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TPS changes

Public sector pension valuation developments

2 August 2019

Since we last updated members in May, there have been developments regarding the valuation of the public sector pension schemes, including the Teachers' Pension Scheme (TPS).

You will recall that the valuation resulted in big increases in employer's contributions but potentially corresponding improvements for career average members with no member contribution increases. UCU have been successful in fighting any job losses or changes in contracts directly linked to the employer increases. After pressure from UCU and Universities Scotland, the Scottish government is providing funding to cover 54% of the costs of the additional employer pension contributions to universities in Scotland. The England and Wales government have ruled out similar funding for now.

The McCloud case

In 2015 the government introduced reforms to public sector pensions, resulting in many public sector workers being moved into new pension schemes. In December 2018, the Court of Appeal ruled that the 'transitional protection' offered to some members of the judges and firefighters schemes as part of the reforms amounted to unlawful discrimination.

On 15 July 2019 the government issued this statement. This has confirmed that as 'transitional protection' was offered to members of all the main public service pension schemes, the difference in treatment will need to be remedied across all those schemes, including TPS.

The government argue that the cost of addressing the unlawful age discrimination across the public sector is £4 billion and therefore they cannot pay the improved benefits in the schemes arising from the valuation. They will look at tackling the age discrimination across each scheme separately based on addressing the scheme design and the size of the discrimination.

One effect of the assessment of age discrimination may be the members in the final salary scheme moving to the career average scheme - we don't yet know. The Trades Union Congress (TUC) have written to the new chief secretary to the treasury Rishi Sunak MP to get some further information on what sort of compensation schemes could choose. They will be influenced by what remedy the court chooses for the firefighters and judges.

The next steps

The timescales are determined by the court remedy hearing for the firefighters and judges. This will be followed by separate scheme technical discussions on a non-prejudiced basis with the treasury to look at scheme specifics. The HM Treasury (HMT) have said this would be at no detriment to existing scheme members or accrued benefits. They would look at different scenarios and possibilities in relation to:

  1. applicability of the ruling to each scheme
  2. remedy options
  3. cost impacts
  4. approach to protections (people still in final salary) going forward.

There is the intention that unions through the scheme advisory board would be involved at all stages. UCU have attended the TUC and HMT initial meeting.

UCU and union demands

UCU along with other public sector unions believe the benefit improvements they were promised and that the employer is paying for should be implemented. The age discrimination cases do not affect the valuation. The government is saying that they cannot afford both. UCU and the other unions want these issues decoupled. Under HMT guidance, costs from a legal case do not fall under 'member costs' therefore members should receive the benefit improvements.

The TPS working group with representatives from further education (FE) and higher education (HE) attending will meet next term to discuss developments and how we can work together with other unions to protect members' pensions.