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17-07-2019

Government recognises NHS pension scheme discriminates on age grounds

The Government has accepted that changes it made to the NHS pension scheme in 2015 are unlawfully discriminatory on the basis of age and will need to be 'remedied'.

Last month, the Government was blocked from appealing a court ruling that found another of its public service pension schemes - for judges and firefighters - was discriminatory.

Treasury chief secretary Elizabeth Truss acknowledged in a writtent statement to parliament yesterday that because the 2015 pension reforms affect all of the main public sector schemes - including the NHS - , the Court of Appeal ruling would also apply to all of them.

As part of the changes to the pension schemes, members close to retirement age were not required to switch to the new version.

But the BMA said this in effect meant younger doctors were forced to join a 'discriminating' pension scheme that will 'result in huge financial losses when they retire' - and supported members to take legal action.

In today's statement, Ms Truss said the Government will look into addressing 'the difference in treatment' across all public sector pension schemes.  

She said: 'The court has found that those too far away from retirement age to qualify for "transitional protection" have been unfairly discriminated against.

'As "transitional protection" was offered to members of all the main public service pension schemes, the Government believes that the difference in treatment will need to be remedied across all those schemes.

'This includes schemes for the NHS, civil service, local government, teachers, police, armed forces, judiciary and fire and rescue workers.'

She added: 'Continuing to resist the full implications of the judgment in court would only add to the uncertainty experienced by members.'

Ms Truss also noted that tackling the issues will cost an estimated £4bn per annum - on top of scheme liabilities from 2015. 

A new NHS pension scheme was introduced in April 2015, alongside the existing 1995/2008 scheme, for all new joiners.

Under the 2015 scheme, pensions are based on an individual's average earnings across their career. This is in contrast to the 1995/2008 scheme, which calculates pension benefits based on the person's final salary.

Accountants predicted increasing numbers of GPs would plan to leave the NHS pension scheme as a result of the changes, meaning many might have to work until 67 or 68 years of age in order to receive their full pension entitlements or risk losing benefits.

Around the same time, in 2016 the Treasury announced lifetime allowance for tax free pensions contributions was to be lowered again to £1m, leading to more GPs paying tax on contributions.

This week Ms Truss argued the measures were brought in to guarantee pensions remain sustainable in the long-term. 

In yesterday's statement she said: 'The Government is committed to providing public service pensions that are fair for public sector workers and for taxpayers. This is why we brought forward reforms in 2015, based on the recommendations of the Hutton report, to ensure that these pensions are sustainable in the future.

'The reasons for the 2015 reforms remain: that public service pensions are a significant cost for the taxpayer, now and in the future. The judgment does not alter the Government’s commitment to ensuring that the cost of public service pensions are affordable for taxpayers and sustainable for the long term.'

Last month, health secretary Matt Hancock announced plans for a flexible pension system - which would allow GPs to cut their pension contributions by half, thereby avoiding tax charges. However, GP leaders and accountants have warned that this solution is not enough to solve the problems.

The BMA previously warned that GPs are retiring early or cutting their hours of work - some in their 30s - to avoid tax charges.

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