Pension age discrimination win a ‘longer-term fiscal risk’ as £29.5bn put aside – OBR

The Office for Budget Responsibility has said the Court of Appeal’s ruling that government changes to the pensions of judges and firefighters are discriminatory, presents a “longer-term fiscal risk” to public finances.

The ruling, on 20 December 2018, found that the government’s transitional pension arrangements offered to some judges and firefighters amounted to unlawful discrimination on the grounds of age. The government has said it intends to appeal the decision but it has said that it could cost around £4bn a year if extended to all applicable public service pension schemes.

The OBR stated that it has asked the Treasury whether it is being treated as a contingent liability, in which it responded saying schemes have made provisions of £29.5bn in respect of a potential increase in liabilities. Therefore, if the government were to lose its appeal, the Treasury would not expect that to affect scheme contribution rates until beyond the period to 2023 for which they are currently in the process of being set.

“As such, this case represents a longer-term fiscal risk rather than one that would be likely to affect the public finances within our current forecast horizon,” the OBR said.

Quilter pensions expert, Ian Browne noted that it is not just the firefighters and judges pension schemes that the government has to worry about.

“In similar fashion, the British Medical Association announced it would sue the government on grounds of age discrimination because the ‘underlying legal principles are essentially the same’ as the judges and firefighters case,” he explained.

Browne said that the government has a “huge challenge” in managing the long-term expense of public sector pensions.

"The generous terms were never really adjusted properly as life expectancies increased, and as a result the public sector pensions bill now represents one of the biggest expenditure items for the Treasury. If the appeal fails and the BMA is also successful then it is likely the Chancellor will need to consider other measures to reduce the cost of these schemes without favouring older members.”

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