contributions is 1.8% x £318,850 = £5703.30.

No personal pension contributions are due for service before 1st April 2012 but variable contributions are due from 1st April 2012 to 31st March 2017 after which contributions have been deducted at source. so in his case the personal pension contributions figure is SAY £1,550

£1,550 + £5,703.30 = £7,253.30 which is his contributions deficit. .

He has chosen not to pay anything off this debt under Regulation 58(1) so under Regulation 58(4)(a) the whole of this debt is payable out of his lump sum 

Step 6 Calculating the taxable lump sum and service award.

Under Regulation 58(4)(a) the Contributions deficit is payable out of the retirement lump sum. Under the Lord Chancellor’s statement of March 2017 the MoJ will deduct this figure from the initial lump sum to arrive at the taxable lump sum and the service award will be the amount of tax deducted.

So the taxable lump sum is:

Initial lump sum                         £22,472.06

Less Contributions Deficit         £7,253.30

Taxable lump sum                     £15,218.76

This is taxable at 45%, so

Less Tax @ 45%                       £6,848.44

Leaving a

Net lump sum                            £8,370.32 rounded up to £8,371.00

And a

Service award                            £6,848.44

Summary of Entitlement

a. Annual Pension (index linked)  £9,988.00

b. Net lump sum                           £8,371.00

c. Service award                           £6,848.44

 

 

    

    

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