Unions representing public-sector pension scheme members have been allocated a date in February to challenge the government’s decision not to reduce contributions in line with a process set out in 2015’s pension reforms – a move that has cost some civil servants thousands of pounds.
The civil service’s biggest union, PCS, is one of six organisations taking the case to the Court of Appeal in a bid to make ministers enact a so-called cost-control mechanism that was part of the 2015 reforms.
According to PCS, ministers’ decision not to apply the mechanism has cost Civil Service Pension Scheme members an average of £53 a month since 2019, when the reduced contributions should have taken effect. The cumulative cost over the four-and-a-half year period would be approaching £3,000 per member by now.
The case 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.
Fixing the discrimination exposed in the McCloud case has been estimated to come with a cost of £17bn. Ministers decided not to enact the cost-control mechanism, which would have reduced pension-scheme members’ contributions after a valuation demonstrated schemes’ financial health. The decision effectively keeps contributions at a higher rate to offset the cost of HM Treasury’s McCloud “remedy”.
The remedy allows public sector workers who would have been discriminated against under the reforms to opt to receive pension benefits in line with their earlier entitlement, rather than those set out under the 2015 changes.
In March, a High Court judge sided with the government in the wrangle. Mr Justice Choudhury said there was “nothing” in the law that underpins the 2015 pensions reforms to stop the government taking costs like the McCloud remedy into account in public-sector pension-scheme valuations.
“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.
February 20’s Court of Appeal hearing will challenge the High Court decision. The Fire Brigades Union is leading the bid, supported by PCS, GMB, the Prison Officers Association, the Royal College of Nursing and Unite. The British Medical Association, the professional body for doctors, has a parallel appeal.
Although civil service unions Prospect and the FDA are not directly involved in the challenges, they are interested parties.
Any decisions related to pension-scheme contributions resulting from the Court of Appeal’s consideration of the case will apply to all members of the affected pension schemes.