Gov suspends pension cost cap action pending legal decision

1 February 2019

Polfed

The Government has announced it will not be taking further action to rectify the public pension cost cap breach at this time due to the ‘uncertain impact’ of December’s Court of Appeal ruling that the ‘transitional protection’ offered to judges and firefighters as part of the reforms amounts to unlawful discrimination.

Alex Duncan, the Police Federation of England and Wales’ (PFEW) National Secretary, said: “We are extremely disappointed to learn that the Government has suspended the required remedial action regarding the cost cap breach.

"The cost cap was put into the scheme by the Government to ensure both employers and scheme members are making fair contributions, and members are getting out what is due. The Government Actuary Department undertook the valuation and identified that employers had not contributed their fair share. We consider it the right and proper course of action to rectify that imbalance without delay."

The Government is currently seeking permission to appeal the Court of Appeal ruling on transitional protections. While this is a separate issue, the provisional estimate is that the potential impact of the judgment could cost the equivalent of around £4 billion per annum, and one way to maintain the overall pension scheme’s value is not to take action to rectify the cost cap.

If the Government is successful in its appeal, the Treasury has stated that it will take the action it originally consulted on to recity the cost cap breach - raising the accrual rate. If the Government is defeated, employees will be compensated in a way that satisfies the judgment.

The Coalition Government introduced reforms to public sector pensions, meaning most public sector workers, including police officers, were moved to new pension schemes in 2015. A mechanism for assessing the value of pensions (the ‘cost cap’) was introduced as part of the 2015 reforms to ensure they remained affordable and sustainable. In September of last year, Government announced that provisional results indicated that the cost cap had been breached and action needed to be taken.

Read our public pension cost cap FAQs.

Read about the legal challenges to transitional protections by judges and firefighters.