Business

Public sector pension deal outlined by government

  • 20 December 2011
  • From the section Business
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An outline agreement for big changes to public service pension schemes has been achieved, Treasury Chief Secretary Danny Alexander has told Parliament.

After months of negotiations, and a national strike, he said most trade unions had now agreed in principle to new schemes from 2015.

The deals would change pension schemes for staff in the NHS, local government, civil service and education.

He said this would eventually save the government tens of billions of pounds.

"These heads of agreement deliver the government's key objectives in full and do so with no new money since our November offer," he told MPs.

'New conditions'

There was confusion when the GMB trade union said it was reconsidering its position on the proposals for the local government pension scheme, on which a deal was thought to have been all but settled.

Brian Strutton, national officer for the GMB, said this was in light of "new conditions", thought to be a limit on employers' contributions, laid down by Communities Secretary Eric Pickles.

Mr Alexander had said this was in a letter by Mr Pickles that was sent in error and had now been withdrawn.

However the GMB, Unison and Unite said that in light of confusion over the letter, they were suspending their agreement, and were seeking an urgent meeting with the government.

'Final position'

A spokesman from the Department for Communities and Local Government then said it was moving to resolve the confusion: "We are in discussion with the unions to resolve any misunderstanding and reassure them that our intentions have not changed.

"It would seem the unions have read more into the letter than we intended. We are not imposing any new conditions."

It said it would be issuing a new letter and it was confident of a resolution.

Danny Alexander said: "The negotiations ... are now concluded. This is the government's final position. Us and the unions agree that this is the best position that we can reach through negotiations."

Prospect, the second-biggest civil service union said it would continue to "seek improvements" on the government's proposals before it would put the offer to its 34,000 members.

Earlier, several other trade unions, including the biggest civil service union - the Public and Commercial Services (PCS) union - said they had definitely not signed up to the outline agreements.

The National Union of Teachers (NUT), the NASUWT (National Association of Schoolmasters Union of Women Teachers), the University and College Union (UCU) and Welsh teaching union UCAC all said they would not sign.

'Final position'

Mr Alexander told MPs that the progress in negotiations meant that increased contributions, amounting to an average of 3.2% of staff salaries, would be phased in over the three years from 2012.

However, the second and third year of these increases would be reviewed in the light of the first year's experience, in case there had been high drop out rates from staff who could not afford to pay more.

From 2015 the various pension schemes under consideration will be changed to a career average basis with their normal pension ages rising in line with the state pension age.

He described this as the government's "final position", with the trade unions who now support the outline agreements agreeing not to call any further strikes.

He acknowledged that the draft agreements would now have to be approved by union members and that there would have to be much more detailed negotiations.

New schemes

Mr Alexander said it was "deeply disappointing" that he had not been able to reach any agreement with the main civil service union, the PCS.

Cabinet Office minister Francis Maude later said there was "no intention to divide and rule" in dealings with the unions and it was disappointing that the PCS had "written itself out of the script".

He said the agreements came despite the strike action on 30 November, not because of it.

Mr Alexander described last month's national strike of more than 20 public service unions as an "unnecessary interruption", before outlining the way some of the new career average pension schemes would probably operate, for all staff, from 2015.

The new offer features changes to accrual rates - the rate at which a pension builds up - and how the existing pot is revalued while an employee is still working, to guard against inflation. The terms include:

  • In the civil service, the accrual rate will be 1/44th of salary, revalued each year in line with the consumer prices index (CPI).
  • In the local government scheme, where negotiations have different parameters, the pension age will be linked to the state pension age but a new career average scheme will be introduced in 2014 - a year earlier than the others - and there will be no increases in employee contributions for all, or the vast majority, of members
  • In the NHS, the accrual rate will be 1/54th of salary each year, revalued in line with CPI plus 1.5%.
  • In the teachers' pension scheme, the accrual rate will be 1/57th of salary each year, revalued in line with CPI plus 1.6% each year.

Separate proposals for the police, armed forces, judges and fire service have still to be published.

Mr Alexander promised that if a deal was done there would be no further changes to public service pension schemes for 25 years.

NHS pensions offer

A new offer on NHS pensions was put to the unions earlier this month. Under the updated proposals:

  • 530,000 staff earning between £15,000 and £26,557 would be spared any rise in pension contributions next year
  • So would those less than 10 years away from retirement
  • Higher-earning employees would be expected to pay more
  • Staff in areas transferred out of the public sector will retain their right to stay in the pension scheme
  • There would also be an improved accrual rate - the rate at which the value of a pension builds up, within a career average pension scheme
  • The government has also pledged to consult on the impact of changes on staff in the emergency services

Rehana Azam, national officer of the GMB which was also involved in NHS pensions negotiations, said discussions had been "extremely difficult" and a lot of detail still needed to be worked through.

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