Government faces legal action over bid to 'pass on costs' of flawed NHS pension reforms

Government plans to make NHS pension scheme members cover the cost of age discrimination introduced in 2015 are unlawful, the BMA has said as it launched legal action against the Treasury.

Treasury faces legal action over NHS pensions (Photo: Peter Dazeley/Getty Images)

The government admitted in 2019 that changes to public sector pensions introduced in 2015 were discriminatory - and that the impact would need to be put right across schemes for 'NHS, civil service, local government, teachers, police, armed forces, judiciary and fire and rescue workers'.

Then chief secretary to the Treasury Liz Truss said that the government believed 'remedying the discrimination will add around £4bn per annum to scheme liabilities from 2015'.

The BMA has now launched legal action against the government over its planned approach to resolving the problem for members of the NHS pension scheme - accusing ministers of 'failing to honour key obligations' and attempting to 'pass the costs of its mistakes onto scheme members'.

NHS pensions

A valuation of the NHS pension scheme in 2016 found that members were 'paying too much' and that under a cost control mechanism were entitled either to see contribution costs reduced or benefits increased, the BMA has said.

However, it says the government is now seeking effectively to divert money that should have been used to put this right to pay for the cost of remedying costs related to age discrimination.

A BMA statement said that 'in essence, having been found guilty of unlawful indirect age discrimination, the government is attempting to pass the costs of its mistakes onto scheme members, thereby meaning that these enhanced benefits that they would have otherwise been entitled to will not materialise'.

BMA pensions committee chair Dr Vishal Sharma said: 'It is entirely wrong in principle that the government is passing the costs of remedying age discrimination, for which it and it alone was responsible, onto NHS pension scheme members.

Pension guarantee

'There is no rationale for the government to seek to withhold the increase in benefits that NHS scheme members were entitled to. It is unacceptable that pension scheme members are being burdened with the cost of the government acting unlawfully.

'When Lord Hutton reformed pensions following his report in 2011, he did so giving the public sector a 25-year guarantee that if pensions became too cheap or too expensive against a predefined target - the cost control mechanism - then the schemes would be altered to account for this.

'The 2016 valuation found that the cost of the scheme was less than had been forecasted resulting in “a cost floor breach”, which should have automatically triggered either an increase in the benefit accrual rate, and/or a decrease in member contribution rates.

'Instead, the government has chosen to use this surplus to fund their own mistake, which is manifestly unfair.'

Judicial review

BMA lawyers have written to the Treasury to outline a proposed judicial review, warning that 2021 NHS pension scheme directions are unlawful. The BMA says changes outlined in the directions block existing legislation, create further 'indirect age discrimination', breach equality act rules and human rights laws on interfering with pension benefits.

A Treasury spokesperson said it could not comment on ongoing litigation but expected to respond by a 3 December deadline.

Dr Sharma pointed out that punitive pension taxation and the complex NHS pension scheme had been key drivers of falling recruitment and retention of NHS staff. Early retirements among GPs have tripled over the past decade, official data show.

Plans for legal action over pensions come after health and social care secretary Sajid Javid admitted that the government was not on track to meet its manifesto commitment to increase the GP workforce by 6,000 FTE GPs by 2024.

The BMA estimates that the average FTE GP is caring for 300 more patients on average compared with 2015.

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