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McCloud rebellion grows as six unions file for judicial review
Six trade unions want to take the government to court in a bid to stop it imposing the cost of the McCloud remedy on their members, with one considering strike action.
The Public and Commercial Services Union, the Fire Brigades Union, the GMB Union, the Royal College of Nursing, Unite and the POA union filed for a joint judicial review on Wednesday, with PCS in particular looking to force the government to allow a 2 per cent cut in pension contributions, initially promised as part of the 2016 valuations, to go ahead.
A judicial review is a court proceeding in which a judge considers the lawfulness of a decision or action made by a public body. It cannot be filed directly — the court needs to be asked for permission first.
As Pensions Expert has reported previously, the decision to transfer the cost of the McCloud remedy to the 2016 valuations has angered several unions, as the government initially promised that favourable outcomes to those valuations would result in increased benefits and reduced contributions.
Our members and key workers across the public sector have kept the country running during the pandemic and yet the government, their employer, has treated them appallingly. Bringing this case is a significant, united step in fighting this great injustice
The cost of McCloud, however, which unions and the Public Accounts Committee have pointed out was a Treasury mistake to begin with, means that what might once have been a positive outcome has been wiped out, which the unions say constitutes a broken promise to their members.
Mark Rowe, national officer for the Fire Brigades Union, explained: “The government is trying to make public sector workers pay via a scheme in their pensions called ‘cost control’.
“Cost control adjusts pension contributions or benefits if the actual cost of the pension scheme diverges from the target cost of the pension scheme by 2 per cent or more, with workers losing out if the actual cost is higher.
“It was the government who introduced the cost-control mechanism into the new pension scheme. The mechanism provided that savings from the new scheme should be passed on to those scheme members. The government now wishes to ignore the legislation that made that provision, legislation that they introduced.”
The PCS, in particular, contends that its members have been “robbed”, forced to overpay into their civil service pension in the past two years and losing, on average, £1,000. The BMA made a similar claim in November.
PCS general secretary Mark Serwotka said: “Our members and key workers across the public sector have kept the country running during the pandemic and yet the government, their employer, has treated them appallingly. Bringing this case is a significant, united step in fighting this great injustice.”
PCS holding a strike ballot
PCS announced on Monday that it will launch a consultative ballot on strike action in the new year, as a combination of a pay freeze, inflation, April’s national insurance hike, and the McCloud “pensions robbery” have left its members facing a cost-of-living crisis.
The union, which is the sixth largest in the UK and the largest representing civil servants and other public sector employees, stressed that the consultative ballot will not determine strike action, but “will ask members what action they would be prepared to take”.
“A statutory industrial action ballot might follow later,” it added.
‘Unjustifiable’ government interference
PCS has branded the government’s attempts to place the costs of the McCloud remedy on its members an “outrageous and unjustifiable government interference in the Civil Service Pension Scheme’s valuation and cost-cap processes in recent years”.
Public sector schemes were told in October to conclude their 2016 valuations after the pause in the cost-cap mechanism, brought in response to the McCloud judgment in 2019, was lifted following Treasury amendments to the mechanism.
PCS contends that the original results revealed a breach in the “floor” of the public sector cost cap, showing that the future cost of the scheme had been “exaggerated” and there was more money to spend on reducing employee contributions — by around 2 per cent — and improving benefits.
However, revising the valuation with the costs of the McCloud remedy included will mean that there is no such breach, and so the promised increase in benefits cannot go ahead.
The union argued that Treasury changes to the cost-control mechanism will “tear up the original basis of the cap, making it likely that there will never be a breach in future”.
Cabinet Office opens consultation as McCloud challenges mount
The Cabinet Office has launched a consultation on how the McCloud remedy is to be implemented for members of the civil service pension scheme, while the GMB union has joined the list of those challenging it in the courts.
“Compounding this already diabolical approach towards scheme members, the government is proposing that the full cost of the remedy will be loaded into the current four-year valuation period, rather than being spread over a longer time,” it said.
“This is completely unjustified, given that most members will not decide on their portion of remedy cost until they approach retirement.”
