Did you hear the one about the judge taking the government to court?
25/11/2020
25/11/2020
Turn the clock back to a time pre-Covid. We’re heading back to 2015, David Cameron is in power and Tim Peake is flying the union jack flag up in space. The UK, pre-pandemic, has some rumblings of discontentment underfoot after the government decided to alter the pension provisions in the public sector.
The Public Sector Pensions Act was launched by the government in 2013 in an attempt to try and make the pension schemes for civil servants more sustainable for the Treasury. The government had set up some transitional provisions, giving those workers within 10 years of retirement the opportunity to keep to their original, and more favourable pension terms. In addition to this, they had also set up a tapering provision for those civil servants who were 10-14 years away from retirement. However, the sticking point came when the government had made no transitional benefits available to the younger workers. The reaction? Aggrieved civil servants, initially from the judge and firefighter corners, who decided to take the government to court.
Initially there was some jostling between the Employment Tribunal and Employment Appeal Tribunal, and as with all legal cases the time seemed to roll on…but after the proceedings, Judge McCloud found the pension reforms to be discriminatory based on age. The Firefighters Pension Scheme 2015 and the New Judicial Pensions Scheme had successfully defined a landmark public sector pension ruling.
By December 2018, the government had failed to produce sufficient evidence in its cross-appeal and in June 2019 the Supreme Court subsequently refused the government’s attempts to appeal. The end of the legal process seemed to have been reached opening the doorway for more public sector workers to take legal action too. However, the government confirmed that it would address the difference in treatment across all public sector pension schemes NOT just those who had previously lodged a claim. Teachers, Civil Servants, Dentists, the NHS, armed forces and the police as well as the firefighters and judges would all benefit from the positive outcome.
After such a success, it seems unfair that the shine is taken away again but in March 2020 John Glen, economic secretary to the Treasury said that public sector workers could choose between whether they stayed with their original (pre-McCloud judgement) pension or whether to switch to a new pension scheme under new proposals.
However, the decision is not an easy one because the government is now considering issuing a potential tax bill from HMRC. With the previous Chief Secretary to the Treasury, Elizabeth Truss, estimating a £4bn liability bill from the original public sector pension scheme, she claimed the public service pensions to be a significant cost to the taxpayer. Mr Glen said “The government will provide more detail later in the year, but if an individual’s pension circumstances change as a result, the government may also need to consider whether previous tax years back to 2015-16 should be re-opened in relation to their pension.”
With this being an ongoing situation, it is unfortunately not averse to delays. Trade unions for dentists and doctors are still unhappy and the BMA for example, have brought further legal cases in respect to NHS pensions, but these are currently on hold. In the meantime however, the BMA will be responding to the government’s consultation proposals. With an initial deadline in October of this year, the doctor’s trade union are continuing to assess which scheme will benefit their members best. Do doctors and dentists wish to remain in the old legacy scheme, join the new scheme or perhaps defer to the old scheme for the ‘remedy period’ and revisit the choice again at their own retirement stage? Everyone’s outcome position and aim will be individual to their set of circumstances and perhaps, during the pandemic, it is helpful to not make the decision until the current deadline of April 2022.
As we wait for the processes to run their course, we would advise that you monitor the situation closely and keep track of the developments. Your independent financial advisers will be able to assist in the long term once the consultation periods have subsided.