Govt ‘developing proposals’ to address public service pension scheme age discrimination

The government is “developing proposals” to address the age discrimination identified in public sector pension schemes following the Court of Appeal’s ruling in the McCloud case.

The proposals the government is considering would allow affected members to make a choice as to whether they accrued service in the legacy or reformed schemes for the relevant periods, depending on what is more beneficial to the individual.

It also noted that, if a member’s pension circumstances change as a result of the proposals, it would need to consider whether previous tax year, back to 2015/16, should be re-opened in relation to their pension.

In the written statement, Economic Secretary to the Treasury, John Glen, said he wanted to “reassure” members that their pension entitlements are safe and confirmed that relevant members would not need to make a claim in order for the eventual changes to apply to them.

In December 2018, the court ruled in favour of firefighters and judges who argued that changes to their pensions constituted to unlawful age discrimination and confirmed that the ruling would be applied across all public sector schemes.

The changes, imposed in 2015, stipulated that older firefighters and judges could stay in the existing and better pension scheme, and younger members had to transfer to a new and worse scheme, causing financial losses.

In February 2020, the government announced plans to launch a consultation on addressing the issues identified in the case, once the relevant pension schemes that have been conducted discussions with member and employer representatives have concluded.

The consultation will set out the government’s proposal to remove the discrimination for future service.

Glen stated: “I am grateful for the constructive engagement of trade unions, staff associations, public service employers and other stakeholders in these discussions.

“The government is considering the initial views of stakeholders and continuing to work through the details of the technical design elements of the proposals.

“Detailed proposals will be published later in the year and will be subject to public consultation.

“This is a complex undertaking, and it is important to get it right.”

It is estimated that the annual pension bill as a result of the ruling could cost the government up to £4bn.

LCP partner and former Pensions Minister, Steve Webb, added that the statement showed the "massive complexity of unpicking public sector pension reforms" following the court ruling.

"If the government goes ahead with its plans, complex calculations will need to be made for millions of public sector workers, including retired members, to help them decide which scheme would be of most benefit," he said.

"Worse still, there is a chance that retrospective changes to pensions could affect tax calculations going back several years.

"Members will need access to good advice to make the right choice and the government has not yet made it clear who will pay for this.

"There is a strong case for ministers to waive any knock-on consequences for tax bills for previous years, otherwise the decision could be extremely complex for some workers and retired public servants’'.

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