The Fire Brigades Union and the British Medical Association have been granted permission to challenge the government over plans to pass McCloud remedy costs onto their members.
Under current plans, members affected by the McCloud judgement will foot the costs of its remedy, which was included in the 2016 public sector scheme valuations recently completed.
Last year, the FBU and the BMA threatened the government with legal action in a bid to shield their members from these costs.
“The crux of our position is that the funding arrangements for the 2015 scheme are not being observed and that the government is seeking to impose the cost of remedying the government’s unlawful discrimination upon them,” FBU national officer Mark Rowe said in a circular to members on July 4.
The BMA’s claim has been held to overlap with the FBU’s case and will be heard together in the upcoming judicial review, the FBU said.
A date for the review to take place has yet to be confirmed.
Costs ‘must not be passed on to scheme members’
The Public Accounts Committee was critical of the government’s failure to predict the problems arising from the 2011-15 public sector pension reforms, which are expected to cost £2.5bn a year to remedy.
Treasury officials told the committee last year that the costs “will be included in the 2016 valuation and will be borne by member costs going up”.
The FBU observed that the most recent valuations of the 2015 scheme were “considerably cheaper”.
It said that in the case of the firefighters’ schemes, the new scheme was 5.2 per cent cheaper than anticipated, which would lead to an increase in its accrual rate.
“Therefore, the government are trying to use financial improvements that should rightfully provide improvements in benefits or reduction in contributions to our members to rectify the cost of the government’s discrimination,” Rowe said.
“The FBU have been clear to all parties though, that the cost of rectifying the government’s discrimination within the 2015 scheme transitional protection arrangements must not be passed on to scheme members, but that the improved benefits and/or reduced contributions, as a result of the most recent valuations, must be passed on to scheme members.”
The government has ‘moved the goalposts’
The FBU and two of its members are claimants in the case, with trades unions including GMB and Unite among the interested parties.
The 2015 rules stated that any improvement in benefits as a result of the scheme’s cost-cap mechanism must be passed on to scheme members, Rowe said.
“The government have moved the goalposts,” he argued. “The McCloud remedy cost must be included as a member cost just because the Treasury says so, according to the new directions. That is plainly unfair and the FBU has a right to challenge that.”
“Improving the benefits of older members (by moving them back into their old scheme) at the expense of members of the 2015 scheme is discriminatory on the grounds of age", Rowe added.
The FBU and BMA have explored measures to either pay members while they wait for legislation, or speed up the process.
Irwin Mitchell partner Penny Cogher told Pensions Expert that it would be hard for the claimants to show indirect age discrimination by burdening the costs, tax and administrative liabilities associated with the McCloud remedy of the scheme.
"The overall aim of the new public sector arrangements are to put all members on an equal footing," she said.
"The consequence of having the earlier arrangements found to be indirect age discriminatory means that all members now have to move forward on the basis of the new arrangements, even if some members would have been better off on the old arrangements – it’s rather like trying to have your cake and eat it.
"We expect the government can demonstrate that there are legitimate aims in seeking to spread the costs of the required remedies across stakeholders, which of course includes the scheme members and that this is a proportional response in any event."
Some Fire and Rescue Services, including the West Midlands Fire Service, have made ‘immediate detriment’ payments to members affected by McCloud following an agreement between the FBU and the Local Government Association, ahead of remedial legislation that is expected in October 2023.
The Staffordshire FRA, however, paused these payments in June following pressure from the government. The FBU said it was preparing legal action after it received a letter intended for chief fire officers, which it described as an attempt “to block firefighters receiving the pensions they are legally entitled to”.
In June, BMA members voted in favour of expediting the McCloud remedy at the union’s annual representative meeting.
The BMA and the government have been approached for comment.
Alex Janiaud is Deputy Editor of Pensions Expert, FTAdviser's sister publication
