Consultation outcome

Equality Statement

Updated 12 May 2023

1. Introduction

This equality statement accompanies the Ministry of Justice (MoJ) consultation document, ‘Judicial Pensions: Draft McCloud Regulations’. In line with the public sector equality duty, under s149 of the Equality Act 2010 (EA 2010), it considers potential equality impacts of the draft regulations required to implement the McCloud remedy.

2. Background

In July 2020, MoJ consulted on proposals to address discrimination in the judicial pension scheme identified in the case of McCloud v MoJ. The Court of Appeal held that the 2015 reforms to the judicial pension constituted unlawful direct age discrimination, as well as indirect race and sex discrimination^{[footnote 1]}.

The official response to the consultation, published in February 2021, confirmed that affected judges will participate in a formal ‘options exercise’ where they will be offered a choice of pension scheme membership for the relevant period, 1 April 2015 until 31 March 2022^{[footnote 2]}. The choice is between ‘legacy scheme’ membership (JUPRA and the fee-paid equivalent, FPJPS) and 2015 scheme membership (JPS 2015).

The government has since enacted primary legislation, the Public Service Pensions and Judicial Offices Act 2022, which provides the framework for delivering the options exercise. Regulations are also required to address certain technical aspects of the remedy. These regulations are the focus of the current consultation.

Equality statements have been published to accompany both the initial consultation and government response, as well as the primary legislation. Since the purpose of the remedy is to address unlawful discrimination, we considered at each stage that there were positive equality impacts. To the extent that the design of the remedy had the potential to treat individuals differently, we maintained that such treatment could be objectively justified.

3. Public sector equality duty

Section 149 of the EA 2010 requires public authorities, in the exercise of their functions, to have due regard to the need to:

• eliminate discrimination, harassment, victimisation and any other conduct prohibited by or under the Act;
• advance equality of opportunity between persons who share a relevant protected characteristic and persons who do not share it; and
• foster good relations between persons who share a relevant protected characteristic and persons who do not share it.

There are nine protected characteristics in the Act: sex, race, disability, age, sexual orientation, religion and belief, gender reassignment, marriage and civil partnership, and pregnancy and maternity.

For the purposes of this equality statement, we are primarily concerned with age, sex and race, due to the nature of McCloud discrimination.

Section 13 of the EA 2010 defines direct discrimination as:

(1) A person (A) discriminates against another (B) if, because of a protected characteristic, A treats B less favourably than A treats or would treat others.

(2) If the protected characteristic is age, A does not discriminate against B if A can show A’s treatment of B to be a proportionate means of achieving a legitimate aim.

Section 19 of the EA 2010 defines indirect discrimination as:

(1) A person (A) discriminates against another (B) if A applies to B a provision, criterion or practice which is discriminatory in relation to a relevant protected characteristic of B’s.

(2) For the purposes of subsection (1), a provision, criterion or practice is discriminatory in relation to a relevant protected characteristic of B’s if:

(a) A applies, or would apply, it to persons with whom B does not share the characteristic,

(b) it puts, or would put, persons with whom B shares the characteristic at a particular disadvantage when compared with persons with whom B does not share it,

(c) it puts, or would put, B at that disadvantage, and

(d) A cannot show it to be a proportionate means of achieving a legitimate aim.

4. Proposals

As drafted, the regulations provide for the following areas:

• a remedy in respect of technical member options, such as voluntary contributions and partial retirement;
• repayment mechanisms where judges owe sums to the scheme or MoJ, including the ability to pay via deductions from lump sum and pension on retirement;
• the application of interest to amounts owed to, or by, judges, for example under or overpaid pension benefits;
• provision in respect of pension sharing orders in the case of divorce;
• a legislative basis to resolve outstanding issues for retired judges and McCloud claimants (referred to as ‘immediate detriment judges’); and
• a legislative basis to resolve the pension entitlement of certain fee-paid judges (referred to as ‘gap judges’).

