Pension reform: PCS warns trust in Treasury is low as Truss promises talks

Written by Richard Johnstone on 17 July 2019 in News
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Union says postponed revaluation of civil service scheme would have likely led to a cut in employee contributions

PCS members protest outside the Treasury in 2017. Photo: PA

The Public and Commercial Services trade union has warned that a lack of trust in the Treasury could hinder planned talks with ministers on how to respond to a court ruling that elements of the government’s 2015 public sector pension reforms discriminatory.

In a written statement on Friday, chief secretary to the Treasury Liz Truss confirmed the Treasury would meet with public service unions after the Supreme Court refused the government’s appeal of a ruling thath the transitional arrangements in the reformed pensions schemes were discriminatory.

The case, initially brought by the Fire Brigades Union and some judges, successfully argued that an overhaul of the Firefighter's Pension Scheme in 2015, which mirrored reforms across the public sector, discriminated on the basis of age. The changes – including a move from a final salary to a career-average defined benefit – were not applied to people within 10 years of retirement age.


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Truss said that the transitional protections were intended to ensure people close to retirement age were treated fairly. These protections allowed only members who were closest to retirement at the time new pension schemes were introduced to remain members of their respective old schemes.

The chief secretary said that as a result, the government would meet with unions to discuss the implications of the ruling. Truss has previously said that extending the protections to all pension scheme members would cost around £4bn, a figure trade unions dispute.

But in a response, the PCS union said for its members “and the other unions, trust is in short supply” as the Treasury had previously cancelled a revaluation that was due for the civil service scheme and also made changes to the process for future valuations.

“The government now claims that the cost of the remedies for discrimination by use of age-related transitional arrangements must be evaluated before restarting the pension valuation process,” the statement said.

The union said the Treasury had “used the valuation outcomes to make unilateral changes to the methodology for future valuations and, at the same time, increased the employer costs in a massive raid on future departmental expenditure limits – in other words, future spending cuts.”

Employer contributions to the civil service pension scheme are set to rise due to a number of reductions to the discount rate for public sector schemes. This is the calculation of how much economic growth is likely to help grow pension assets, and was reduced from 3% to 2.8% in the 2016 Budget, and then to 2.4% in last year’s Budget.

The Treasury said this was “in line with established methodology to reflect [Office for Budget Responsibility] forecasts for long-term GDP growth”, and added that it would “support departments to ensure that recognition of these costs does not jeopardise the delivery of frontline public services or put undue pressure on public employers”, with the additional contribution for employers calculated by the Government Actuary Department as an increase of 6.1%, required from April. A decision on whether departments or the Treasury would meet these costs beyond 2019-20 was intended to be made in this summer’s Spending Review, although this looks likely to be delayed.

PCS also highlighted that the specific remedies for firefighters and judges had been referred back to an employment tribunal, but Truss indicated that the government wouls develop proposals to achieve a consistent approach.

“While this part of the statement is welcome, it is also intended to head off the pressure from unions for the cost sharing arrangements to operate as previously agreed,” PCS said.

“In the civil service pension scheme, the latest valuation undershot its target by such a wide margin that significant scheme improvements, including reducing the rate of employee contribution, are needed.”

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Richard Johnstone is CSW's deputy and online editor and tweets as @CSW_DepEd

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