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Millions of public sector workers may need pensions advice

Millions of public sector workers may need financial advice to guide them through their pension options as the Government decides how to respond to the McCloud judgment on age discrimination.

Pension consultant LCP highlighted the need for advice as part of its response to the Government consultation on how to respond to the judgement. The consultation closed on 11 October.

In its response, LCP said it is in favour of giving scheme members an immediate choice between scheme options.

Should this approach happen, there could be a major opportunity for Financial Planners to offer advice to public sector workers looking to make the best choice for their personal circumstances, LCP said.

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In order to address the issue of age discrimination highlighted in the McCloud judgment, the government is consulting on two options for members of the relevant public sector pension schemes. 

This is in relation to their membership during the period 2015/16 to 2021/22. 

Under the first ‘immediate choice’ option, members would make a decision as soon as possible as to whether to be in the pre-reform or post-reform scheme for that period. 

Under the second ‘deferred choice underpin’ option, no decision would be taken at this stage. Instead, the situation would remain unresolved until retirement at which point the member would be able to choose whichever scheme turned out to have produced the highest pension.  For a younger public service worker, this could mean that matters were not resolved for many decades.

LCP said that no matter which option is chosen members would need to be given considerable guidance to help them make the best decision for them, and that this should include modelling tools to allow them to explore their options. 

The consultancy said that those with the most complex affairs (such as high-earning NHS staff) would almost certainly need tailored financial advice to make sure they took account of the tax implications of their choice.

Luke Hothersall, partner at LCP, said: “Letting members choose the best scheme for them now would have the advantage of resolving this messy business once and for all, rather than running dual records for decades to come. But that choice is not a simple one for many members. 

“If the government were to go down the immediate choice route, it is vital that this is accompanied by a meaningful level of guidance and support.  This should include online modelling tools and, for those with the most complex circumstances, access to regulated financial advice.”

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