Judicial Pensions Circular 18: Update on the 1.25:1 uplift

A. This circular attempts to explain the current position over the last major obstacle which faces the MoJ in giving effect to the judgment of the ECJ in O’Brien2 for those who started their careers as fee paid judges before 31 March 1995 in an office with a 15 year comparator under the Judicial Pension Act 1981 (“JPA 1981”).

B. I repeat again that the views expressed in this document represent my personal understanding of the current position which is far from straightforward. It is not intended to offer encouragement or discouragement to any individual nor do I accept any duty of care to any individual. So once again I repeat that any individual who wishes to pursue his options further should take independent advice. The same applies to deciding whether or not to take a particular course of action in arranging your personal finances.

C. The Judicial Pensions Fee Paid Judges Pension Regulations 2017 as amended by the 2023 Regulations (“FPJPS”) introduced a new pension scheme covering service in qualifying fee paid offices up to 1 April 2022. With a few limited exceptions all service both before and after 1st April 2000 is now qualifying service. Important further amendment Regulations are highly likely to occur (see below). Consequently there are no longer any broad brush solutions for those appointed before 31 March 1995. Taking proper professional advice is a sensible course to follow.

D. Can I also remind you all that generally 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 views expressed by me without my consent. However on this occasion it is appropriate that if you wish, you are free to share this circular with your accountant or financial adviser.

E. Equally if you know of any surviving spouses or children of PTFPJs who have been receiving payments on account of surviving spouse/children’s pensions please feel free to copy this circular and/or my e-mail address to them. The same applies with greater urgency to the surviving spouse/ child of any PTFPJ know to you who has died since 2 December 2012 who has not yet lodged a claim. Although the money claim moratorium has ended the pension claim moratorium is still in place so claims where the death occurred after 2 December 2012 are still in time. There is also at least a strong probability that those who have received interim payments will be entitled to significant tax refunds and there are time limits for claiming these. We are all in this together.

Does this apply to me?  

This message only concerns those who:

(a) started their part time fee paid service before 31 March 1995, and;

(b) that service has been in one of the offices with a comparator with a fifteen year service period to qualify for a full pension under JPA 1981 e.g. Deputy High Court Judge, Assistant Recorder, Recorder and Deputy Employment Judge; and either

(c) are still serving in part time judicial office; or

(d) finally retired from judicial service after 2 December 2012 or have now made an in time pension claim; or

(e) are the surviving adults of a fee paid judge who qualifies under (a) to (d);or

(f) are the child of a fee paid judge who was in full time education at the time of their parent’s death either in service or in retirement after 2 December 2012.

For this purpose the term Recorder includes Assistant Recorder so that those appointed Assistant Recorder before 31/3/95 and then Recorder after that date will be treated as holding a single office with a pre 31/3/95 start date. The exact number is unknown but is likely to be up to 1,000 individuals.

  1. For those who have already retired or died in service or retirement leaving surviving adults or dependants, XPS have been making interim payments of pension benefits based on the FPJPS BUT in most cases without applying the 1.25:1 uplift to your qualifying pensionable fee paid service.
  2. The FPJPS Amendment Regulations 2023 now provide that for those who started fee paid service before 31 March 1995 the default position will be that their pension benefits for service in a qualifying office will be calculated using the JPA 1981 scheme but these judges or their personal representatives will have the option to elect to have the pension for their relevant fee paid service to be calculated under FPJPS with an uplift of 1.25:1 in the number of days of relevant pensionable service, provided that the conditions in the FPJPS are met in relation to that office .
  3. The current cut off date for giving notice of election to join FPJPS is 31 March 2024, and that date now gives rise to a serious problem.
  4. The MoJ has accepted that it is their responsibility:
    • to identify each individual who now has the right to elect to join FPJPS from those who have been receiving interim payments; and
    •  to provide each individual with an illustration of their pension benefits under the two schemes.
  5. The MoJ will NOT give advice to individuals as to whether or not to make the election. Their role is simply to provide information to enable each individual to make a reasoned decision.
  6. At present the MoJ do not have the resources available to carry out this exercise before 31 March 2024. As a result they have announced their intention to introduce amendment regulations to extend the date for election to 30 April 2025. Leaving aside the possibility of outside events such as parliamentary elections the timetable for doing this before 31 March 2024 is clearly unachievable.
  7. The latest thinking at the MoJ is that the time for making elections will need to be extended even further to 31 March 2026 and this date will also apply to elections to join any of the AVC schemes which are included in FPJPS (see below). Any extension beyond 31 March 2024 will have to be retrospective.
  8. This delay has a practical knock on effect to the exercise which XPS hope to carry out during 2024 of applying the 1.25:1 uplift to existing claimants who are currently receiving about 12.5% less than their true entitlement under FPJPS in respect of their part time fee paid service.
  9. The MoJ has confirmed that it accepts responsibility to seek out those who are entitled to the 1.25:1 uplift and adjust their payments to the correct amount retrospectively from the date of commencement of entitlement. So there is no need for those who are currently receiving interim payments and waiting for their uplift to lodge fresh claims. But it may be helpful if I offer some general comment about the factors which may influence your choice when and if you have the chance to choose.

