Members of the Local Government Pension Scheme who are affected by the McCloud discrimination judgment are “being actively encouraged” to lodge a claim against the government.
The warning was made by the Environment Agency Pension Fund in an update on its website in March, which stated that such claims are unnecessary because civil servants affected by the case will “automatically benefit from any protection that’s provided as a result of this judgment”.
“You don’t need to make an employment tribunal claim to secure your entitlement,” the scheme added.
The claims relate to a dispute first brought by firefighters and judges in March 2015 – known as the McCloud and Sargeant cases – where judges found that by protecting older members from a downgrade to their defined benefit pension accrual, the government was discriminating based on age.
Entering into a claims process on behalf of a qualifying member is not only unnecessary, but also risks sharing any benefit they would automatically receive with a third party
Jeff Houston, LGPS
Similar claims have since been brought by teachers, police officers and doctors – all members of the new public sector career average revalued earnings schemes, in which similar age protections were implemented.
Transitional provisions took different forms, allowing older members to remain members of the old schemes, either until retirement or until the end of a period of tapered protection, depending on their age.
The difference in treatment will, in due course, be removed for all members with relevant service across all the main public service pension schemes – not just those who have lodged legal claims, the government noted.
The devil is in the detail
Jeff Houston, board secretary for the LGPS advisory board, confirmed the warning made by the Environment Agency Pension Fund.
“The scheme advisory board is aware of claims being lodged in other public service pension schemes such as the Teachers [Pension Scheme], despite the government’s stated intent, (…) that all staff who qualify for the extended protections in all schemes – including those who left since the introduction of the new Care schemes – will receive them automatically.”
Mr Houston added: “Entering into a claims process on behalf of a qualifying member is not only unnecessary, but also risks sharing any benefit they would automatically receive with a third party.”
Kirsty Bartlett, partner at Squire Patton Boggs, noted that given the government’s commitment to address the issue across all public sector pension schemes, it should be unnecessary for individual LGPS members to lodge claims.
However, she added: “This will depend on the detail of the changes, which are not yet known, and the time limits that apply to discrimination claims may mean that some individuals prefer to bring a protective claim.”
Ms Bartlett explained that technically, only employment tribunals can decide whether the benefits provided by a particular scheme are unlawfully age discriminatory.
In the judges’ and firefighters’ cases, the relevant tribunal will have to approve the government’s proposed remedy. In the remaining public sector pension funds, the government is looking to agree an appropriate remedy with the trade unions without further claims being brought.
“Technically, any member who is unhappy with a particular remedy could still complain to the employment tribunal (within the applicable time limits),” Ms Bartlett said.
The agreement of trade unions to the terms of any remedy “is no bar to a successful complaint”, she said. “The unions were heavily involved in negotiating the Hutton reforms, including the transitional protections that have now been held to be unlawfully age discriminatory.”
LGPS to apply underpin solution
The solution being developed will take the form of an underpin, which compares the benefits payable under the current rules with the benefits that would have been paid if the scheme had not changed in 2014, and pays the higher.
However, the SAB warned that members should be “made aware that many of them will not see an increase to their pension benefits”.
“For others, any increase is likely to be small because of low salary growth since the new schemes were introduced,” it added.
Maurice Titley, director at data consultancy ITM – which is undertaking assessments of the impact of the McCloud judgment on LGPS funds – said: “Our initial analysis for clients does show relatively small numbers of members that will see any increase to pension benefits.
“For active members, the future impact can only be assumed and will need to be calculated at the point of retirement, so that is primarily down to future assumptions around things like salary increases.”
Mr Titley said it is “understandable that the LGPS will want to protect their members and themselves from any unnecessary costs – and additional employment tribunals around the McCloud judgment are likely to be just that”.
Solving the McCloud pensions mess
Finding remedies for discrimination caused by changes in public sector pension schemes is proving to be of Byzantine complexity, with possible solutions risking further legal challenges or increases in costs that could undermine the initial reforms.
Nevertheless, he said that there are still actions LGPS funds should take to ensure they are prepared and not exposed to any future potential claims.
“Delays in data collection may risk the data availability; for example, if the provider was changed or went into insolvency, which could pose a future and unknown risk,” he concluded.
