At this stage, however, it is not clear what compensation will be payable to teachers and support staff in this position, when it will be payable, and more importantly what further consequences this court action will have for the future of public sector pension schemes.
The Court of Appeal decided that protection arrangements in the pension schemes for judges and firefighters constituted unlawful age discrimination against younger scheme members who were excluded from protection. The Government has been refused leave to appeal this decision to the Supreme Court. The case is being returned to the Employment Tribunal, which will determine compensation.
The protection arrangements in those schemes were similar to those in other public service schemes (many of which were agreed by the unions concerned). Members who were less than 10 years from their scheme’s normal pension age (NPA) as at 1 April 2012 were given full protection, which allowed them to remain on their existing final salary pension arrangements until retirement. Members who were between 10 and 13.5 years from NPA were given tapered protection, which allowed them to remain on final salary arrangements for a limited period but then moved them onto the new career average pension arrangements.
The Government believed that these protection provisions would not constitute unlawful age discrimination since they were a proportionate measure in pursuit of a legitimate policy goal (i.e. protecting those close to retirement while securing changes to the schemes). The Court of Appeal ruled, however, that the extent of loss in these particular cases was such that that this defence did not apply.
The Government has stated that the position established in these cases will be applied to all public sector schemes. Compensation will also therefore be applied to members of the Teachers’ Pension Scheme (E&W) and Local Government Pension Scheme who were denied protection, although the extent of this compensation will not be known for several months.
It is also not clear what impact this will have on the future of public service pension schemes going forward, given that the payment of compensation is an obvious additional cost. The Teachers’ Pension Scheme (E&W) was due to implement improvements in member benefits from April 2019 following its four-yearly actuarial valuation, but this has been paused by the Government until the outcome of the compensation issue is known. Other public sector pension schemes are in a similar position. The NEU and other unions are continuing to press the Government to implement the improvements which were due. Given the Government’s undertaking at the time of the 2015 changes that the schemes would not be subject to further political changes for a 25 year period, the NEU will not accept any attempt to worsen the schemes in order to recoup the cost of compensation or for any other reason.