Supreme court ruling to apply to all public sector pension schemes
29 July 2019
On 27 June 2019, the Supreme Court denied the government permission to appeal the Court of Appeal’s judgment that transitional provisions introduced to the reformed judges and firefighters pension schemes in 2015 gave rise to unlawful age discrimination.
Background
The pension scheme changed on 1 April 2015 from a Final Salary Scheme to a Career Average Revalued Earnings Scheme (CARE) where members starting after 1 April 2015 would join the 2015 Scheme. Unprotected members of the 1992 and 2006 Final Salary Schemes moved into the 2015 Scheme on 1 April 2015. Protected members of the 1992 and 2006 schemes, depending on the level of protection, either stayed in their existing scheme or moved into the 2015 Scheme when their protection ceased.
In December 2018, the Court of Appeal held that transitional protections that sheltered older judges and firefighters from the significant reductions in pensions entitlements which the claimants suffered as a result of the public sector pensions changes in 2015, were unlawfully discriminatory. It also held that the desire to protect older judges/firefighters when they would have been least affected by the 2015 changes was ‘irrational’ and that the absence of evidence supporting this aim meant that there was no basis on which it could have been found to be legitimate. The Court of Appeal also found that the age protection was indirectly discriminatory on the grounds of sex and race.
Permission to appeal denied
On 27 June 2019, the Supreme Court denied the government permission to appeal the Court of Appeal’s judgment that transitional provisions introduced to the reformed judges and firefighters pension schemes in 2015 gave rise to unlawful age discrimination.
The Chief Secretary to the Treasury, Elizabeth Truss responded to the decision in a written statement saying that the Government respects the Court’s decision and will engage fully with the Employment Tribunal to agree how the discrimination will be remedied.
The ruling relates to the ‘transitional protection’ offered to some members when the reformed schemes were introduced. In order to ensure people close to retirement age were treated fairly, the government agreed to ‘transitional protection’, which broadly permitted those members who were closest to retirement at the time new pension schemes were introduced to remain members of their respective old schemes.
The court has found that those too far away from retirement age to qualify for ‘transitional protection’ have been unfairly discriminated against. As ‘transitional protection’ was offered to members of all the main public service pension schemes, the government believes that the difference in treatment will need to be remedied across all those schemes. This includes schemes for the:
- NHS
- Civil service
- Local government
- Teachers
- Police
- Armed forces
- Judiciary
- Fire and rescue workers
The Chief Secretary said that continuing to resist the full implications of the judgment in Court would only add to the uncertainty experienced by members.
The matter will be remitted to the Employment Tribunal in respect of the litigants in the firefighters and judicial pension schemes. It will be for the Tribunal to determine a remedy. Alongside this process, the government will be engaging with an employer and member representatives, as well as the devolved administrations, to help inform government proposals to the Tribunal and in respect of the other public service pension schemes.
Initial estimates suggest remedying the discrimination will add around £4bn per annum to scheme liabilities from 2015.
The Chief Secretary ended her letter confirming that the reasons for the 2015 reforms remain:
“that public service pensions are a significant cost for the taxpayer, now and in the future.”
And that the judgment does not alter the government’s commitment to ensuring that the cost of public service pensions is affordable for taxpayers and sustainable for the long term.