Defined Benefit  

Govt's final court pensions bill still unknown

Govt's final court pensions bill still unknown

It is still unknown how much it will cost the government to comply with a court ruling which stated changes made to judges and firefighters pension schemes were discriminatory.

FTAdviser reported yesterday (June 27) that the Supreme Court refused the government’s application to appeal the court case, which was the last legal hurdle in the dispute.

Elizabeth Truss, chief secretary to the Treasury, revealed in January that if the government lost it could cost around £4bn a year if extended to all applicable public service pension schemes.

But FTAdviser understands the final figure won’t definitely be known until the tribunals have determined the precise remedy to be applied.

A Treasury spokesperson said: “We are disappointed by this decision. The government will now consider how best to compensate those affected by the judgment as part of the court process.“The judgment does not alter the Government’s commitment to public sector pensions that are fair to both workers and tax payers.”

In March 2015, the defined benefit pension schemes for judges and firefighters were closed, and these people were transferred into a replacement scheme.

Transitional provisions were put in place, which allow older judges and firefighters to remain members of the old schemes, either until retirement or until the end of a period of tapered protection, dependent on their age.

But in a ruling handed out in December, the Court of Appeal said that the government discriminated against the two groups on the grounds of age, race and equal pay in relation to changes to their pension.

According to the Fire Brigades Union, the Supreme Court refused the government’s application to appeal because it did not raise an arguable point of law. In addition, the government has been ordered to pay the costs of the case, it stated.

Rosalind Connor, a partner at ARC Pensions Law, said the government had followed what was common practice in the private sector when closing DB pension schemes.

She said: “It is accepted that the effects of pension scheme closure are often hardest on those closest to retirement, who don’t have time to save enough to make up the difference, particularly when leaving a final salary scheme, where the last few years are the most valuable.

“As a result, many employers have tended to give a ‘softer’ close to those members closest to retirement, where they continue in the more generous scheme for a period longer than the younger members.”

Ms Connor noted that in this case, the court held that there was not sufficient justification for this softer close.

She said: “So the government must approach a close in a different way, possibly reversing some significant steps taken to reduce the cost of public sector pensions by moving younger staff out of the final salary schemes. 

“Ironically, the steps taken in both professions towards diversity have added another argument against the government in this case. Because of those steps, there are a greatly increased number of younger members who are women and/or Black, Asian and minority ethnic.