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Public Sector Pensions Speedbrief: Supreme Court refuses Government permission to appeal in public sector age discrimination cases

  • United Kingdom
  • Pensions - Public sector

05-07-2019

It has been reported that on 27 June 2019, the Supreme Court denied the Government’s request for permission to appeal against the Court of Appeal’s decision in the cases of McCloud and Sargeant regarding age discrimination and transitional protection arrangements in the New Judges Pension Scheme (NJPS) and New Firefighters’ Pension Scheme (NFPS). This refusal could have very significant implications for all public service pension schemes.

Court of Appeal

The Court of Appeal ruled on 20 December 2018 that the transitional protections in the NJPS and NFPS which allowed older members either to:

  • remain members of their existing scheme until retirement, rather than becoming members of the replacement scheme (“full protection”); or
  • remain members of their existing scheme until the end of a period of tapered protection (dependent on their age) and then become members of the replacement scheme (“tapered protection”),

were unlawful on the grounds of age discrimination and could not be objectively justified.

The transitional protections were, of course, given to scheme members who, on 1 April 2012, were either within ten years of their normal retirement (who would receive full protection) or for those who were three to four years younger (who would receive tapered protection).

Cost control mechanism

Following the Court of Appeal’s decision, on 30 January 2019, the Government issued a statement pausing one element of the valuation process of the public service pension schemes (the “cost control mechanism”) on the basis that it was not possible to assess the liabilities of the current public service pension arrangements with any certainty, given the decision.

Potential implications

Although the two cases related specifically to the judicial and firefighters’ pension schemes, similar transitional arrangements were agreed in relation to all other public service pension schemes. Therefore, following the refusal of permission by the Supreme Court, public service pension schemes face the following potential implications:

  • as the transitional protections have been ruled unlawful, those younger members who are found to have been discriminated against will need to be offered appropriate remedies to ensure they are placed in an equivalent position to the protected members;
  • in order to address the discrimination, normal principles mean that the benefits of unprotected members will need to be improved rather than the benefits of protected members being reduced;
  • as a result, significant changes are likely to be required to the public service pension schemes;
  • depending on the extent of those changes, when the cost control mechanism is recommenced, there could be a material impact on the outcome of the process (with implications for both members and employers);
  • it is anticipated that any remedy implemented following the decision would need to be backdated to the commencement of the transitional protections in April 2015 for most public service schemes (and April 2014 for the LGPS);
  • once the changes to the public service pension schemes are known, the Government has stated its intention to apply any changes resulting from the cost control mechanism with effect from April 2019.

Next steps

Before the precise implications for the public service pension schemes can be confirmed, the issue of remedy needs to be addressed either by:

  • hearings in the Employment Tribunal which could take some time and from which there could be further appeals; or
  • the parties agreeing an approach to remedy without the need for hearings in the Employment Tribunal.

Comment

While it is useful that the Supreme Court has now confirmed that leave to appeal has been refused, there is still some way to go in relation to these cases before we know exactly what the full impact will be for members and employers in the public service pension schemes.

Given the potential cost implications for the Government (with the sum of £4bn per annum having previously been referred to), it may well be the case that the Government will want to proceed with the Employment Tribunal hearings in order to explore the remedy issues further, rather than trying to agree a settlement model at this stage.

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