The government must find an additional £4bn of annual funding for public service pensions after it was denied leave to appeal a case concerning age discrimination.
In a case concerning changes to the firefighters' and judges' pension schemes, the government had forced younger members to less generous schemes, while the oldest workers were able to continue accruing benefits in the older, more generous schemes as "transitional protection".
Younger members - who were more likely to be women or black, Asian or minority ethnic - complained to the courts, with an initial employment tribunal and a follow-up Court of Appeal ruling declaring the changes unlawful.
Now, the Supreme Court has denied the government to appeal the decision once more, exhausting all of the government's legal hurdles to overturn the challenge. The effect of the ruling means either the all pension scheme members must be within the same scheme, which the Treasury has estimated will cost the taxpayer £4bn per year.
Fire Brigades Union (FBU) general secretary Matt Wrack welcomed the outcome, noting it was a "hard-fought victory" for the union and its members.
"FBU members took action for what they believed to be right, and today we have been vindicated," he said. "We never gave up on our fight for justice, and we are delighted that our perseverance has paid off.
"This ruling proves that the government has discriminated against thousands of younger firefighters. They must now rectify the damage they unnecessarily caused."
The decision will also have significant impact on the Local Government Pension Scheme (LGPS). Last month, the Government Actuary's Department said while it would not "expect the news to be quite as bad", LGPS employers may face further contribution increases to meet heightened liabilities.
Arc Pensions Law partner Rosalind Connor said the initial Court of Appeal ruling "had far-reaching effects for government policy on pensions", noting the government's actions had been "common practice".
She said: "In this case, the court held that there was not sufficient justification for this softer close, so the government must approach a close in a different way, possibly reversing some significant steps to reduce the cost of public sector pensions by moving younger staff out of final salary schemes."
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