Following on from last week’s initial update this week we provide some thoughts on the 2 options under consideration: Immediate Choice (IC) or Deferred Choice Underpin (DCU)
The consultation document canvasses opinion from all stakeholders of public service pension schemes regarding the timing of member choice regarding the pension scheme which will cover their service during the remedy period (1 Apr 15 – 31 Mar 22) – so the ‘when’ to make the choice not ‘what’ that choice will be.
IC or DCU and which one is best for you?
We have identified 3 groups of Service Persons (SP) who will be affected in different ways in making this decision:
- Those that will have left service during the remedy period.
- Those that will leave service in the first few years after the end of the remedy period
- Those that intend to serve for longer than 5 years after the end of the remedy period.
Let’s look at these in turn:-
Those that will have left service during the remedy period
This group will have the opportunity of selecting the best option for them with the benefit of career hindsight (so similar to the DCU option) and for most they will be able to make their decision shortly after 1Apr 22 (the IC option). Therefore, this group is likely to be content with whichever option the Government selects as we anticipate their benefits being ‘remedied’ as soon as practicable after the remedy period ends.
Those that will leave service in the first few years after the end of the remedy period
For this group, there is not much difference in likely timescale for SP to make choices between the two options but for some there is potentially more uncertainty. For example, if a SP’s career path is known from 1 Apr 22 until retirement, he/she may be able to predict future pension circumstances relatively accurately. In such a case the IC option would seem to carry little risk whilst at the same time providing one less thing to worry about when approaching resettlement. On the other hand, for those SP whose final years do not have such clarity, it may be that the DCU option, which brings with it the benefit of hindsight, would be the choice to select.
Those that intend to serve for longer than 5 years after the end of the remedy period
For this group, the difference between either IC or DCU options has the greatest impact. IC will again be favoured by those SP who already know how they want the remedy period to be treated. The difficulty for this group rests in the amount of forecasting that is required to determine, under IC, the best option to select. DCU avoids this requirement as it ultimately deals with choices informed by hindsight.
The Government is expected to make its decision, IC or DCU, towards the end of the year. The consultation period, which ends on 11 October 2020, provides everyone, with the opportunity to influence that decision.
For those who have not yet read the consultation document you can read it here and you can submit your comments and responses to any/all of the 24 questions asked in the document via:
Email to PensionsRemedyProjectConsultation@hmtreasury.gov.uk or
Post to: Pensions Remedy Project Team, HM Treasury, 2/RED, 1 Horse Guards Road, London, SW1A 2HQ
(Please do not send your responses to the Forces Pension Society)
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