    What’s the difference?

  10. On the one hand the JPA 1981 Act equivalent pension will always be greater than the FPJPS alternative. As a matter of simple maths 4/3 is always greater than 5/4. But if you look at the total pension benefits including the lump sum the position is not so straightforward. The lump sum under FPJPS is 2.25 x the pension as against 2 x pension under JPA 1981. In addition JPA 1981 has no provision for any top up payment for death in early retirement (“DIER”). FPJPS provides for a further lump sum to be paid on DIER if the total benefits are less than 5 times the pension at the date of death.
  11. In cash terms the value of the DIER payment runs down to zero approximately 30 months after retirement. The difference between the FPJPS pension and the enhanced lump sum as against the higher JPA 1981 Act pension and lower lump sum gradually diminishes over time so that if a judge survives for more than five years in retirement JPA 1981 offers a smaller lump sum but an increasingly larger pension and consequently a larger surviving adult’s pension on the judge’s death in retirement.
  12. My limited information is that the majority of retired judges have now survived for more than five years in retirement.
  13. So what does that mean in cash terms? In rough terms and ignoring inflation increases after a judge has survived for five years the value of the overall net total pension benefits are now roughly equal. Thereafter in retirement each £1,000 of JPA interim payment becomes £1,333 p.a. and each £1,000 of FPJPS becomes £1,250 p.a. That is a difference of about £7 per month.
  14. There is another consideration which some judges may wish to take into account. Any judge who wishes to take advantage of the right to make additional voluntary contributions for their surviving adult’s pension will have to elect to join FPJPS in order to do so. The JPA 1981 equivalent scheme does not have any similar right. This aspect of the choice is so complex that any judge who is considering AVCs would be well advised to take independent professional advice.

    Next steps

  15. There is one group which does not have a problem. The service uplift for death in service under age 65 means that almost every surviving adult and consequently every eligible child is going to be better off electing for an FPJPS pension. The only possible exception are those who die in service after reaching age 65. The MoJ has accepted this reality and GAD has been doing the calculations on this basis for several years.
  16. As the law stands at the moment the personal representatives of those in this category must now give notice of election to join FPJPS before 31 March 2024 to be sure of enjoying the better benefits of FPJPS. The retrospective extension of that date to 30 April 2025 or 31 March 2026 will require parliament to pass amending Regulations.
  17. Personal Representatives who prefer not to wait for amending Regulations may think it prudent to secure the position of surviving adults and children by giving notice of election before 31 March 2024. The Minister has not yet prescribed a form of notice but the form at Appendix B has been used and accepted by the MoJ in at least one case of a surviving adult and child.
  18. But I accept that for retired fee paid judges it is not so simple. Some of you, particularly those who have now retired more than ten years ago, may be tired of waiting and would prefer to take your uplifted benefits now on the basis that actual enjoyment of a substantial lump sum in terms of arrears is worth more than a further long delay.
  19. However for those who are prepared to wait that may prove to be a false economy. The MoJ are proposing to carry out a reconciliation exercise in each case which will compare the FPJPS entitlement with the JPA 1981 equivalent for those first appointed before 31/3/1995. As a matter of simple maths the longer you served as a Recorder and the longer you have been retired the more you are owed in arrears under the JPA 1981 Act equivalent. There are certainly judges who stand to receive several thousand pounds a year in extra pension from the date of their final retirement.
  20. Each individual case will be different but the worked example at Appendix A should give you some idea of how much MoJ could owe to a fee paid Recorder with long service and more than five years in retirement.
  21. We are none of us getting any younger. There may be some judges for whom the advantages of speed for those who have already reached age 80 may well justify an election now rather than waiting for up to another 12 months or even longer. Moving to FPJPS will require a positive act by you in the form of a notice of election which will be irrevocable. It will also require the MoJ to produce a form of election approved by the Minister as the Regulations require.
  22. But equally as the worked example at Appendix A shows there will be a significant group for whom the advantages of JPA 1981 Act equivalent will be equally clear. The default position will be a JPA 1981 Act equivalent pension but at the moment there is no provision which allows the individual to short circuit the reconciliation exercise by irrevocably electing to remain in the JPA 1981 equivalent scheme.

