Judges’ and firefighters’ age discrimination pension case February 2021

The government has published its response to the July 2020 public consultation - Public service pension schemes: changes to the transition arrangements to the 2015 schemes consultation.  Full details of the government’s response can be found here.  The NEU is pleased that the government has adopted our position and favours ‘Deferred Choice’.  

In July 2020, the government announced a public consultation seeking views on how to remove the discrimination caused by the transitional protections in the Teachers’ Pension Scheme (TPS).

Transitional protections meant older members of the TPS remained in the Final Salary Scheme or delayed joining the CARE scheme whereas younger members were immediately transferred into the CARE Scheme as soon as it was implemented in April 2015.  The Courts determined that this was discriminatory and ordered the government to rectify the situation.

Of the two options presented by the government in the consultation, the NEU favoured the ‘Deferred Choice Underpin’ (DCU) and we welcome today’s decision by the government to implement the DCU to remedy the discrimination. The key advantage of the DCU is that the choice is made at the point of retirement, so the decision is based on known facts rather than assumptions about the future.

The key elements from the government’s response are:

  • The Deferred Choice Underpin will be implemented to remedy the discrimination. Eligible scheme members will receive a choice at the point they take their benefits from the scheme (e.g.at retirement) on whether to take final salary or career average scheme benefits for the service they have accrued between 1 April 2015 - 31 March 2022 (known as the remedy period).
  • The final salary scheme will close to future accrual on 31 March 2022. From 1 April 2022 all those who continue in service will do so as members of the career average schemes, regardless of age, meaning all members will be treated equally in terms of which pension scheme they are a member of. Benefits built up in the legacy schemes will be protected.
  • The government will bring forward new primary legislation as soon as parliamentary time allows, to provide the powers to deliver these changes through the public service pension schemes.
  • Any improvements to members’ benefits resulting from the 2016 valuation, paused as a result of the pending outcome of the discrimination, will be honoured.
  • Future cost control policy for future valuations will be set out once Government Actuary’s ongoing review of the mechanism has concluded and any recommendations have been fully considered by the government.
  • Changes to the employer contribution rates resulting from the 2020 valuations process will be delayed from April 2023 to April 2024. This is an exceptional but necessary decision taken in light of the wider public service pensions landscape.

Background

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 was refused leave to appeal this decision to the Supreme Court.  The case has 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 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 (LGPS) who were denied protection.  Compensation for members in the LGPS will be different owing to the different benefit structure.

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 was paused by the Government until the outcome of the compensation issue was known.  As this can now be assessed, the cost control element of the 2016 valuation can now be finalized. HM Treasury will set out the technical detail in directions and the valuation process for 2016 will be completed.  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.