A consultation into how the government can compensate members for age discrimination in public sector pension schemes could leave millions needing expert financial advice, former minister Steve Webb has warned.
Consulting on how to implement the Court of Appeal’s ruling in the McCloud case, the government has proposed a plan that would involve millions of public sector workers being allowed to make a choice to have their pension for certain years worked out under the old pre-reform rules rather than the new rules, if this would give them a better outcome.
The McCloud case centred around unlawful age discrimination identified by the Court of Appeal in the 2015 reforms to the Judicial and Firefighters’ pension schemes.
A written statement in Parliament leaves open the possibility that any change could affect tax calculations going back several years which could leave members needing complex advice.
The government has not yet said how members will be advised what to do or who will pay for any advice.
The government has not yet said how it plans to address the issues of discrimination going forward says LCP partner and former pensions minister Steve Webb.
Webb says: “Today’s statement shows the massive complexity of unpicking public sector pension reforms following the recent decision by the Court of Appeal. If the government goes ahead with its plans, complex calculations will need to be made for millions of public sector workers, including retired members, to help them decide which scheme would be of most benefit.
“Worse still, there is a chance that retrospective changes to pensions could affect tax calculations going back several years. Members will need access to good advice to make the right choice and the government has not yet made it clear who will pay for this. There is a strong case for ministers to waive any knock-on consequences for tax bills for previous years, otherwise the decision could be extremely complex for some workers and retired public servants’’.