The Employment Tribunal has handed down its decision in the case of McCloud & Ors v Ministry of Justice & Ors relating to the transitional provisions (introduced as part of reform to public service pension schemes) in the New Judicial Pension Scheme (NJPS). The decision confirms that the transitional provisions are age discriminatory and cannot be objectively justified, since they are not a proportionate means of achieving a legitimate aim. This decision could have far-reaching consequences across other public service pension schemes where similar transitional provisions were adopted (including the Firefighters' Pension Scheme, where thousands of cases brought on a similar basis are currently before the Employment Tribunal). It is also likely to be of interest to private sector schemes - it offers further insight into the standards which must be met for an objective justification defence to succeed.
The case relates to complaints by over 200 members of the judiciary that the transitional provisions in the NJPS subjected them to age discrimination (and in some cases, race discrimination and sex discrimination/unequal pay).
Before 1 April 2015, the claimants were all members of the previous final salary Judicial Pension Scheme (JPS). By section 18 of the Public Service Pensions Act 2013 and the regulations made pursuant to it, the JPS was closed on 31 March 2015, and on 1 April 2015 serving judges were compulsorily transferred into the replacement NJPS, which provided benefits on a Career Average Revalued Earnings (CARE) basis. The transitional arrangements provided exceptions to this compulsory transfer which permit older judges either to:
- remain members of the JPS until retirement, rather than becoming members of the NJPS (full protection members)
- remain members of the JPS until the end of a period of tapered protection (dependent on their age) and then become members of the NJPS (tapered protection members).
The claimants either received no protection and had to transfer to the NJPS on 1 April 2015 (unprotected members) or are tapered protection members. The tapered protection members will be transferred to membership of the replacement NJPS at some point between 1 April 2015 and 1 February 2022 (depending on the applicable taper period, as based on their age).
In relation to discrimination, the MoJ conceded at the Employment Tribunal that the transitional provisions involve less favourable treatment of the claimants because of age and also that, because of the gender and racial profile of the full protection members, tapered protection members and unprotected members, the provisions have a disproportionate impact on female and black / ethnic minority (BAME) judges. However, the MoJ sought to argue those transitional provisions were objectively justified, as being a proportionate means of achieving a legitimate aim (the legitimate aim being to protect those closest to retirement from the financial effects of pension reform).
The Employment Tribunal decided that:
- as a result of the transitional provisions, the MoJ has treated and continues to treat the claimants less favourably than their comparators because of their age;
- the MoJ had failed to show that the treatment of the claimants under the transitional provisions was a proportionate means of achieving a legitimate aim.
The Employment Tribunal undertook a detailed analysis of objective justification in the context of age discrimination. It concluded that:
- It was not possible to construct a 'legitimate aim' merely by referring to a desire to protect those employees 'closest to retirement' as the Government had sought to do. This was, in reality, simply declaring an intention to discriminate, rather than identifying a legitimate social policy aim of the kind which could provide a justification for direct age discrimination.
- In so far as there was possibly an underlying concern that older workers may find it more difficult to adapt their retirement planning to changes in pension provision, this was not borne out by the facts in this case. The clear and undisputed evidence was that older judges would actually be less adversely affected by the pension provision changes than younger judges (meaning that there would be less need for them to adapt); and there was in any event no evidence that older judges had made fixed or concrete plans for retirement which would be difficult to change.
- While it might have been possible (if properly argued and evidenced) for the Government to make out a legitimate social policy aim of ensuring consistency of approach across all public service pension schemes by introducing such transitional provisions, the extent of the detriment to younger judges from the transitional provisions outweighed that aim, and therefore the transitional provisions under the NJPS were not proportionate. It was further noted that consistency would not help the Government's justification defence if it were to be the case that the transitional provisions in other schemes were also unlawful age discrimination (a point which the Tribunal refrained from commenting upon): "schemes which are unlawfully discriminatory remain unlawful, however consistent they may be with other schemes".
- In any event, even if the Government had been able to make out its case in relation to either of the above 'legitimate aims', it had failed to establish that the means selected for doing so were 'reasonably necessary' to achieve those aims. It was noted, in particular, that there was no evidence of any thought process which had led the Government to a conscious conclusion that the 10-year protection window under the transitional protections in the NJPS was 'about right' in the context of that scheme: instead, this period had simply been 'read across' from negotiations on other public service pension schemes (where the trades unions had been pressing for this kind of protection).
As noted by the Employment Tribunal, it is clear that the decision to introduce these transitional provisions was taken by the Government with the objective of securing agreements with the public sector trades unions to the proposed changes in respect of the other public service pension schemes, and reflected the fact that the trades unions were pushing hard for such transitional protections. It is somewhat ironic that the transitional arrangements which the trades unions pushed so hard for are now being challenged as age (and sex and race) discriminatory, including (indirectly) by some of the unions concerned (for example, the involvement of the Fire Brigades' Union in the ongoing cases relating to the new Firefighters' Pension Scheme).
The MoJ has indicated that it is disappointed by the decision and is considering its options for an appeal. Given the potentially significant impact of the decision across the full range of public service pension schemes, it is expected that they will do so.
In the wider pensions context, trustees and sponsoring employers of private sector schemes should also take note of the rigorous approach taken by the Tribunal to arguments of objective justification. The Tribunal dismissed much of the Government's alleged legitimate aims as being "mere generalisations", unsupported by hard evidence. It was similarly critical of the lack of any real evidence that the employer had given reasoned consideration to the question of whether the discriminatory provisions were genuinely appropriate or reasonably necessary to achieve its aims. The clear message is that cogent, specific and contemporaneous evidence will be needed if an objective justification argument is to stand a real chance of success.