Pension decision could be to “detriment of public sector”

THE Employment Tribunal on judges’ pensions has been reported as a victory. But who wins, questions Andy Fittes, PFEW General Secretary (pictured). Mr Fittes was speaking after an employment tribunal  ruled that the Government’s transitional pension arrangements for judges amount to unlawful age discrimination. Andy warned: “The PFEW believes that the success of this challenge could have unintended consequences to the detriment of public sector workers.”

He added: “The ET ruling was on a narrow part of pension legislation, and ruled against a provision that unions across the public sector had fought for.”

So, what was the case about?

The case was solely about transitional protections, and whether these caused direct discrimination by age, and indirect by gender and ethnicity.

• There was no challenge to the legality of the introduction of a new judges’ pension scheme.
• The judge acknowledged that there is no statutory ban on reducing pensions and pay.
• The judge was very clear that he was not ruling on wider public sector pensions’ reform, as this is a matter of public policy.

What are transitional protections?

Transitional protections are a mechanism that was lobbied for by unions – including PFEW – across the public sector to protect members.

The aim is to ensure those members who cannot remain entirely in “old” schemes, but who have fewer years to serve before retirement, are given special arrangements to help them adjust.  The rationale was that these members would already have based future plans on an expectation of a certain pension pot.

There are three types of scheme members:

• Those solely in the old scheme
• Those in the new scheme but with transitional protections
• Those solely in the new scheme

What does the judgement say?

The judgement does not state that either judges only subject to the new scheme (without protection) or in the old scheme have been treated illegally.

It only states that those judges afforded transitional protection have been treated in a way that causes discrimination. In fact, the judge goes further, and states that those with transitional protection have been treated better than they could have been. When considering whether transitional protections were a proportionate means to achieve a legitimate aim, the judge considers whether they may have been “excessive” and states that an option might have been to simply follow Hutton’s recommendation that accrued rights under the old scheme be protected. The judges’ schemes both protected old rights and offered transitional protection. (As do the police schemes).

The judge states that in conceding to unions that transitional protections were needed, the employer (the Ministry of Justice) failed to seek or providence sufficient evidence of need.

What might be the next steps?

There are a number of things that may happen:

• The Ministry of Justice may appeal. However, if it does, it will actually be forced to adopt the position the unions initially argued for – i.e. that transitional protections are a good thing.
• The Ministry may not appeal, and instead seek to remove the unfairness.

There are a number of ways the Ministry might do so:

1. The Ministry could offer all judges the same protection that members with transitional protection get – but that would cost more money from the public purse – possibly an additional £80,000,000 for judges alone. (The same across the public sector would cost billions of pounds).
2. Bearing in mind that the unfairness has been deemed to be insofar as those with transitional protections have been treated better (in the judge’s view) than they might have been, one option may be to remove transitional protections completely.

This would reduce the cost to the public – possibly by £28,000,000.

Unfortunately if this latter course is taken, some members of the pension scheme lose out. Ultimately it would mean no member of the pensions’ scheme will gain from the claimants’ win, in this ET.

 What is the PFEW doing?

“We continue to monitor the situation,” said Andy. “We continue to believe that transitional protections are a good thing, and are deeply disappointed that this case may have consequences that the litigants did not anticipate, and that would cause pension scheme members to lose money.

“We believe it is important that we act in the best interests of as many of our members as possible. We believe transitional protections offer a better pension for more members.

“The ET decision is only binding on the judges, not on any other employers –  although it may be referred to in other ET cases. If the Ministry for Justice appeals, then that Employment Appeal Tribunal (EAT) decision would have to be followed by other ETs, (albeit it would not be binding if it could be proved the facts of the case differed sufficiently).

“The judges’ position is different in many respects from the police position.  However, it remains to be seen whether – in fighting the one common element of schemes, the transitional protection – the litigants have opened the door to poorer pension provision in the public sector.”