Landmark case could have huge consequences for final salary schemes seeking to close

What happened?

Following the coalition government’s review of public sector pensions the Ministry of Justice (MoJ) introduced a New Judicial Pension Scheme (NJPS) in April this year to replace the existing Judicial Pension Scheme.

With the previous scheme - a final-salary vehicle - closing to new members and future accruals at that point, judges were essentially given no option but to join the new contributory scheme.

Any scheme member born prior to 1 April 1957, however, has had their benefits protected. While High Court judges born after 1957 will now receive a career-average pension of around £80,000 a year if they have served on the bench for 20 years or more, those born before that date will get around £90,000 plus a lump sum of £170,000 after tax.

“We believe these claims have a good prospect of success”

As older members of the judiciary are typically white, privately educated males, the change has been seen as discriminatory against the younger ethnic minorities and females who have entered the upper ranks of the legal profession in recent years.

As a result, 194 judges are suing the government on the basis of age, sex and race discrimination.

What does it mean?

The case is a real conundrum for the judicial system. As judges must always remain impartial when hearing a case, it is unclear who could oversee the matter if it does hit the courts, especially as many of the parties to the action have chosen to remain anonymous.

The MoJ has yet to file its defence of the claim, although statements from the department indicate that it will stand by the reforms. According to a spokesperson the new scheme “brings judicial pensions into line with other public services whilst ensuring judges still receive a good pension”.

“Judges aged 55 and over have been given transitional protection as they have less time before retirement to make financial and lifestyle adjustments,” the spokesperson adds.

It is possible that the matter could be settled out of court, for example through mediation. However, with a number of other public sector schemes undergoing similar changes to the judicial one, not to mention the fact that the pensions world looks to the judiciary for clarity on complex pensions matters, there will be a real impetus to make the outcome public.

What’s next?

As the changes being disputed were introduced as part of a government-led review of 17 public sector schemes, the case will be watched closely from many quarters.

Law firm Leigh Day, which is representing the judges, has already revealed that it is investigating legal claims for more than 2,000 police officers who became members of the Career Average Revalued Earnings (CARE) Police Pension Scheme, which also launched in April.

“We believe these claims have a good prospect of success as a less favourable pension scheme is being forced upon younger officers, a greater proportion of whom are female or from an ethnic minority. We believe this is a clear breach of the Equality Act,” says Leigh Day employment lawyer Shubha Banerjee.

If these and the judges’ claims are successful, the fall-out could be unprecedented.