This notes looks at the reforms to public service pensions introduced in 2015 under the Public Service Pensions Act 2013Jump to full report >>
Reforms to public service pensions introduced under the Labour Government had the aim of improving financial sustainability and reflecting changes in life expectancy, working practices and the private sector, including increases in the pension age for new entrants only.
In June 2010, the Coalition Government established an Independent Public Service Pensions Commission, chaired by former Labour Secretary of State for Work and Pensions, Lord Hutton of Furness, to look at “the long-term affordability of public sector pensions, while protecting accrued rights.” In its final report, published in March 2011, the Commission recommended replacing the existing schemes with new ones, with pension entitlement based on career average earnings rather than final salary, and increases in the pension age: i.e. linking the normal pension age to the State Pension age in all schemes except those for the ‘uniformed services’ (armed forces, police and firefighters), which would have a pension age of 60.
The Government accepted the Commission’s recommendations as the basis for negotiation with the trade unions. It announced final proposed agreements for reform of most public service schemes over the period March to October 2012. It then legislated in the Public Service Pensions Act 2013 for a framework for the new schemes to be introduced for future service from 2015 (2014 for local government). Section 10 provided for normal pension age linked to the State Pension age, except for the schemes for firefighters, police and armed forces, which are to have a normal pension age of 60. For more detail, see Library Briefing Paper CBP-6581 Public service pension age – 2015 onwards (November 2018).
There was protection for accrued rights and transitional protection arrangements to enable those ‘closest to retirement’ to remain in their existing schemes either until retirement, or for a limited period, depending on their date of birth. In December 2018, the Court of Appeal ruled in McCloud v Ministry of Justice that the ‘transitional protection’ offered to some members as part of the reforms amounted to unlawful discrimination. The Government was denied leave to appeal, meaning that the Court of Appeal’s decision will stand, with the matter referred back to an employment tribunal for a detailed decision (Financial Times, 27 June 2019). Responding to the judgement, the Government said it would “now consider how best to compensate those affected by the judgment as part of the court process.” The wider implications of the judgement are as yet unclear (Civil Service World, 2 July 2019).
In January 2019, the Government said that the “potentially significant but uncertain impact of the Court of Appeal judgement” meant it was “not now possible to assess the value of the current public service pension arrangements with any certainty.” It therefore put on hold discussions on the operation of the employer cost control mechanism, put in place under the 2013 Act, to protect against unforeseen changes in costs relating to scheme members.” In September 2018, the Government said initial results of the 2016 valuations meant that public sector workers would “get improved pension benefits over the period for employment over the period April 2019 to March 2023.”(HC Deb 6 September 2018 c13WS.) For more detail, see CBP-6971 Public service pensions – the employer cost cap (February 2019).
This note aims to provide an overview of the reform process. The funding arrangements are discussed in CBP-8478 Public service pensions -facts and figures (January 2019).
Commons Briefing papers SN05768
Author: Djuna Thurley