The draft regulations also address consequential amendments to existing legislation. We have identified the following areas of the draft regulations as having potential equality impacts:

5. Added Pension

The draft regulations provide that judges who make a legacy scheme election and who have purchased Added Pension in the 2015 scheme should be offered a choice of:

• receiving compensation for the net value of their contributions, i.e. the gross Added Pension rate less any tax relief; or
• having the contributions ‘regularised’, i.e. preserved in the 2015 scheme.

This position was reached following consultation.

The first option would see the judge returned to the position they would have been in, so far as possible, had they never purchased Added Pension, since they would be compensated for the net amount of contributions and have the rights associated with them extinguished.

The second option provides for judges to return to legacy scheme membership but have their Added Pension remain in the 2015 scheme, i.e. judges would become a member of the 2015 scheme in respect of their Added Pension only.

We recognise that the second option treats judges in scope of the remedy differently from judges who are not in scope, specifically judges who remained in the legacy scheme in 2015 (known as ‘protected judges’ as they were protected from the reforms in 2015 due to their age). This is because the latter group, while in the legacy scheme, are not able to purchase Added Pension in the 2015 scheme.

While this could arguably be considered less favourable treatment of protected judges on the grounds of age, we consider that such treatment can be objectively justified. First, unlike judges in scope of the remedy, protected judges were not discriminated against in 2015; they have had certainty regarding their pension provision throughout by remaining in a scheme with objectively favourable terms not afforded to others at the time. Second, purchasing Added Pension is a pure member cost, with no contributions made on behalf of the member by the judge’s ‘employer’ (in this case, MoJ). We will therefore not be offering this to protected members.

5.1 Scheme Pays

Retrospective provision of Scheme Pays is available for judges who make a 2015 scheme election and incur an annual allowance tax charge (AATC) in respect of a tax year in the remedy period. Scheme Pays allows the member not to pay the charge upfront, but request for the scheme to pay it on their behalf and have a reduction in pension benefits on retirement accordingly.

In the course of administering the McCloud remedy, a retrospective AATC could arise in two scenarios where judges make a 2015 scheme election:

• where judges received tapered protection in 2015 and therefore remained in the legacy scheme for a period before joining the 2015 scheme at a later date, and
• where judges received tapered protection in 2015 but did not taper to the 2015 scheme (because MoJ stopped tapering judges when the outcome of McCloud was clear), i.e. they remained in the legacy scheme during the whole remedy period.

Where a retrospective AATC arises in either scenario, the draft regulations provide that Scheme Pays should be available to allow the judge to request for the scheme to pay the charge upfront to HMRC. Without such provision, there would be differential treatment between the following two groups:

• Group A: judges in scope of the remedy who make a 2015 scheme election and who incur a retrospective AATC, who would have to pay the charge upfront to HMRC, and
• Group B: judges not in scope of the remedy (because they took up office after 31 March 2012) who are members of the 2015 scheme for the same period and were able to use Scheme Pays to pay the AATC on their behalf.

The differential treatment might arguably amount to indirect age discrimination against group A. This is because these judges are likely to be older than group B judges, since younger judges are less likely to be able to satisfy the requirement to have been in office by 31 March 2012.

Therefore, making retrospective provision in the regulations for Scheme Pays ensures, so far as possible, equal treatment on the grounds of age.

5.2 Interest

The PSPJOA 2022 provides the power for schemes to make regulations to apply interest to amounts owed to, or by, members in the context of McCloud remedy^{[footnote 3]}.While the draft regulations apply interest to such amounts, the relevant rates and details concerning calculation periods are set out in HM Treasury directions. Therefore, this consultation does not seek views on the rates of interest, which HM Treasury has determined following consultation with the Government Actuary.

The application of interest ensures, so far as possible, equal treatment between those in scope of the remedy and all other judges. The latter group will have made payments to the scheme, for example pension contributions, or received payments from the scheme, e.g. lump sum and pension benefits if they have retired. Therefore, when it comes to implementing the remedy for those in scope, an amount of interest will be applied to such payments to recognise the real term value of amounts at the time of payment. This aims to avoid differential treatment on the grounds of age or any other protected characteristic.

