BMA plans legal action against Government over mishandling of NHS pensions

Press release from the BMA

Location: UK
Published: Monday 15 November 2021

The BMA is accusing the Government of failing to honour key obligations introduced as part of the 2015 reforms to the NHS pension scheme. This has resulted in those paying into the scheme not building up improved benefits to which they would have otherwise been entitled, according to the BMA.

This relates to the last pension scheme valuation in 2016 which, far from demonstrating that the NHS scheme was unaffordable, instead showed that members were paying too much for their pension and under the terms of the Cost Control Mechanism1 were entitled to see their contribution costs reduced, or the benefits they received increased.

Under this mechanism, changes should have been made to automatically increase the benefits and decrease the contributions for members from April 2019. However, Government unilaterally decided to pause the implementation of these changes.

The BMA brought legal action against the Government relating to this in 2019, but UK Government is now trying to pass the costs of the ‘McCloud Remedy’2 into the previous scheme valuation. These costs relate to the measures required to rectify the Government’s unlawful age discrimination against younger members when they implemented the changes to public sector pension schemes in 2015. 

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.  

Describing the Government’s 2021 Directions to address the issue as ‘unlawful’, the BMA has now written to the Treasury and Department of Health and Social Care. This is the first formal step before requesting a High Court Judicial Review of the issue.

The letter3 challenges the Public Services Pension and Employer Cost Cap Amendment in which the Government intends to lift the suspension of the Cost Control Mechanism, but to include in it the full costs of the McCloud Remedy. In effect, making NHS Pension Scheme members pay for the age discrimination flaw which the Government should itself have resolved years earlier.

The BMA argues that not only is this wrong in principle to seek to make NHS scheme members pay for the Government's mistakes, but that it also has major implications for the workforce. The overall cost of scheme membership due to the combination of the high contribution rates – higher than other public sector schemes and the punitive pension taxation system - is pushing staff to retire early or reduce their hours, all at a time of immense pressure.  

Dr Vishal Sharma, BMA pensions' committee chair, 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.

“Had it acted lawfully in 2015 when reforming the NHS pension scheme and other public service pension schemes, then there would have been no McCloud judgement, and no need for a remedy that the Government is now proposing that scheme members pay for. This is an entirely separate issue to the cost control mechanism and 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, Government has chosen to use this surplus to fund their own mistake, which is manifestly unfair. It has tried to remedy one injustice – an unlawful act of age discrimination – with another which has no reasonable basis. We will take the strongest action to resist it.

“As the BMA has made clear before, the complex NHS pension system and punitive taxation arrangements are key reasons behind the decreased recruitment and retention of healthcare workers. Government has had opportunity to address this issue, but time and again has failed to do anything about it. 

“We need to see real reform that works for all NHS staff, not at their expense.” 

ENDS

Notes to editors

The BMA is a trade union and professional association representing and negotiating on behalf of all doctors in the UK. A leading voice advocating for outstanding health care and a healthy population. An association providing members with excellent individual services and support throughout their lives.

  1. When the Government was faced with resolving longstanding age discrimination issues on the NHS Pension scheme following the implementation of the 2015 revisions, it froze financial safeguards – otherwise known as the Cost Control Mechanism – while it considered what to do.
  2. The McCloud judgement refers to a Court of Appeal ruling that the protection offered to older members when introducing new public sector pension schemes in 2015 resulted in unlawful age discrimination. More on the McCloud pension consultation judgement can be found here.
  3. Please find the full letter here.