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Teachers threaten legal challenge to Government's pension changes

The Government cannot force through changes to the Teachers' Pension Scheme as it has not proved that the current system is unsustainable, the UK's largest teaching union has said.15 Feb 2012

The NASUWT has written to the Government threatening a legal challenge if it presses ahead with the changes, arguing that the existing scheme should have been properly valued before the changes were proposed. The Teachers' Pensions Regulations provide that an actuarial valuation must be carried out once every five years, however the last valuation took place in 2006, the union said.

An up-to-date valuation would, the union said, indicate "whether there was a problem with the viability and sustainability of the scheme" and, if so, the extent of the problem.

Public sector pensions expert John Hanratty of Pinsent Masons, the law firm behind Out-Law.com, said that the union's argument was that the Government could not claim the cash-flow positive Teachers' Pension Scheme was unsustainable without measuring its financial position at the time the proposals were made.

"One of the prime arguments put by the unions throughout the debate on public service pension reform has been that the schemes are largely cash generative for HM Treasury because the value of contributions being made to the schemes is greater than the value of benefits being paid out," he said.

He said that if the NASUWT ultimately brought an action for judicial review it could argue that the Government cannot have "considered all the relevant factors as is required under the legal principles which govern public law decision making" by not obtaining an up-to-date actuarial valuation.

The NASUWT was one of six unions which challenged the Government's change of inflation protection measure from the Retail Prices Index (RPI) to the Consumer Prices Index (CPI). One of the grounds for that challenge was that the proposed change was driven not by the unaffordability of the previous RPI regime but rather the Government's political and economic aim to reduce the country's debt deficit, Hanratty said.

In a majority judgment at the end of last year the High Court said that the Government had acted lawfully, although all three judges agreed with the unions that the change was a deficit reduction measure rather than motivated by a genuine belief that CPI was a more appropriate measure of inflation. An appeal verdict is due next week.

Hanratty said that it would be "unusual, although not unprecedented" if the union was successful in a judicial review claim. The challenge could, however, delay the implementation of increased contributions and higher retirement ages, which are due to come into force from 2015.

"In the private sector there are only very few and limited situations in which an employer has been found to be bound to provide a specified level of superannuation rights for future service and, in general – as long as past service rights are preserved and protected – it is for the employer to determine what level of pension it will provide for future service," he said.

"It would be unusual, though not unprecedented, if this situation was found not to apply in the public sector but this challenge could raise questions about the Government's decision-making process. While it may not prevent the changes from going ahead, it could cause a delay to the implementation process."

NASWUT general secretary Chris Keates said that the Government had ignored the union's "repeated requests" for an up-to-date valuation.

"It is simply unacceptable and irresponsible for a Government to embark on changes which will have such a profound adverse impact on the financial future of teachers and their families without having evidence to demonstrate that a problem even exists. It is, however, probably safe to assume that if a valuation would have provided evidence to support the Government's changes, it would have produced it," she said.

The union would "leave no stone unturned to defend teachers and their conditions of service", she added.