If you have a local government pension scheme this could have implications for your school or business. The Public Service Pensions Act 2013 was implemented in April 2015 making significant changes to the pension scheme going forward (this came into effect in 2014 for the Local Government Pension Scheme). The purpose of these changes were to;
- Create fairer career average public service pension schemes to replace the largest existing final salary scheme
- Link normal pension ages to state pension age to manage longevity risk (except for firefighters, police and the armed forces, where normal pension age will be 60, subject to regular reviews)
- Introduce an employer cost cap to protect the taxpayer from changes in cost
- Set out requirements for scheme governance, regulation and administration to ensure transparency and accountability
- Allow for transitional arrangements and protections where necessary
- Reform public body and ministerial pension schemes
The new scheme was a career average pension scheme, which looks at a members earnings throughout their career. A final salary pension scheme used the member’s final pensionable earnings to calculate pension benefits.
In March 2015 judges and firefighters disputed the close off of their pension scheme and transition to a replacement scheme.
The transitional provision put in place allowed older judges and firefighters to remain members of the old scheme until retirement or the end of a period of tapered protection, depending on the member’s age. So what’s happened since 2015?
December 2018, the Court of Appeals ruled in favour of the pension members stating the government had discriminated on the grounds of age, race and equal pay in relation to changes to their pensions.
June 2019, the Supreme Court refused to hear the governments appeal as they had not raised an arguable point in law to carry an appeal forward.
The British Medical Association is suspected to bring a comparable claim in relation to the NHS pension scheme, but the government has accepted that the ruling has wider application across public service pension schemes and therefore, this claim may not be necessary.
Elizabeth Truss (Chief Secretary of the Treasury) confirmed the initial estimate made in January to remedy the discrimination claim would amount to approximately £4bn a year in liabilities across the public sector pension schemes from 2015. The government has agreed Truss’ estimate although unions contest the figure suggesting the amount is significantly more.
The government are now in a position of undoing their own work and resetting the pension scheme to a legally acceptable format, without discrimination. Watch this space for any further announcements of the pension scheme reforms.
References:
https://www.ftadviser.com/pensions/2019/07/16/govt-to-make-changes-to-all-public-pension-schemes/
