Unions have reacted angily to the government’s announcement that it will pause part of its work on the valuation of public service pensions – including the Civil Service Pension Scheme – which could delay improvements to members' benefits.
Chief secretary to the Treasury Liz Truss told parliament yesterday that a December judgement from the Court of Appeal on “transactional protection” offered to some scheme members could have a £4bn a year impact on public-sector pension finances. She said the decision meant it was “not now possible to assess the value of the current public service pension arrangements with any clarity”.
Unions said the move was a delaying tactic to avoid recognising that the costs of operating pension scheme changes introduced by the coalition government in 2015 had been less than anticipated – which could lead to member contributions being reduced or their benefits improved.
Mark Serwotka, general secretary of the PCS union, said the announcement was an unnecessary response to the Court of Appeal decision, which followed an action brought by the Fire Brigades Union. The FBU had successfully argued that the protection arrangements imposed on younger scheme members as part of the 2015 changes were unlawful on age discrimination grounds.
Serwotka said there was no need for the Treasury to suspend the valuation while it challenged the court decision. He said the process, including addressing the rectification measures proposed by the relevant scheme advisory boards, could proceed as planned.
“It is outrageous that the government is delaying and possibly denying pension improvements, when our members have been paying too much for too long, and for pensions which have been dwindling in value,” he said.
“Our members should not have to bear the brunt of government decisions to flout equality laws.”
Lucille Thirlby, assistant general secretary at the FDA union of senior public sector staff questioned whether the government would have delayed any element of the valuations had it believed that members of the scheme would need to contribute more in future.
“The Civil Service Pension Scheme valuation identified a breach of the cost cap floor, meaning it has operated cheaper than expected,” she said. “The members of this scheme should be reaping the rewards of this.
“For years, civil servants have suffered from real term pay cuts. Now improvements to their pension benefits aren’t being realised. This is just adding insult to injury.
“The government created a set of agreed rules to last for 25 years – now it is trying to back out. By halting this process, Civil Service Pension Scheme members will be unable to benefit from lower contributions or improved benefits for an unknown length of time.”
Garry Graham, deputy general secretary of the Prospect union – which represents a range of professionals across the civil service and wider public sector – said the decision would undermine scheme members’ faith in the government’s commitment to honour its agreements.
“We cannot allow the government to pick and choose which parts of an agreement it will honour and to back out of the parts that may not be convenient any longer,” he said.
“Years of pay restraint means that our members will already face lower pensions than they might have expected when they come to retire. Now they are being penalised again by the government going back on its agreed terms. It is no wonder more and more of them are beginning to wonder if their future might be better outside the civil service."
Graham accepted that the Court of Appeal decision gave the government “legal issues” to manage, but said Truss’ pause was a red herring.
“Postponing the implementation of the cost cap mechanism implies it wants to pass its legal liability on to public sector workers which would be completely inappropriate,” he said.
In her written ministerial statement, Truss referred to a September announcement from the government that said provisional valuation results “indicated” the 2015 reforms’ cost-control mechanism would be engaged, “triggering automatic changes to member benefits”.
Truss said that if the government won its challenge against the Court of Appeal’s decision the changes to employee benefits unions expected would be implemented as planned.
But she said that if the government was defeated, employees would be compensated “in a way that satisfies the judgment”.
“Given the potentially significant but uncertain impact of the Court of Appeal judgment, it is not now possible to assess the value of the current public service pension arrangements with any certainty,” she said.
“The provisional estimate is that the potential impact of the judgment could cost the equivalent of around £4 billion per annum. It is therefore prudent to pause this part of the valuations until there is certainty about the value of pensions to employees from April 2015 onwards.”
She added: “Whatever the court outcome, we know the costs of providing public sector pensions are increasing. The 2015 reforms were to ensure public service pensions are affordable and sustainable in the long term, maintaining intergenerational fairness and ensuring the burden on the working population remains proportionate.”