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29 January 2019

Court of Appeal rules in favour of judges and firefighters in pensions case against the Government

Overview

In December 2018, the Court of Appeal ruled against the Government, holding that changes made to pension schemes discriminated against a group of firefighters and a group of judges on the grounds of age.

The Court of Appeal heard the two cases, Sergeant and others v London Fire and Emergency Planning Authority and others (Sergeant) and McCloud and others v Ministry of Justice (McCloud) together, due to similarities in the issues under consideration. In a nutshell, the court looked at whether transitional protections offered to older judges and firefighters in their respective pension schemes, which were intended to cushion them from changes being made to future pension benefits, were directly age discriminatory, on the basis that younger members of the schemes were offered no such protection.

Background

Under the Equality Act 2010, if a member of a pension scheme is treated less favourably than another on the grounds of age, this would constitute direct discrimination. Indirect discrimination would occur if a provision, criteria or practice is applied which means that a person is at a particular disadvantage because of a protected characteristic such as age.

Both direct and indirect age discrimination is potentially permissible, however only if it can be shown that:

  • there was a legitimate aim; and
  • the means used to achieve that aim were proportionate.

The Employment Appeal Tribunal had previously ruled in both Sergeant and McCloud that, whilst in each case the Government’s pursuit of its social policy objectives to protect those closest to retirement constituted a legitimate aim, this aim was not achieved by proportionate means. Both decisions were then appealed to the Court of Appeal.

Facts

In Sergeant, proposed reforms to the Firefighters’ Pension Scheme (FPS), meant that a new, less beneficial scheme had been introduced by the Government. The transitional provisions of the FPS meant that anyone within 10 years of normal pension age (NPA) would remain in the old, more favourable scheme. Tapering provisions applied to those who were 10-14 years away from the NPA, and the younger firefighters who were more than 14 years away from NPA would transfer straight to the new, less generous scheme. It was accepted by all parties that the transitional and tapering provisions were discriminatory. Under the new scheme, firefighters would not be able to retire before reaching the age of 60 and if a member chose to retire early (at the former pension age of 55), they would see their pension reduced by 21.8 per cent, as reported by the Fire Brigades Union (FBU), which clearly amounted to a detriment. As a consequence the FBU initiated more than 6,000 Employment Tribunal claims alleging that these government changes amounted to unlawful age discrimination.

McCloud concerned similar proposed reforms, this time to judges’ pension schemes. Again, transitional arrangements were put in place to protect those judges closest to pension age. Under these arrangements, as had been the case with the FPS above, older judges were allowed to remain in the Judicial Pension Scheme, a defined benefit scheme which offered attractive benefits, until retirement or until the end of a transitional period, depending on their age. The typically younger judges had to move to the less favourable New Judicial Pension Scheme which brought those discriminatory effects discussed above.

Furthermore, many more of those in the younger group of judges tended to be female and / or were from a BAME background, and so claims were also pursued for indirect discrimination based on gender and race.

Ruling

The Court of Appeal held in both instances that such transitional provisions were discriminatory on the basis of age and could not be objectively justified. They rejected the argument that older pensioners close to retirement were likely to face financial or other difficulties that, with more time to prepare for, younger firefighters could somehow avoid or overcome.

Given that the age discrimination claims were successful, the court held that the equal pay and indirect race discrimination claims for the changes in the JPS scheme were of ‘no real practical significance.’

Implications

The judgement is expected to have an impact on other public sector groups who have seen similar changes to their pension schemes (for example, police officers). This judgement will also extend to other public sector workers such as those employed by the NHS, teachers and prison officers.

Furthermore, the implications are not restricted to public sector pension schemes – this could apply to any employer considering making changes to their pension provisions. It highlights the importance of careful consideration of any transitional protections or concessions they offer to employees to ease that change, particularly where those are only offered to people of a certain age group.

It is therefore always important to ensure that:

  • there is a robust, well-reasoned and rational aim for treating members differently; and
  • the aim is supported by evidence to prove that it is objectively justified.

This is not an easy task and so should be approached with caution.

Next Steps

The FBU views the decision as a significant victory for both groups and were pleased that the court heard in their favour after their ‘long and arduous legal battle.’ They held that the ‘government must now take swift and tangible action to address this unlawful policy.’

In the meantime it remains to be seen whether an appeal will be made to the Supreme Court by the Government. If the Supreme Court provides the same answer as the Court of Appeal (or should an appeal be refused), the costs of remedying this will be significant. The Government will need to compensate younger members for the less favourable treatment they have received since the transitional provisions came into force, as well as work out how to revisit the pension scheme changes going forward so that the discriminatory elements are removed for all members.

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