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