Defined Benefit  

Govt to make changes to all public sector pension schemes

Govt to make changes to all public sector pension schemes

The court ruling stipulating that changes to firefighters’ and judges’ pensions were discriminatory will be applied to all public sector schemes, the government has said.

In a written statement published yesterday (July 15), Elizabeth Truss, chief secretary to the Treasury, said the remedies for the firefighters and judicial pension schemes would be decided by the Employment Tribunal.

But at the same time, the government will be engaging with employer and member representatives, as well as the devolved administrations, to inform them about proposals in respect of the other public service pension schemes.

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The dispute started when in March 2015, the defined benefit pension schemes for judges and firefighters were closed, and the members transferred into a replacement scheme.

Transitional provisions were put in place, which allowed 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.

In June, the Supreme Court refused the government’s application to appeal the court case, which marked the end of the legal process.

According to the Fire Brigades Union, the Supreme Court refused the government’s application to appeal because it had not raised an arguable point of law.

Ms Truss confirmed the initial estimates made in January that remedying the discrimination will add about £4bn a year in liabilities across public sector pension schemes from 2015.

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

She noted that the reasons for the 2015 reforms remained "that public service pensions are a significant cost for the taxpayer, now and in the future".

She added: "The judgment doesn’t alter the government’s commitment to ensuring that the cost of public service pensions is affordable for taxpayers and sustainable for the long term."

According to Jon Greer, head of retirement policy at Quilter, it is likely the government will want to move everyone onto the 2015 basis for future accrual as soon as possible in a bid to control costs.

He said: "This needs to be worked through and means that the younger members are entitled to have their benefits 'levelled up', so that they are treated as having the same protection as the older members, until a non-discriminatory amendment can be made."

Mr Greer noted that the cost to the government was significant since they will have to provide pre-2015 members with higher benefits for a longer period than expected, and it’s not clear that the full cost has been factored into the £4bn estimate, or "if indeed there will be an even bigger hole in the new prime minister’s pockets".