A HM Treasury spokesperson said: “We cannot comment on ongoing litigation.”
Aston Martin faces strike action over DB scheme closure
Workers at carmaker Aston Martin have threatened industrial action following news that it plans to close its defined benefit pension scheme in January 2022.
Unite the union said that workers “voted overwhelmingly in a consultative ballot” for full-scale industrial action in the new year, in order to protect their retirement incomes.
Some 400 members of the Aston Martin Lagonda Limited Pension Scheme are set to be affected by the proposed change. The company has approximately 2,000 employees in total.
Staff at sites in Gaydon and Wellesbourne, both in Warwickshire, as well as Milton Keynes, Newport Pagnell, and St Athan in South Wales took part in the consultative ballot.
These workers have done as asked and saved for their retirement, but they have also worked hard to deliver improved profits for Aston Martin. There is, therefore, no case to be made for closing the DB pension schemes, a move that robs our members of tens of thousands of pounds – in the case of Aston Martin workers, that is about £100,000
Workers face losing about £100,000 in retirement income if the DB scheme, based on a career-averaged salary, is closed from February next year, Unite argued.
The company wants to move the DB members to the existing defined contribution scheme, which currently covers the majority of the workforce and also new employees.
However, Unite argues that such DC schemes are at “the mercy of sudden fluctuations in global stock markets and produce worse retirement incomes”.
Changing gears
Plans to close the company’s DB scheme come four years after it transitioned away from a final salary model.
In 2017, its structure was changed to a career average revalued earnings scheme. The scheme was closed to new entrants on May 31 2011.
According to the pension fund’s 2020 actuarial valuation, the value of its assets stood at £314.6m, sufficient to cover 76 per cent of the benefits that had accrued to members.
It had been planned that from January 2022, contributions would increase from 23.7 per cent to 37.5 per cent for active members who do not participate in the salary sacrifice scheme. Those who do participate make no contributions.
From January 1 2022, the group contribution would increase from 30.2 per cent and 34.7 per cent to 44 per cent and 48.5 per cent for members who opted for benefits of 1/80th’s and 1/70th’s of pensionable salary, respectively.
With the scheme deficit standing at £97m, the group agreed in December 2020 to increase the recovery plan contributions from £7.1m to £15m a year, effective from 2021 to 2027.
Estimated contributions for the year ending December 31 2021 were £20.6m, the group’s 2020 annual report stated.
Aston Martin backs DB closure
Unite general secretary Sharon Graham said: “We will back our members at Aston Martin 100 per cent if they decide to take industrial action to defend their pensions and defeat this threat to their retirement incomes.
“These workers have done as asked and saved for their retirement, but they have also worked hard to deliver improved profits for Aston Martin. There is, therefore, no case to be made for closing the DB pension schemes, a move that robs our members of tens of thousands of pounds — in the case of Aston Martin workers, that is about £100,000.
“Aston Martin’s whole workforce is now aware of the gross inadequacy of the existing DC scheme by comparison, and this will be a significant factor when we put forward our claim in the 2022 pay review,” she added.
A spokesperson for Aston Martin told Pensions Expert: “As a responsible employer, Aston Martin has a duty to deliver financially sustainable pension arrangements for its circa 2,000 employees, while managing its pension risks and underlying costs.
“Having completed a detailed review of its future pension arrangements, and in line with many other UK employers, it is proposing changes to its DB scheme affecting circa 400 employees.
Union ballots for strike action over schools’ exit from Teachers’ scheme
The National Education Union is balloting its members on industrial action over plans by the Girls’ Day School Trust to exit the Teachers’ Pension Scheme.
“Should these changes occur, Aston Martin has outlined an attractive transition arrangement, including a one-off cash payment and equity in the company. This is in addition to supporting the DB pension scheme to meet the cost of pension benefits already earned,” the spokesperson continued.
“Aston Martin remains in direct communication with the affected employees, and their representatives, regarding these changes and is unable to comment further at this time.”
The consultation period with members is due to end on December 17, although Unite has called for it to be extended.
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