This is an expensive project - HM Treasury has estimated the cost of remedying the discriminatory transitional protections for public service pension schemes to be £2.5bn per year (or £17bn in total). This is of course in addition to the current cost of providing the public service pension schemes.
In essence, those members with service on or before 31 March 2012 and on or after 1 April 2015, will be able to choose whether their benefits (for the "remedy period") should be calculated on the legacy scheme basis, or the revised scheme basis. An important point is that this is not just a question of final salary versus CARE - as the comparison relates to the whole bundle of benefits.
The "remedy period" relates to benefits accrued between 1 April 2015 and 31 March 2022.
The Government is consulting on two options for this member choice as to how their benefits are to be addressed:
1) decide now (or by 2022(ish));
2) decide when you retire (the "deferred choice underpin").
Option one provides more certainty today - but requires a herculean effort in a short window.
Option two provides more certainty as to the comparison at retirement, but requires complex administration for the next 30 years.
The consultation document (which even at more than 70 pages is not scheme specific - there are separate consultations per scheme) is very useful in highlighting issues such as: tax, death cases, administration challenges, recovering overpayments and interest, divorce.... but demonstrates the massive challenge in dealing with benefit revisions for millions of members.
In fact, even if you have no interest in public sector schemes, the document serves as a useful note as to: (a) this issues which can arise on benefit recalculations; and (b) the Government's suggested approach to dealing with those issues. Therefore, for private sector schemes which have to address similar issues, this would be a helpful read.
Whatever the outcome of the various consultations - this will be a significant issue for public service schemes for possibly decades to come.
Government plans to rectify a pension discrimination issue highlighted by two landmark court cases is expected to cost taxpayers £17bn.