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Mr Alexander had said this was in a letter by Mr Pickles that was sent in error and had now been withdrawn.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 695.

    686.pickmypocket - If you're confident that you won't live to 68 then you're in the rather enviable position of not needing to contribute to a pension. My advice, spend it now and enjoy yourself while you can :-)

  • rate this

    Comment number 694.

    The 'gold-plated' myth that you sheep believe is incredible.

    Had the Government not have allowed Priv Sect firms a tax loophole, their pensions would be fine.

    It is absolutely incredible that they tamper with working class lives, and the audacity to pick up 6 fugure annual pensions themselves.

    The Pub Sec is already sustaianable, this is just a masked tax to ringfence funding for bigwigs.

  • rate this

    Comment number 693.

    So what the purpose of the one day strike?
    Just to loose a day's pay?
    The unions should not have built up people's hope for a lost cause.

  • rate this

    Comment number 692.


    You are right that MP's ARE greedy - do what we say, not what we do! - is their attitude, but please don't be misled into believing that those who do the real work in the Public Sector are greedy, We haven't had a pay rise for over 3 years. I'm on under 20k a year, and it hurts when I read the newspaper fiction!!

  • rate this

    Comment number 691.

    I'm a civil servant and while I concede that these reforms are necessary they are not something that anyone should be happy about. Both public sector and private sector pensions provisions have been reduced in recent years. Those enjoying a moment of schadenfreude should consider the long term impact on society. We may all be living longer but for many retirement will have a very bleak outlook.

  • Comment number 690.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this

    Comment number 689.


    My point is reality...demographics are hard to argue against...more out of the coffers....less in...

    The pie can only be cut so many ways...

    Yours is also correct..

    I`ve had pension schemes misold and wiped out by Lawson and Brown...doesn`t mean I wish it on a public worker...

    I would be grateful for their security....thats the major consideration..surely..

  • rate this

    Comment number 688.

    It seems that many commenting here are quite happy with the big race to the bottom; depleted pension pot, low pay, no TU rights, high prices for basic stuff, high rents & C/tax. But when some try to defend their living standards its a crime. The brave private sector has low pensions. So lets everyone join them, instead of those workers demanding a decent living beyond their working days too.

  • rate this

    Comment number 687.

    The money supply (the M0 measure), and the control of interest rates, in the UK is in the hands of the Bank of England which when I last looked was not a privately owned company.

  • rate this

    Comment number 686.

    671. Roaminoff

    Lobby the same politicians that make legislation. Legislate to make private sector employers offer and make contributions to their employees pensions.

    670. Steve.

    I'm a bin man working north of the money pit. Whats my life expectancy and what do you think I'll receive at 68? I'll tell you, I won't receive a pension because I'll probably be gone before then. Pay more for nothing.

  • rate this

    Comment number 685.

    fine. dont trust bankers. dont get a loan, dont have an overdraft, dont get a mortgage. Grow up. That is unless you are on the dole and just take take taking. In which case you dont need finance. Just hand outs.

  • rate this

    Comment number 684.

    There is an open government petition on MP's pensions - "Have terms and conditions of the Final Salary Pensions of MP's changed in line with the changes being made to the rest of the Public Sector Pensions" . Worth putting your name down!

  • rate this

    Comment number 683.

    Whilst we all want good pensions, we have to be realistic about thier affordability. The Socialist unions do not understand simple economics. Special treatment only breeds resentement. They are obviously becoming aware of this and thus thier position is weak and unsustainable. Mark Say whatever he wants of the PCS is doing great damage to them.

  • rate this

    Comment number 682.

    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.
    Just as long as you remember the new boy has to blow it up & it takes quit a long time before you'll get your turn ;-)

  • rate this

    Comment number 681.

    Get a real job in the private sector then and send your kids to public school..
    Got me one. I bet on the price of stuff with money that doesn't exist, and I buy these toxic things I don't understand (i think they're called complex instruments or something) and then I gets a massive bonus and stuff like that...impossible to get sacked unless you get caught being diligent.

  • rate this

    Comment number 680.

    #396 Public sector workers are tax payers too and pay towards their pensions as well so the are "in it" more than you probably. The issue here is private sector workers have been let down by the Financial Institutions but what is happening to them ?? Do you see any of the Bankers being prosecuted by anyone for total misuse of finances and until this happens no one will trust a Banker again .

  • rate this

    Comment number 679.

    "Nimrod2" - Printed money creates hyperinflation
    I'm talking about controlling the money supply, creating and removing as the economy needs it. The ability to do this should be in the hands of a democraticallyt accountable institution not a privately owned corporation. Rothschild:"Give me control of a nation's money and I care not who makes her laws"

  • rate this

    Comment number 678.

    653. ruminations
    You are all missing the point . None of the extra money being collected will reduce the Pension bill. The money is going into the treasury coffers to meet current spending. It will still cost the taxpayer exactly the same amount in the future as it is forecast now. None of this money is going into Pension funds.
    Public Sector would pay more if it would go into a fund

  • rate this

    Comment number 677.

    @667.David Hill

    I'm not sure the abbreviation "PS Worker" is the most sensible in this debate ...

  • rate this

    Comment number 676.

    Two American companies have looked at how long after retirement their employees live. Those who retired at 50 had an average life span of 86 whilst those who stopped working at 65 only lived a further 18 months (making for a very cheap pension). We may be living longer at the moment but that is likely to change as the retirement age increases.


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