8 February 2019
Last week, the Government announced it will not be taking further action to rectify the public service pension cost cap breach at this time due to the ‘uncertain impact’ of December’s Court of Appeal (CoA) ruling that the transitional protections provided for older judges and firefighters amount to unlawful discrimination.
The Government’s decision to halt the remedy for the cost cap breach means that the higher accrual rate for all existing members of the 2015 CARE Scheme that would have been put in place is now on hold until the judges and firefighters’ case has reached its conclusion. The Government has applied to the Supreme Court for leave to appeal the decision of the CoA, and we expect to hear if this is granted in early summer.
It is our view that the suspension of the cost cap breach remedy suggests that the Government is moving towards an “industrial resolution” that would apply across public sector pension schemes, in keeping with the potential outcome of the judges’ and firefighters’ claims. Potential resolutions could alter the liabilities of the schemes, and require them to be reassessed by the Government Actuary’s Department to see where the schemes stand in relation to the cost cap. Our interpretation is that the Government now fears that the higher accrual rate we had agreed as a cost cap remedy will not now be affordable.
There are currently a lot of uncertainties, but be assured that anything that has already been accrued by way of pension, and continues to be accrued until any changes are made, is protected.
We cannot predict what will happen next: whether the Government’s application to appeal will be accepted, or how they will choose to deal with the potential outcomes of the case. , but the cost cap announcement has changed the situation significantly.
We need to consider all possibilities, one of which could be the removal by the Government of transitional protections from a future date, but before April 2022 when they are due to come to an end. This is a very complicated situation with a number of possible outcomes, and we are working hard to gain further insight and provide further guidance as soon as we can.
We understand people’s frustrations and concerns, but it would be irresponsible of us to speculate and provide guidance based on guesswork about the eventual outcome. Currently, our recommendation to members is to not rush into taking decisions and/or actions. The police pension schemes remain better than alternatives.
Our understanding is that those representing the police pension challenge group are inviting officers who are not currently signed up with them to do so now. Our advice is to wait. The Government’s recent moves suggest that it is planning to take action across the public sector. This means it is possible that only the judges’ and firefighters’ cases will be heard in court, as the police pension challenge case has been stayed. In those circumstances, any remedy will cover all impacted members.
Even if this proves not to be the case, we believe it would still be possible to lodge a claim. However, we are not taking claims, and any choice to do so remains a personal matter.
I appreciate that you have questions and concerns. We hope to have more information in the coming weeks and as soon as we are able to provide you with more definitive informed advice, we will do so.