    The information deficit

  23. The question to which there remains no definitive answer is when will the reconciliation exercise take place. MoJ have announced a revised closing date for elections as 30 April 2025. I am now advised that a further extension to 31 March 2026 is under consideration. At that rate some judges who retired more than twelve years ago will now die without ever having received their full proper entitlement.
  24. Their current payments are about 12% less than either their JPA 1981 equivalent or their 1.25:1 FPJPS entitlement. Even assuming that there will be amending Regulations I respectfully suggest that there is a strong case for allowing those whose position is clear and who wish to do so not only to elect to join FPJPS but also to elect irrevocably to remain in the JPA 1981 Act equivalent scheme immediately.

John Platt, March 2024

Appendix A

Judge A was appointed an A/R on 1 January 1990 and then Recorder on 1 January 1994. He retired on 31 December 2012. On that date his CJ comparator’s pensionable pay was say £130,000.

During his 22 years fee paid service he completed 600 pensionable days so his initial interim FPJPS pension without any uplift from XPS is 600/210 = 2.8571 years/40 x £130,000. That is an interim initial figure of £9,285.

Now compare that to the JPA 1981 Act equivalent. Judge A has completed 15 years service of which 2.8571 years are pensionable under JPA 1981. His comparators pension after 15 years is £130,000/2 = £65,000. But his actual pensionable service is 2.8571 so his pro rata pension is 2.8571/15 x £65,000. which is £12,375.

Now consider the lump sum and service award allowing £6,000 for missing window’s pension contributions (“L/Sum”)

Under JPA 1981

L/Sum is 2 x pension so £12,380 x 2= £24,760 - £6,000 = £18,760 tax free but no service award

Under FPJPS with uplift

L/Sum is 2.25 x pension so £11,607 x 2.25 = £.26,115.75 - £6,000 = £20,115.75 taxable but with a service award equal to the tax

Even if you apply the uplift of 1.25:1 under FPJPS the pensionable service becomes 2.8571 x 1.25 = 3.5714 years and the initial pension is 3.5714/40 x £130,000 = £11,607.

Under FPJPS as at 31 December 2023 he has been underpaid a little less than £2,300 a year initially for 11 years plus the pensions increases over 11 years plus the Preston interest over that period. A reasonable guestimate is that he is owed pension arrears of something close to £30,000.00 gross.

Under JPA 1981 as at 31 December 2023 he has been underpaid a little less than £3,100 a year initially for 11 years plus the pensions increases over 11 years plus the Preston interest over that period. A reasonable guestimate is that he is owed pension arrears of something close to £38,000 gross.

Appendix B

Notice of Election under Regulation 11C of The Judicial Pensions (Fee-Paid Judges) (Amendment) Regulations 2023.

To XPS Administration

PO Box 562

Middlesborough

TS1 9JA

Ref: [from payslip]

And

To the Minister of Justice

Area9.22

23 Petty France

London SW1H 9AJ

Ref:

As Personal Representative and administrator of the estate of [name of deceased FPJ] who died on [insert date of death] I hereby give you notice of my election that the pension benefits payable to [name of surviving adult] as surviving adult and [insert names and d.o.b. of child(ren)] as an eligible child be calculated under the post 1995 provisions of The Judicial Pensions (Fee-Paid Judges) Regulations 2017 as amended by the Judicial Pensions (Amendment) Regulations 2023 as from the date of his death .

I understand that this notice is irrevocable

Date ………………….

Signed……………………………………………………….

[name of PR]

Address