BMA to take Department of Health to court over pension discrimination

Following the Judges’ and Firefighters’ win in the Court of Appeal, the BMA has followed suit and written to Matt Hancock warning of their intention to sue. 

What was the Court of Appeal case about?

The Court of Appeal tried the two cases together because of their similar nature.  Just like the NHS, the pension schemes for the Judges and Firefighters introduced new schemes from April 2015 with poorer terms if comparing benefits at the same age as normal retirement in the earlier schemes.  Older members of each scheme were provided with protections, either by fully remaining in their existing scheme (full protection), or staying in the old scheme for a period of time after April 2015 before moving into the new scheme (transitional protection), or those younger members with no protection at all who moved straight into the new scheme in April 2015.  The Court of Appeal found that those younger members with no protection had been discriminated against on the grounds of age (and sex and race in other aspects of the case).

What are the key points of the decision?

  • None of the sides challenged the introduction of new schemes.  These were a perfectly legitimate end.  Following Lord Hutton’s reports, everybody accepts that public sector pension schemes were not sustainable in their earlier forms.
  • The introduction of protections was not illegal.  It is a legitimate end to help older members, those thus nearer retirement, to plan for that retirement.
  • Everybody involved, including the Government, accepted that the protections were directly discriminatory on the grounds of age.  All accepted that the Government may introduce legislation that has such an effect.  Changes to the State Pension Age are another example of this.  This is a legitimate end to protect public finances.
  • The Appeal Court Judges had only to consider whether the direct discrimination was proportionate to the legitimate aim of protecting older members. 
  • They found that, having conceded that protections were required, the employers failed to seek or provide sufficient evidence to show that, as well as protecting benefits earned under the earlier schemes up to April 2015, the further opportunity to remain in the old scheme after April 2015 was proportionate to the legitimate end of providing protection.

Will the above points automatically apply to the NHS?

No.  Whilst it is obvious that the protections in the NHS case are directly discriminatory, were the protections proportionate to the legitimate end of having them?  That, we cannot tell.  The NHS Scheme is a very different scheme to either the Judges’ or the Firefighters’.  Retirement ages and benefits were both different.  The profile of membership is vastly different.  Further, the Department of Health may be able to produce ample evidence as to why the protections were agreed as they were.  Lastly, the original Judges’ scheme was an EFRBS (Employer Financed Retirement Benefit Scheme).  This was not a registered pension scheme and therefore pension tax charges to the Annual and Lifetime Allowance, did not apply to it.  They do, however, apply to the new Judicial Pension Scheme.  It seems possible to more readily accept that there is a disproportionate amount of protection if the younger judges get lower benefits and big tax charges and the older ones get neither.  It is, however, beyond this article to consider this issue.  There are too many differences.

What happens next?

The Government has indicated its intention to appeal the Judges and Firefighters decision to the Supreme Court.  Until that case is heard, the NHS Scheme has shelved plans to increase the accrual rate (the amount of benefit earned each year) in the 2015 scheme.

What if the Government lose in the Supreme Court?

Good question.  There are any number of possible outcomes, which could include younger members with no protection being entitled to compensation or the Government attempting to withdraw protections given to older members.  Or perhaps some combination of the two.  Compensation, however, would be incredibly costly, particularly if it occurred across the entire public sector.

I am a protected member in the NHS pension scheme nearing retirement.  How can I plan the next few years?

With no great certainty I am afraid.  We just don’t know which way things will go.  This also adds another problem for some of the services we offer.  We frequently project our clients’ NHS pensions to assist them in planning their retirement.  Whilst we can still do this, it must be accepted that it will only be done under the current rules.  If those change, they will have to be looked at again.

If you would like to discuss this in further detail please email David Walker or call us on 01253 404404.