And it has emerged pensioners have threatened legal action in a letter to the First Minister if heads do not roll at the Scottish Government‘s pensions agency over what has happened.
The Herald can reveal that more than 200,000 Scots police, teachers, NHS staff including nurses, firefighters and local government workers, both pensioners and those close to retirement, are being sought over an age discrimination court ruling by the Scottish Public Pensions Agency which is responsible for providing each worker with a potential remedy.
The SPPA has broken at least two statutory deadlines to put things right and that is expected to cost the taxpayer millions more in interest payment penalties, which is being charged at 8% a year. By the first deadline of March 31 of this year, when they had only managed to process a third of those who needed to be contacted, some £4m was paid out in interest payments to police pensioners alone.
The crisis stems from a landmark 2018 court case in London, known as the McCloud judgment, which ruled that the UK government’s 2015 public sector pension reforms unlawfully discriminated against younger workers.
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Why has Scotland been struck by a £1.7bn public pensions bombshell?
There reforms were brought in to make public sector pensions more affordable for taxpayers, because people were living longer and the cost to government was rising sharply.
Pensioners have appealed to John Swinney to resolve the crisis
But the reforms moved most public sector staff onto new, less generous schemes, while allowing older employees to stay on better ones. Judges and firefighters challenged the changes, and the Court of Appeal found that the “transitional protections” offered to older workers were unfair and breached equality laws.
The fallout from that has seen all public sector pension schemes in Scotland scrambling compensate those discriminated against.
But it has come at a cost, both financially to the public and to the pensioners who have lodged complaints that they have been waiting years in many cases for their money.
As of August, some 55,000 staff were still to get those statements, which have to be delivered before any compensation can be kickstarted for lost money.
Some have died waiting for their pension remedy statements from the SPPA which includes arrears dating back to 2015.
According to Scottish Government records, three members of the police pension scheme alone had passed away before they received their remedy statement.
The Herald can reveal that Scotland faces a bill running to £1.67bn to repair the damage which is adding extra financial burdens to the NHS in Scotland, the 32 Scottish local authorities, Police Scotland and the Scottish Fire and Rescue Service, who all rely on taxpayer cash to run.
All have now had to increase the amount they pay into their pension schemes for staff, known as employer contribution rates, to cover the extra costs caused by the court ruling.
Employer contribution rates are the percentage of an employee’s salary that an organisation must pay into the pension scheme on top of the worker’s own contributions. Higher rates mean that employers – and ultimately taxpayers – have to put in more money.
It can be revealed that for the Police Pension Scheme, employer contribution rates have had to rise from 30.2% to 38.7%, while for the Firefighters’ Pension Scheme (Scotland) it has gone from 28.5% to 34.1%.
Rates for the Scottish Teachers’ Pension Scheme have risen from 23% to 26%, while for the NHS Pension Scheme (Scotland) it has gone from 20.9% to 22.5%.
Those schemes are thought to have been hit hardest because the money that goes into them has historically not been invested.
They are known as pay-as-you go schemes in which contributions are used immediately to pay pensions to people who are already retired, rather than from a separate investment fund, as happens with a miriad of private schemes and the Local Government Pension Scheme in Scotland which is also having to deal with the fallout of the age discrimination findings.
If there is a shortfall, it is down to the Scottish Government to cover the gap using taxpayer money from public budgets.
A widow who saw her detective husband die two days before receiving his remedy statement has called for the agency responsible to be “held to account” and said the SPPA chief executive Stephen Pathirana should go.
Gillan Frew and late husband Bob (Image: Gillian Frew)
Bob Frew, who retired as a detective chief inspector six years ago waited years for details of his police pension to arrive but died of cancer two days before it actually arrived on April 1. He would have been 60 this Sunday.
His widow, Gillian, 52, also a retired police pensioner, who only got her pension compensation only after her husband’s death after raising it with government told the Herald that the SPPA’s handling of the affair was “deplorable”.
Retired police superintendent Martin Gallagher, who heads a Job’s Forgotten group of over 500 members to co-ordinate issues for those who are fighting to get their pension remedies, has described the whole affair as a “national scandal” and says it is long past time that pensioners got what they were legally entitled to.
Martin Gallagher (Image: Martin Gallagher)
He said the unfair changes to the pension schemes “went down like a bucket of cold sick”, that the response from the SPPA was a “shambles” and that his group have warned John Swinney about legal action of heads do not roll at the pensions agency.
“As you know we are accruing 8% interest on our money until paid. This is an enormous ongoing drain on the public purse,” he said.
He said pensioners “have a debt they did nothing to cause… and the longer the SPPA delay issuing statements the more money they (pensioners) recoup through this interest. They are continuing to apply this interest even though they have breached a statutory deadline to issue retired officers their statement, which would be the only opportunity for retirees to stop it growing.”
He said: “Communications from the SPPA have been poor and have seen repeated deadlines for resolution missed over the last three years.”
The SPPA said in April that it had made “significant progress in delivering what is a complex and challenging programme of work”. Those affected by the judgment that they oversee, included 65,000 who were retired who were retired and had to make an immediate choice in their remedy statement and 150,000 who have to make a ‘deferred choice’ because they have not yet retired.
By the March 31 deadline, there were just 2,800 remedy statements delivered to pensioners who had to make an immediate choice, with 56,000 going to those who had not yet retired.
In a circular relating to the Scottish police pension scheme members, believed to be among the first to get remedy statements, SPPA chief executive Stephen Pathirana apologised for the failure to meet the March 31 deadline.
“The overall programme being managed by SPPA is complex as it requires [statements] to be issued across four large public service schemes to active, deferred and pensioner members.”
SPPA deputy chief executive Kate Thomson-McDermott said: “The delivery of the remedy remains a key priority for the SPPA and, while we continue to make progress, as with other public sector pension scheme providers, challenges remain. Remedy is a complex technical exercise which requires the skills of experienced pensions administrators. Training new pensions administers takes years as these are skilled and complex jobs.
“SPPA continue to focus on improving automation capability and training new pension administrators to release experienced staff to focus on calculating and issuing statements to eligible members.”
The Scottish Government was approached for comment.