Further delay to reform of the Research Councils Pension Scheme

The Research Councils Pension Scheme (RCPS) Management Board has decided that reform of the scheme will be delayed further and will not happen before April 2020.

This means that thousands of members of the current sections of the RCPS will retain their current pension benefits for longer and will not transfer to the Alpha scheme until a later date.

Public sector pension provision was reformed under the Coalition government. Changes were implemented in the biggest schemes first with the Public Service Pensions Act 2013 requiring smaller schemes to complete this process by 31 March 2018.

The reforms affected scheme members in different ways:

• Any members of the scheme who were in service and within 10 years of pension age on 1 April 2012 would continue to accrue the same pension benefits.
• Others would transfer to new pension schemes with benefits based on average earnings over a career and pension age linked to State Pension Age.

Smaller public sector pension schemes like the RCPS are due to close under the relevant legislation with reform achieved by transferring members to the new civil service pension scheme, Alpha.

Members of the Judicial pension scheme and Firefighter’s pension scheme have challenged the government’s approach to reform on age discrimination grounds. In January 2018 an Employment Appeal Tribunal ruled that aspects of the reform were age discriminatory.

The government has appealed this ruling and that case will be heard next month with a ruling likely early in 2019.

The legal uncertainty resulted in Treasury pausing reforms for schemes that had not completed the process. In November 2017 the RCPS announced that reform would be delayed until at least April 2019 and now that has been further postponed until at least April 2020.

Separately, the Alpha scheme that many RCPS members are expected to transfer into is undergoing a cost-sharing valuation. A cost cap mechanism was introduced in the main public sector pension schemes as part of the overall reforms. This allows for regular valuations of the schemes with measures to return the cost to the original level if it increases or decreases beyond an agreed margin.

Since the baseline valuation for the cost cap mechanism was undertaken there have been developments that have affected the expected cost:

• Public sector pay restraint has resulted in lower pensions being awarded.
• A fall off in the rate of improvement of life expectancy means that pensions are not expected to be in payment for as long as previously thought.

These factors have brought the cost of Alpha below the agreed floor and under the cost cap mechanism the benefits will have to be improved as a result. Approximate calculations by Prospect indicate that benefits in Alpha will improve by about 20% from April 2019.

Prospect national secretary Tony Bell said: “There needs to be legal certainty before the RCPS reforms are implemented so the decision to postpone this until at least April 2020 makes sense.

“Members should be reassured that their existing benefits are protected and that will apply to all pension built up until at least April 2020.

“The Alpha scheme that members may transfer to in the future is also a very valuable pension scheme and it will be even more attractive if the benefits are improved by about 20% from April 2019.”