Taxpayers face £17bn pen­sion bill fol­low­ing ‘huge’ mis­take

The Daily Telegraph - Business - - Business - By Jes­sica Beard

TAXPAYERS will have to foot an es­ti­mated £17bn bill to boost pen­sions for up to 3m pub­lic sec­tor work­ers af­ter an “avoid­able” mis­take meant the Gov­ern­ment had to back­date pay­outs.

In 2018, the Gov­ern­ment was found guilty of dis­crim­i­nat­ing against younger work­ers af­ter it rad­i­cally changed pub­lic sec­tor pen­sions in 2015 – mov­ing away from a gen­er­ous “fi­nal salary” model to­wards a “ca­reer av­er­age” cal­cu­la­tion. Mil­lions of pub­lic sec­tor work­ers lost out and are now each due close to £6,000 in com­pen­sa­tion.

Tom Selby, of AJ Bell, a pen­sion provider, said the bill was a re­sult of a “colos­sal” and “en­tirely avoid­able” mis­take made by the Gov­ern­ment when it ne­go­ti­ated the pen­sion plan with trade unions prior to the 2015 change. A ca­reer av­er­age pen­sion is less gen­er­ous than a fi­nal salary cal­cu­la­tion, with the change made dur­ing the coali­tion gov­ern­ment’s aus­ter­ity plan.

How­ever, those within 10 years of re­tire­ment from 2012, when the changes were fi­nalised, had their pen­sion prom­ises pro­tected.

This was sub­se­quently deemed il­le­gal by the courts in 2018 as it was age dis­crim­i­na­tory against younger work­ers who were forced on to the less de­sir­able pen­sion scheme with­out any com­pen­sa­tion.

The Gov­ern­ment must now re­pay pub­lic sec­tor work­ers to the tune of £17bn. It will have to treat all work­ers as equal and in­crease their pen­sions as if they were un­der the old sys­tem for any years worked be­tween 2015 and 2022.

This is when the 10-year grace pe­riod for older work­ers ends and the ca­reer av­er­age model cov­ers all staff.

Tom Selby of AJ Bell said the Gov­ern­ment had made a ‘colos­sal’ mis­take over pub­lic sec­tor pen­sions

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