Chief secretary to the Treasury Danny Alexander has set out details of the government’s offer on public sector pensions.
The offer includes:
- An 8% increase in accrual rate, from the 1/65ths offered in October to 1/60ths.
- Anyone within ten years of their pension age on 1 April 2012 will be protected, meaning they will see no change in when they can retire nor any decrease in the pension they receive at their normal pension age.
- Others very close to being ten years from retirement age may also see some additional protection, the details of which will be subject to further discussions.
The proposals are conditional on agreement being reached in scheme-by-scheme talks.
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The previously announced increase to pension contributions will start in April 2012, and will still apply to those earning more than £15,000 a year.
In July, the government agreed a process with the unions for taking forward Lord Hutton’s proposals for long-term reform through scheme-specific talks. To provide the parameters for talks with trades unions, the government set out initial cost ceilings at the beginning of October, which set out the combined employee and taxpayer contributions.
Danny Alexander, chief secretary to the Treasury, said: “From nurses to teachers, civil servants to road sweepers, public service workers provide a valuable service and deserve good pensions in retirement. But people are living longer, so public service pension reform is inevitable.
“We have listened to public service workers and come up with a deal that is fair and affordable. The lowest paid and people ten years off retirement will be protected – and pensions will still be among the very best available.”
Francis Maude, the minister for the Cabinet Office, added: “From the beginning we have been absolutely committed to engaging with the unions on making the necessary reforms to public service pensions. We have listened to the concerns of public service workers and responded.
“It is time now for the unions to respond in a responsible manner and remember that industrial action will cause unnecessary disruption to small businesses and working people up and down the country who themselves do not have access to such generous pensions schemes.”
Read more articles on public sector pension schemes
These proposals offer additional protection to public sector workers, particularly to the low paid, while still achieving the essential reform which taxpayers need. It is not in the interests of public sector workers to plough on with industrial action, which would cause significant disruption to everyone.
We now seem to be back to a 60th accrual rate from the originally proposed 65th for public sector pension schemes after 2015. If that is where we end up then at least it will mean that most public service employees will earn the same amount of pension each year as they are already earn.
The fact that Mr Cameron has indicated to the Commons that the changes will mean in some cases even bigger pensions than before will most likely give some reassurance to public sector workers, however, the bottom line is that, while some may receive bigger pensions than before, they will have to pay in more and for longer to get their bigger pensions, an outcome that seems fair enough.
The suggestion that the local government pension scheme could still retain a final salary scheme if it could be justified is intriguing – Lord Hutton does no doubt not believe it. It does seem hard to believe that, while there are good reasons to treat the local government pension schemes differently, that this extends to retaining a final salary formula – albeit a career average scheme with earnings revaluation – is not a million miles away anyway.
The next exciting instalment has got to be the reaction from the unions – will the strike be called off? The nation is on the edge of its seat …
If it wasn’t for the strength of feeling among public sector workers, the government would have never made this change to their original and dreadful proposals.
This is welcome, but it is a first step. Now the negotiations with the government can begin in earnest, but there is no time to waste. There is still a long way to go and Unite remains committed to the Day of Action on 30 November.
It is absolutely vital that we continue to campaign and keep up the fantastic work union representatives and members are doing across the public sector to defend public sector pensions.
The government’s announcement is an important milestone in the negotiations on public sector pensions reform. Such reform is necessary to guarantee their long-term sustainability and to ensure public sector workers can continue to receive good quality pensions.
Ultimately, we need to avoid a race to the bottom. All workers, whether in the public or private sector, should have the opportunity to retire with a good pension.
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