Career average move works against councils in equal-pay disputes

WHEN they agreed back in 2013 that benefits from the Local Government Pension Scheme should be calculated on a career-average basis, councils across Scotland must have thought they were going to save themselves a fair amount of cash.

After all, if moving away from a final salary system reduced the amount of retirement income employees were entitled to surely it would reduce the liability each local authority faced too.

The problem is that a pay deal agreed in 2006 to make amends for women being paid less than men for doing equivalent work was itself discriminatory.

When the councils started being hit by a fresh wave of equal pay claims in relation to that they found the women had started demanding their pensions were re-rated too, with the move from final salary to career average having a direct impact.

Previously, moving a stillworking woman up the pay scale would have been enough to put her at the right level for final salary benefits on retirement.

With career average, however, when past earnings are factored in the sum a woman’s pension is based on will be lower than it should be regardless of what she is earning on the day she retires.

Crucially, it would make her pension lower than that of a man earning the same at retirement.

For Stefan Cross QC, who is representing thousands of women with equal pay claims, that is why councils must allow their female workers to make up the pension contributions that were lost in the years they were being underpaid.

Anything less, he said, would mean the “discrimination is baked in for life”.

Yet as a 2017 report from gender equality charity the Fawcett Society highlighted, because they have earned less over their working lives women tend to be more conservative with their financial decisions than men, meaning many will be unlikely to part with any of their settlement in order to up their pension provision.

That is why the onus should be on the councils not just to offer female staff the chance to increase their contributions, but to highlight that it would be in their best interests to do so too.

Indeed, as Mr Cross discovered in Birmingham, while one woman had to pay £3,500 into her pension pot, it resulted in her retirement income increasing by £15,000 a year.

So many of the women that have brought claims against Glasgow and North Lanarkshire Councils have already been doubly discriminated against in the workplace – first by missing out on bonuses paid to men they shared a pay grade with and then by seeing those bonuses amalgamated with male colleagues’ pay as part of a deal that was supposed to level the playing field.

Ensuring that the value of their pensions can be re-rated in line with any fresh settlement will stop it happening for a third time.

As North Lanarkshire Council has found out, and Glasgow City Council is likely to discover, thanks to the career average move the retirement pay gap is just as big an issue as the gender pay gap in these equal pay disputes.