The government has announced it will pause a mechanism used to assess the value of public sector pensions while it awaits the outcome of a legal challenge.
Reforms in 2015 meant most workers were moved to a new scheme, with those within 10 years of retirement being given “transitional protection” from any changes to the value of their pension.
A subsequent legal challenge on the grounds that this 10-year period was unlawful age discrimination was accepted by the Court of Appeal – a ruling the government will now appeal.
Neil Sellstrom, CIPFA advisor for pensions and treasury management, told PF: “This has left officials in charge of pension schemes in a situation of uncertainty.”
He said that the debate was due to be resolved in time for the new financial year but any clarity will now be delayed.
Sellstrom said the decision to halt the valuation, announced in a written statement by Lizz Truss, chief secretary to the Treasury, could have “expensive outcomes” and “cause concerns for administrators”.
Truss’ said on Wednesday: “Given the potentially significant but uncertain impact of the Court of Appeal judgment, it is not now possible to assess the value of the current public service pension arrangements with any certainty.
“The provisional estimate is that the potential impact of the judgement could cost the equivalent of around £4bn per annum. It is therefore prudent to pause this part of the valuations until there is certainty about the value of pensions to employees form April 2015 onwards.
“The value of public service pensions will not be reduced as a result of this suspension.”
But the FDA union warned that civil service pension scheme members will be unable to benefit from lower contributions or improved benefits.
Benefits for public sector staff had been expected to improve from April after the ongoing valuation had indicated that earlier cuts to their pensions delivered larger savings than expected.
Lucille Thirlby, FDA assistant general secretary, said: “For years, civil servants have suffered from real-term pay cuts. Now improvement to their pension benefits aren’t being realised. This is just adding insult to injury.
“By halting the process, civil service pension scheme members will be unable to benefit from lower contributions or improved benefits for an unknown length of time.
“The FDA will continue to fight for its members’ access to affordable sustainable pensions. The Treasury approach, yet again, seeks to crack a nut with a sledgehammer.”