5.3 Dependant contributions

The draft regulations also amend existing legislation to retrospectively amend the rate of dependant contributions payable by salaried judges with income above £150,000. The change will be backdated to 2016. This is to ensure equal treatment between judges in scope of the McCloud remedy and those not in scope who remained in the legacy scheme in 2015 (protected judges).

Judges in the latter group with income above £150,000 have not been charged the correct rate of dependant contributions since 2016. Effectively, protected judges were charged total contributions of 4.43%, rather than 6.23% as required by the relevant legislation (which would have included dependant contributions).

As the regulations stand, in resolving McCloud discrimination, we would be required to charge the full 6.23% to McCloud judges with income over £150,000 for the years in the remedy period. This would treat McCloud judges less favourably on the grounds of age, since they are younger than protected judges. Therefore, we propose amending the relevant contributions legislation, with retrospective effect, to ensure McCloud judges are charged at the same rate as protected judges, and to regularise the rates that protected judges have been charged.

6. Conclusion and next steps

We consider that the draft regulations achieve positive equality impacts since they are designed to remedy unlawful discrimination identified in the case of McCloud. Where there is the potential for differential treatment, we consider that such treatment can be objectively justified.

We will continue to monitor potential equality impacts following consultation, taking into account responses received to the consultation. An official government response to the consultation will be published in spring 2023, following which we aim to lay the draft regulations.

7. Annex: Data

The tables in this document compare the characteristics of the following two groups:

• In scope:^{[footnote 4]} This group comprises judges under the age of 55 as at 1 April 2012 who were in post on the 31 March 2012 and on or after 31 March 2015; and
• Current in post:^{[footnote 5]} Court and tribunal judges in post as at 1 April 2022.

The groups below have been selected to ensure that no single group contains less than 10 judges. To report percentages from a smaller group could be disclosive. In addition to this, as stated in the published judicial diversity statistics, where small numbers are present, percentages are highly volatile and potentially misleading.

7.1 Comparison based on the characteristic of gender

Table 1-Comparison of judges in scope for McCloud and current judges in post based on the characteristic of gender^{[footnote 6]}

Group	Women	Men	Total
In scope	42%	58%	100%
Current in post	41%	59%	100%

The gender split for women and men in scope of McCloud is 42% and 58% respectively. These figures are similar to the gender breakdowns for judges currently in post.

7.2 Comparison based on the characteristic of ethnicity

Table 2-Comparison of judges in scope for McCloud and current judges in post based on the characteristic of ethnicity^{[footnote 7]}

Group	Ethnic Minority	White	Total
In scope	12%	88%	100%
Current in post	10%	90%	100%

The ethnicity data for minorities and ethnic majority (white) in scope of McCloud is 12% and 88% respectively. These figures are similar to the ethnicity breakdowns for judges currently in post.

7.3 Comparison based on the characteristic of age

Table 3-Comparison of judges in scope for McCloud and current judges based on their age groups (ages as at 1 April 2022)

Group	Under 50	50-59	60 and over
In scope[footnote 8]	8%	48%	45%
Current in post	31%	34%	35%

These tables compare the ages of judges in scope to the current ages of the judiciary. Table 3 shows age data for different groups of judges who are in scope of McCloud for <50, 50-59, 60 and over are 8%, 48%, 45% respectively.

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1. Though indirect sex discrimination is framed as equal pay where it concerns remuneration ↩

2. https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/964861/mccloud-consultation-response.pdf ↩

3. See s61 Public Service Pensions and Judicial Offices Act 2022 ↩

4. Note that a switch over in data systems took place in November 2015, and only records that were live at the end of October 2015 were transferred to the new system. For this reason, this data may be incomplete ↩

5. Current in post figures come from the 2022 judicial diversity statistics ↩

6. Judges whose gender is unknown have been excluded from these calculations ↩

7. Judges whose ethnicity is unknown have been excluded from these calculations ↩

8. The age of the in scope group is as at 1 April 2022 ↩