Later Life

Government unveils £17bn proposal to end unlawful age discrimination in pension schemes

Remedying the discrimination is expected to cost a total of £17bn.

Rozi Jones
|
17th July 2020
Houses house of parliament commons government govt gov
"This is a new and complex approach where affected members will need to make decisions about their pension benefits."

The government has published new proposals to rectify age discrimination in public sector pension schemes.

The issue relates to public sector pension reforms in 2015, when workers 10 years from retirement were protected from reforms which saw younger workers moved to less generous pensions.

In 2019, the Supreme Court ruled that changes made to firefighters’ pensions in 2015 "gave rise to unlawful age discrimination" against younger members.

As a ‘transitional protection’ was offered to members of all the main public service pension schemes, the difference in treatment will need to be remedied across all those schemes. This includes schemes for the NHS, civil service, local government, teachers, police, armed forces, judiciary and fire and rescue workers.

The government's proposals will apply to all members who were in service on or before 31 March 2012 and on or after 1 April 2015, including those with a qualifying break in service of less than five years, across all affected public service schemes.

This is irrespective of whether they have submitted a legal claim or not, or whether they are currently an active, deferred or pensioner member.

The government says many scheme members are likely to be better off in the reformed schemes rather than the legacy schemes. It therefore proposes to provide members with the option to choose between receiving legacy or reformed scheme benefits.

Remedying the discrimination is expected to cost a total of £17bn.

Chief secretary to the Treasury, Steve Barclay, said: “Rather than just returning all members to the legacy schemes, I want to ensure that people who are better off in the reformed schemes can choose to keep those benefits.

“I also want to ensure that those who were closest to retirement age, and so were prevented from moving to the reformed schemes, will now have that choice.”

Ian Browne, retirement planning expert at Quilter, commented: “Correcting the monumental pension mistake caused by the 2015 pension scheme could not have come at a worst time for the government. We all know pensions are costly but that bill just got much higher and puts yet more pressure on the Chancellor to find some spare pennies, to be specific £17bn worth. Where that is going to come from is anyone’s guess but it seems sensible that if the triple lock wasn’t on the chopping block before it might be now. Let’s face it, if the Government can’t control the costs of public sector pensions then they will likely look at other areas of pension costs and seek to control them instead.

“The change in 2015 was an attempt at control by the Government but that boomerang is coming back and it’s going to hit them where it hurts. This is a new and complex approach where affected members will need to make decisions about their pension benefits. This consultation has been a long time coming as it about a year since the Treasury confirmed the Supreme Court ruling that changes to firefighter’s pensions in 2015 were discriminatory and would apply to all public sector schemes. The debate is now how to implement the correction but either option requires a choice. The government need to be ensuring that those who are required to make a choice get the support they require. You cannot and should not expect to have the time and knowledge to know what is the best decision for their circumstances.”

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