The JPS 2015 and JPS 2022
The main differences between the JPS 2015 and previous judicial schemes were:
- The scheme retirement age would be linked to State Pension Age.
- Career average revalued earnings, rather than final salary, would be used to calculate benefits.
- The scheme would be registered for tax purposes.
The reformed JPS 2022
The MoJ launched the new scheme in April 2022 and all future benefits transferred to the new scheme. The key features of the 2022 scheme are as follows:
- The scheme is set up as unregistered for tax purposes.
- Normal retirement age will still be linked to State Pension Age.
- Career average revalued earnings would still be used to accrue benefits however the benefit accrual rate increased marginally to 2.50% from 2.32% of pensionable earnings for each scheme year.
- Members contribute a flat rate of 4.26% of pensionable earnings rather than variable rates based on earnings bands.
- There continued to be no cap on the number of service years that one can build up.
Planning opportunities
The most important change to note is the unregistered status of the JPS 2022. As member contributions to the new scheme will not receive tax relief, the pension savings accrued are not tested against either the Annual Allowance or the Lifetime Allowance. This presents some tax planning opportunities:
- Individuals with Lifetime Allowance protection can accrue benefits within the 2022 scheme without loss of their protection.
- Benefit accrual within the 2022 scheme won’t count towards the pension Annual Allowance. The standard Annual Allowance is £60,000, although this is ‘tapered’ for those with an adjusted income of £260,000 or more and can be as low as £10,000 for those with an adjusted income of over £360,000.
- Those paying into personal pensions can reduce their income tax liability as pension contributions will benefit from tax relief at your highest marginal rate.
- Savings into personal pensions are not subject to Inheritance Tax and can be passed on to dependants. Deferring the withdrawal of funds from personal pensions and generating retirement income instead from investments that are subject to Inheritance Tax is often a very sensible strategy.
- Part-time judiciary should check that all judicial roles have been accounted within the JPS accrual since records may not be accurate especially when multiple roles are held.
Expert financial advice for Judges and Barristers
Fleet Street Wealth is a Chartered, independent, fee-based wealth management firm focused on providing well-researched and bespoke advice. We are proud to be a Bar Council Partner.
In addition to advising Judges about the JPS and its impact on their retirement planning, we provide advice to many hundreds of Barristers about all aspects of financial planning.
You can read more about our work with Barristers and the Judiciary here. To arrange a free initial consultation please complete and submit the form on our Contact us page, call 0207 353 6373 or email barristers@fswealth.co.uk.
The information is based on our understanding of current allowances and rates which could be subject to change. The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. It is important to take professional advice before making any decision relating to your personal finances.