On the go: The Teachers’ Pension Scheme has awarded a £20.6m extension to Capita’s current third-party administration contract to deal with the implementation of the McCloud remedy.
In a notice published on Friday, the Department for Education stated that Capita’s current contract, which ends in 2025, needed to be amended to deliver a transitional protection discrimination remedy.
The scheme, along other public sector pension funds, needs to make changes to its current structures to implement legislation being brought forward by HM Treasury.
“We must amend the scheme to avoid further discrimination going forward, and TPS members who have already been impacted by the discrimination must be appropriately compensated,” the notice stated.
The court case relates to a dispute started in March 2015, when the defined benefit pension schemes for judges and firefighters were closed, and the members transferred into a replacement scheme.
Transitional provisions were put in place, which allowed older judges and firefighters to remain members of the old schemes, either until retirement or until the end of a period of tapered protection, dependent on their age.
But in a ruling handed out in December 2018, the Court of Appeal said the government discriminated against the two groups on the grounds of age, race and equal pay in relation to changes to their pensions.
In June 2019, the Supreme Court refused the government’s application to appeal the court case, which marked the end of the legal process.
In February this year, the government announced the solution chosen for this issue will be a deferred choice underpin, under which members may opt at retirement for whichever scheme would have produced the larger pension.
The government estimates that the cost of providing additional pension benefits during the remedy period will be £17bn, but this excludes administration costs.
The DfE stated that it decided to make changes to the current contract, instead of looking for a new admin for this task, due to “economic and technical reasons”.
“A change of contractor would cause significant inconvenience and have to overcome significant technical barriers in order to amend and reconcile live pension data as well as substantial duplication of costs for the contracting authority,” it said.
In the meantime, the DfE will be soon awarding a new contract for administration services for the TPS, as Capita’s contract is due to end in 2025.
According to the tender notice, published on August 20, the new administrator will be appointed for a 10-year contract worth £185m, with an option for a five-year extension.
