Public sector pension deal outlined by government


Danny Alexander says "this is a proper reward"

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Mr Alexander had said this was in a letter by Mr Pickles that was sent in error and had now been withdrawn.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

Pension schemes explained

  • Final-salary scheme: Guaranteed pension based on earnings at the end of your career and length of service
  • Career average scheme: Guaranteed pension based on your average pay over your career
  • Defined contribution scheme: Determined by contributions and investment returns. Usually worth less than final-salary pensions

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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  • rate this

    Comment number 675.

    It's a shame the debate seems to be about private vs public.

    For years private sector = higher pay but not the best pensions... whereas the public sector = good pensions but lower pay (serve the public all your life, won't get paid well but will be looked after in your old age).

    That's now changed - so shouldn't we be fighting for good pensions for all-not taking away pensions already earned?

  • rate this

    Comment number 674.

    @661 Billythefirst
    Define more than enough money?
    Who are you, or ANYONE, to decide what enough money is?? This is not a communist state. Oh yeah..and if you tell me i am only 'allowed' to earn 30k a year I will quite my job and join all you slackers on the doll and on the public payroll. In my mind both a drain on the economy!!
    @632 you from Zimbabwe per chance??

  • rate this

    Comment number 673.

    656 Living by Logic....

    Its variable....the comparisom between public and private sector...there lies the rub..

    Some in the public sector will dribble when regional pay comes into effect...I`ve no doubt it will....

    National pay bargaining will be history....

    I`ll unwrap some biccies and watch the fallout...

  • rate this

    Comment number 672.

    My private pension is so poor that it has 1/2 in value in 3 yrs. To me all the public sector from teachers to MPs are fat cats. Why should I work until 70 so others can retire at 60. Doesn't matter what deal u have. No tax, no pensions. Private individuals unite. Reduce your hours, go part time, don't move house. Crash the tax system. A full system reboot of the public sector is required.

  • rate this

    Comment number 671.


    "Shouldn't people working in the private sector be lobbying for better pensions instead of shouting for everybody else's to be raped?"

    Who exactly would we lobby? Who would pay? are you volunteering ?

  • rate this

    Comment number 670.

    644.pickmypocket - Shouldn't people working in the private sector be lobbying for better pensions instead of shouting for everybody else's to be raped?
    AVERAGE life expectancy for a teacher at 65 is 86. If their final salary is £36k then they would receive £18k (with 40yrs service). That is a pension cost of +£360k. They fund less than £100k. Better start the printing press whilst lobying.

  • rate this

    Comment number 669.

    "The nations debt which requires us to pay interest on raised capital is a prime example of how insane the our nations finances are. Countries shouldn't have to borrow money to raise capital they should be able to create it. The private central banks are to blame."

    Printed money creates hyperinflation.

  • rate this

    Comment number 668.

    634. Dancin Pagan - My apologies, I have become a right keyboard warrior today. Anomynity, politics and the Internet don't mix to produce productive debate. I liked your "polish" gag.

    658. In a HYS first, I am going to admit I don't know what the fractional reserve banking system is and shall withhold comment while I read. : )

  • rate this

    Comment number 667.

    I really do think that the PS workers should wake up and smell the coffee.
    Face the facts and realise that we are all living so much longer the country cannot afford it without increasing contributions. In the private sector, Gordon Brown raided my pension pot years ago to the point I have still not recovered the losses. I have to work years longer and so should everybody else

  • rate this

    Comment number 666.

    Comments from private sector workers moaning that their pensions are poor so public sector workers should get same. Private sector need unionised again to fight for good pensions. Govt are trying to finish what Thatcher began, deunionising of all UK workers. If successful we'll all have 3rd world terms and conditions whilst the rich will rocket ahead again.

  • rate this

    Comment number 665.

    It is hard enough with high inflation our houses will have lower income and with more pension contributions it will be a lot harder to manage money for the PS. They account for the majority of the UK therefore expect consumption to fall, what is the reason behind the Govt doing this, what will they gain through the increased revenue, we shall see what they do?

  • rate this

    Comment number 664.

    Those in the private sector couldn't care less about pensions in the 'loadsamoney' good times - too busy spending their wealth, whilst those in the public sector had poor wages but haggled a decent pension. Now the greed of the private sector has brought about a collapse in the economy, suddenly the private sector wants equality. And when the economy picks up, they w'ont care less again.

  • rate this

    Comment number 663.

    Where on Earth are we going."

    One reason private FS schemes closed is because they could no longer afford to "early retire" staff who were becoming less productive as they got older (especially the higher paid ones). The same is happening in the public sector and have the employee pick up the cost of early retirement instead (or wait).

  • rate this

    Comment number 662.

    659. I know - see 621.
    I would not advise anyone starting out now to get a job in anything other than the public sector if you want a decent retirement in 30+ years time.
    No point taking any risks, trying to build a business, contributing to wealth creation. Pen-pushing in the Civil Service IS the only way to go. The accrual rates, annual uplift and inflation protection are unbeatable.

  • rate this

    Comment number 661.

    I thought Big Society was a tory "initiative".

    I was making an observation that those very well off types telling us we have to cut back and do things for nothing, feel no need to display similar behaviours and in some cases do the opposite, despite the fact that they have more than enough money.

    Appalling isn't it?

  • rate this

    Comment number 660.

    @ Rabid Right Wing Europhobe 638

    An " exhausted, elderly teacher" (or any other worker) will be "performance managed" either to be effective or out of their job.


    My god that frightens me to death. I sincerely hope that older teachers, with years of experience, will be not subject to that potential bullying.

    Where on Earth are we going.

  • rate this

    Comment number 659.

    642 Ichabod

    The teachers pension scheme isn't part of the local government pension scheme .... I think their academy programme is more ideology driven than anything else. It's certainly not driven by educational imperatives and I'm sure you're right that offloading teacher pension liabilities is high on the agenda.

  • rate this

    Comment number 658.

    ErrrorWayz - "All people was is fairness at the end of the day."
    You aren't going to get fairness when private central banks control the money supply and the fractional reserve banking system. The economy we live in is based on debt and where the interest to service the debt doesn't get created anywhere. It's a big scam. Do you your homework and you will see.

  • rate this

    Comment number 657.

    Get a real job in the private sector then and send your kids to public school...

  • rate this

    Comment number 656.

    @631 Neale35

    The average full time private sector worker earns £3802pa less than the average full time public sector worker.

    I assume you will accuse the source of bias - you may wish to check a few. There are plenty.


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