In December 2018 the Court of Appeal ruled the changes made to firefighters’ and judges’ pensions in 2015 were discriminatory on the grounds of age. In both cases it is the ‘transition arrangements’ between the old and new schemes that is the source of the problem.
The transition arrangements were designed to ensure members who could not remain entirely in the old scheme, but nonetheless were fairly close to retirement, would be given special arrangements to help them adjust financially. The rationale was these members would already have based their future plans on the expectation of a certain level of pension from a certain future date and the new arrangements interfered with that.

The transition arrangements were lobbied for by unions across the public sector to protect members. Both the unions and the government agreed the transition arrangements discriminated on the basis of age but the government took the view the terms met the legislative requirements of being ‘a proportionate means of achieving a legitimate aim’. The Court of Appeal has now ruled the introduction of transitional protections to judges’ and firefighters’ pensions was not a proportionate means for the government to achieve a legitimate aim, so are unlawful.

Those directly affected by this ruling are firefighters and judges who joined the Firefighter’s Pension Scheme 2015 and the New Judicial Pension Scheme respectively, under the transition arrangements i.e. their joining date for the new scheme will be after April 2015.
As other public sector pension schemes put in place transition arrangements (for example, the NHS, teachers, police and prison officers) when new pension schemes were introduced in 2015 this ruling is likely to affect them as well.

It is currently not clear when or how this matter will be resolved, nor is it clear whether those affected will have their pensions ‘levelled-up’ or ‘levelled-down’. In a divorce context the immediate reaction may be to delay any settlement where the transition arrangements apply until the position is clarified, but in most cases this may not be necessary. Often ‘post 2015’ benefits are small relative to the other pensions under consideration. Hence any adjustment for the ‘transition issue’ is unlikely to be material to the outcome of a divorce settlement, and well within a reasonable margin of error for pension divorce calculations. Hence this issue just becomes another unknown element within a calculation that has a lot of unknowns.

If you would like to discuss the issues raised in this note, please contact us.

For further reading, please also see the following useful articles:

https://www.ftadviser.com/pensions/2018/12/21/judges-and-firefighters-win-pensions-court-case/?page=1

https://www.fbu.org.uk/news/2018/12/20/firefighters-win-major-pension-legal-case-against-government

http://www.polfed.org/fedatwork/3926.aspx

http://www.pensionsage.com/pa/Firefighters-and-judges-win-pension-age-discrimination-case.php