Policing police pensions

Such allegations can only create further member uncertainty; and uncertainty is no friend to good outcomes.

But I have some admiration for these officers who have the energy and dogged determination to grapple with the impenetrability of pensions law and scheme regulations in the best interests of the fellow officers whose views they express.

Even if their challenges fail, their arguments reveal where communications may historically have been poor and/or scheme provisions lacking in transparency, and so there is still something to be learnt.

But there is some real substance to some of the issues raised. In particular, the complaint that retirement rules of the 1987 final salary scheme (PPS) and the 2015 career average revalued earnings scheme, into which it is proposed that all police officers will be transitioned for service from April 2022, do not currently work well in combination. The former are based on attainment of service criteria, the latter on age criteria. 

Let us take an example of an officer who joined at age 20, and completes 23 years’ service in PPS and seven years’ service Care. This officer becomes entitled to their PPS benefits at age 50, but will be unable to access their Care pension for a further five years until they reach normal minimum pension age — currently age 55.  

Linked to this is the question of the actuarial reductions that are applied to officers’ Care scheme benefits claimed before their normal pension age.

Deferred status

Here, the Pension Challenge complaint appears to be that these reductions are calculated from age 60 for those retiring from active service but are calculated from the individual’s state pension age for those retiring from deferred status.

Officers in the position described above will be treated as deferred members unless they are willing and financially able to wait until the SPA to claim their Care benefits.

Hence our example officer — who has a SPA of age 67 — would be subject to a 12-year, rather than a five-year, reduction to their Care benefits because they have retired from deferred status.

Although this issue is not unique to the police scheme, the impact can be significantly more severe due to impacted officers’ right to claim PPS benefits on attainment of service minima. Therefore, entitlement can arise as early as age 48.  

A further linked issue is that there are no provisions under final salary arrangements for actuarial enhancement of benefits claimed late, reflecting the shorter expected payment period. So coming back once again to our example officer, they broadly have the following options:

• Retire normally at age 50 leaving Care benefits unclaimed until their SPA.  
• Retire normally at age 50 but claim Care benefits at normal minimum pension age. In this case, the Care benefits will suffer an actuarial reduction based on the officer’s SPA rather than age 60.
• Continue in service to age 55 or beyond and claim both PPS and Care benefits together. In this case, PPS benefits will not be uplifted for late payment and Care benefits may suffer an actuarial reduction, which will be calculated from age 60.

Leaving aside the question of whether this amounts to unlawful discrimination, this does feel like a Catch-22 situation, which makes member complaints understandable. It is to be hoped that these issues will be reviewed as the detail of arrangements from April 2022 onwards is buttoned down.

Transparency and clarity is key

It goes without saying that stakeholders will need to consider how any concessions would be funded, including the extent to which additional costs might fall on the wider police scheme membership. 

As a final note, I am not a particular expert in police pension arrangements. But I am a pensions professional, and I suggest that if there is something I have missed, then chances are that members have missed it too. That brings me full circle to the point I made at the outset relating to communications.  

Public sector pension scheme transitional arrangements bring layers of complexity to schemes that are already unfathomable to many of their members.

It seems to me that whatever policy decisions are eventually implemented, transparency and clarity of communications will be pivotal in ensuring acceptance and good outcomes for our hardworking police officers.

Moira Warner is a senior intermediary development and technical manager at Royal London