Fire Brigades Union challenges government’s changes to public sector pensions

The Fire Brigades Union (FBU) is challenging the government’s recent changes to public sector pensions. The changes, introduced by HM Treasury in 2019, meant that the costs of remedying the government’s own discrimination (proven by the courts) were to be passed on to public service pension scheme members.

The hearing will take place over three days in the Court of Appeal starting on 20 February.

Following the Hutton Report into public service pensions in 2011, the government introduced in the Public Service Pensions Act 2013 a Costs Control Mechanism for controlling the costs of public sector pensions (‘CCM’).

Changes in certain costs of the new schemes attributable to personal circumstances of pension scheme members were to be measured and any consequential increase in cost to the pension scheme could then be passed on to scheme members in the form of increases to contributions and/or reduction in scheme benefits.

However, other so-called ‘employer costs’ (such as actuarial valuations and assumptions) were not to be taken into account for the purpose of the CCM.

From 2015, government introduced new public sector pension schemes. Pensions were to be based on average earnings over a career, as opposed to final salary. Transitional protection was introduced for those close to retirement – they were allowed to remain in their existing ‘legacy’ final salary schemes. All other members of public sector pension schemes were required to transfer to the new schemes.

In 2019, in the Sargeant and McCloud cases, the Court of Appeal ruled that the transitional protections for older pension scheme members amounted to unlawful age discrimination.

The remedy for that unlawful age discrimination against younger pension scheme members included allowing public sector workers to transfer back into their ‘legacy’ schemes for the period up to 31 March 2022, and payment of compensation for injury to feelings. The cost of providing that remedy is known as the ‘McCloud/Sargeant Remedy Cost’ (MSRC’).

The CCM, and the valuations required by it, are governed by directions from HM Treasury. In 2021, a new Treasury Direction was issued so as to permit the MSRC to be passed on to members of the new public sector pensions schemes.

The FBU’s challenge by judicial review of that new Treasury Direction was unsuccessful. It now appeals to the Court of Appeal. The FBU argues that the CCM, and the associated powers contained in the 2013 Act, should not, and were never intended to, be allowed to pass the MSRC on to public sector pension scheme members.

It also argues that passing on the MSRC in this way is another version of the age discrimination the Court of Appeal has already found to be unlawful.

The Court of Appeal granted the FBU permission to appeal in May 2023. The FBU’s appeal will be heard alongside an appeal by the BMA.

Matt Wrack, Fire Brigades Union general secretary, said:

“The FBU has shown that the 2015 pension scheme changes were age discriminatory. It beggars belief that the government should be able to change the rules so that the costs of remedying its own discrimination are passed onto firefighters who have already seen their pensions cut.

“Firefighters dedicate their lives to serving the public, and their work is highly demanding. Like all workers, they deserve pensions which reflect their commitment without being eroded by unfair cost adjustments. This appeal is a stand for justice. We are resolute in our fight for what is right for our members, and we will not rest until everyone has access to a decent pension.”

Richard Arthur, Head of Trade Union Law at Thompsons Solicitors LLP which is representing the FBU and its members said:

“It’s a well established principle that the government can’t use its power under statute to thwart the objective of the Act – in this case, the Public Service Pensions Act 2013. That’s what’s happening here, as well as a second round of discrimination against firefighters.”

The case has significant implications for all public sector pension schemes and the millions of workers who are members of them.