Legal judgment
GAD advised HM Treasury and provided support to their counsel team during a recent legal hearing. Two unions had launched a challenge in relation to the cost control mechanism.
A challenge by the Fire Brigades Union (FBU) and the British Medical Association (BMA) in relation to the cost control mechanism has been dismissed in the High Court.
The FBU and the BMA had sought a Judicial Review against HM Treasury’s decision to include the costs of the McCloud remedy in the cost cap mechanism.
The Government Actuary’s Department (GAD) advised HM Treasury and provided support to their counsel team during the 4-day hearing.
McCloud remedy
The transitional arrangements made when public service pension schemes were reformed in 2015 were previously judged to be unlawfully discriminatory. The changes made to remove this discrimination are known as the McCloud remedy.
Cost cap mechanism
Public service pension schemes are subject to a cost cap mechanism. Scheme costs are measured at each actuarial valuation.
If costs move too far from a target cost, then member contributions or benefits must be adjusted to return costs to the target level.
The government decided that the McCloud remedy should be included in the costs compared against the target cost.
The judge, Mr Justice Choudhury, ruled the government’s decision was not unlawful. He dismissed the applications on all grounds. The unions may seek permission to appeal.
Valuation costs
The cost of the McCloud remedy was calculated by GAD at £19 billion across the UK public service pension schemes when the 2016 valuations were completed.
Experts in GAD advised that if the remedy cost was to be absorbed by employers instead of being included in the cost cap mechanism, then all schemes would have seen costs fall significantly below the target cost. This would have required increases to benefits or reductions in member contributions had the costs of the McCloud remedy not been included in the cost control mechanism.