Unions challenging the government’s failure to reduce contributions to pension schemes for civil servants, firefighters and health-service professionals in line with expectations have been given the go-ahead to take their case to the Court of Appeal.
PCS, the civil service’s biggest union, is one of six organisations behind a bid to make ministers enact a so-called cost-control mechanism that was part of pension reforms introduced in 2015. It says ministers’ decision not to apply the mechanism has cost Civil Service Pension Scheme members an average £53 a month – adding up to more than £2,500 each – over the past four years.
The wrangle is part of the fallout from the Court of Appeal’s 2018 McCloud judgment, which effectively declared elements of the 2015 reforms illegal because they discriminated against younger members of public-sector schemes.
A periodic valuation of pension schemes based on 2016 figures should have meant CSPS members' contributions were reduced from 2019 because of the financial health of the scheme. But ministers decided not to engage the cost-control mechanism that the valuation should have triggered, to offset the cost of fixing the discrimination highlighted in the McCloud case. That cost is estimated at £17bn.
In March, High Court judge Mr Justice Choudhury dismissed the unions’ case against the government’s approach. He said there was no dispute that the costs of implementing the government’s McCloud remedy were “substantial” and that there was a question over how they should be covered.
But he said there was “nothing” in the terms of the Public Service Pensions Act 2013 – which underpins the 2015 pensions reforms – to stop the government from taking costs like the McCloud remedy into account in considering the financial health of public-sector pension schemes.
“The fact that those costs are the result of a finding of discrimination against the government does not of itself render it absurd or unconscionable for them to be taken into account, any more than might be an increase in costs that were the result of irretrievably poor economic policy choices made by government,” he said.
“Were that not the case then any additional cost would be subject to scrutiny as to whether it was an ‘acceptable’ cost, in terms of its moral, political or economic legitimacy, to include.”
On Friday, PCS confirmed that the unions challenging the March decision had been given leave to take their case to the Court of Appeal. It said it was “checking on the likely timing” of the hearing.
When the March judgment was handed down, the Fire Brigades Union said “the majority, if not all” of its pensions challenges against government had not been successful at the first hurdle but had gone on to achieve greater success at appeal.
Pensions fairness – and the application of the cost-control mechanism – is one strand of the PCS union’s ongoing industrial action at government departments.
Civil service unions Prospect and the FDA are interested parties in the pensions challenge, but not active participants.
If the Court of Appeal challenge is successful, benefits from the outcome will not be limited to union members.