Most judges will avoid pension scheme cuts
- 6 February 2013
- From the section Business
Three-quarters of judges will avoid forthcoming cuts to their pensions, the government has revealed.
The generosity of the Judicial Pension Scheme is being reduced along with most other schemes in the public sector.
But judges who were within 10 years of retirement, in April 2012, are excluded from the changes.
The new scheme, starting in 2015, will provide lower pensions for new and younger judges, and will abolish the large lump sums they receive.
"The new pension arrangements will continue to provide a good way of saving for retirement and the new judicial pension scheme will remain among the most generous in the public sector," said the Justice Minister, Chris Grayling.
Under the far-reaching and controversial government changes to most public sector pensions, all judges started making modest contributions for the first time in April 2012, but will have to increase those contributions substantially in 2013 and 2014.
Their scheme, one of the most generous in the country, currently offers them a pension of half their final salary, at age 65, but after a maximum of just 20 years' service, plus a lump sum of two and a quarter times their annual pension.
The Ministry of Justice said currently a High Court judge, who retired after 20 years, might earn a pension of £86,500 plus a lump sum of £173,000 after tax.
Under the rules of the new scheme - which will be a career average arrangement rather than a final-salary one - that would be cut to £75,000 with no lump
The judges would also have to pay an annual allowance tax charge each year while they were working, of £11,000.
That is because the rate at which their notional pension pot builds up will probably exceed the forthcoming limit of £40,000 a year, and land them with a personal tax bill.
A Circuit Court judge who retired after 20 years might, under present rules, receive an annual pension of £64,000 plus a lump sum of £144,000 after tax.
In the new scheme this would be cut to £55,000 and with no lump sum.
These judges too would have to pay an annual allowance tax charge of about £3,000 a year while employed.
The normal pension age for judges in their new scheme will rise in line with the state pension age: to 66, 67 and probably 68 in the coming decades.
However judges will in future not have their pension accrual capped at 20 years and will be credited with pension for as many years as they work.