Protecting older members: judges and firefighters cases

This article was produced by Nabarro LLP, which joined CMS on 1 May 2017.

Two recent employment tribunals (ET) have come to opposite conclusions on the legality of transitional provisions introduced which benefit older members.

In each case, protection was given to members nearing retirement age when their existing pension schemes were replaced with new schemes offering less favourable benefits. Broadly, the main justification put forward for these transitional provisions (which on the face of them discriminate against younger members) was that members nearing retirement would have less time to adjust to the new pension benefits.

Although both these cases concern public sector schemes they are of more general interest as many schemes have some form of protection or “red-circling” for older members introduced at a time when future benefit has been reduced or where schemes have moved from DB to DC accrual. Although the detailed justification arguments are slightly different in the public sector, many of the same considerations will still apply.

In the first cases concerning judges, the younger members were successful in their claim.

The New Judges Pension Scheme (“NJPS”) has significantly lower benefits than those in the Judicial Pension Scheme (“JPS”) and it is registered with HMRC (whereas the JPS was unregistered, with members receiving payments to offset tax charges). The key objection of the younger members was to transitional provisions allowing members who will reach normal pensions ages (“NPA”) by 2022 to remain in the JPS until retirement (with tapered protection for those reaching NPA between 2022 and 2025). 85% of serving judges have protection (full or tapered).

Arrangements like this could be lawful if they can be justified as a proportionate means of achieving a legitimate aim. The legitimate aim put forward was “protecting those closest to retirement from the financial effect of pension reform”. The ET found that the transitional provisions had been introduced for no better reason than that similar provisions were being included in other public sector schemes. No separate consideration had been given to the judiciary. In fact, the ET considered that older judges were less badly affected by the change than younger ones.

Turning to the second case which involved firefighters’ claims, again it concerned age discrimination in relation to transitional protection awarded to older members when the Firefighters’ Pension Scheme (“FPS”) was replaced by the FPS2015. The changes included lower accrual rates and a higher NPA. This claim was rejected by the ET – the discrimination could be justified. The aim of the transitional provisions was to protect those nearest to retirement. That aim was legitimate and the means used to achieve it were proportionate.

Why the different outcomes?

First, it is important to remember that ET decisions are only binding on the parties. They do not have any precedent value and ETs are not bound to follow earlier decisions. The ET in the firefighters’ case was referred to the decision in the judges’ case, but the ET expressly disregarded it in coming to its conclusions.

There are two general reasons why the decisions are different: facts and evidence.

The employment terms of judges are very different to those of firefighters. Judges often take a substantial pay cut on taking office and may be required to confirm they will take no future employment after retiring as a judge. In addition, the fact that the JPS was unregistered and the NJPS was registered made the financial difference much more stark - the relative decrease in benefits was much greater than that suffered by the firefighters. The upshot of this was that younger judges had a longer period with lower benefits then older members. The aim of protecting older members had not been established.

In relation to firefighters, the ET was able to find on the facts that older firefighters did warrant protection; those closer to retirement have a greater legitimate expectation that things will not change significantly when they are only a few years from their pension – they are more focused on their pension entitlement. There was also medical evidence that older members would have more difficulty in maintaining operational fitness until the new NPA of age 60.

A brief reading of the ET decisions also suggests that the Home Office, in the firefighters’ case, was able to produce far more detailed evidence as to why protecting older members was a legitimate aim and that the means to achieve this were proportionate. Evidence included medical reports, proof of Government policy and modelling of alternative provisions. Very little of this type of evidence appears to have been available to the ET in the judges’ case.