Government poised to make deepest cuts ever to public sector pensions

Leaked paper reveals ministers want to raise retirement age to 66 and increase contributions by 3.3 percentage points Millions of teachers, nurses, civil servants and members of the armed forces will be thousands of pounds poorer in retirement as well as having to work longer after ministers set out plans for the deepest cuts ever made to state employee pensions. The starting offer in the government’s negotiations, made privately to unions but leaked to the Guardian, reveals they are poised to adopt nearly all of the proposals in the independent report by Lord Hutton, the Labour ex-minister. It proposed 6 million state employees should pay more in, work longer and receive smaller pensions while keeping the final-salary (defined benefit) scheme, which is more generous than most in the private sector. But sources close to the talks say the government’s opening offer has further eroded the value of pensions. Some unions are now clamouring for strike action, claiming the government has left them nothing to negotiate with. Pensions is the only issue over which all unions could legally launch coordinated strike action. Civil service and education unions representing 750,000 people are already moving to a 30 June strike. Other unions have been awaiting the outcome of the formal negotiations at the end of next month before striking, but many of those have been angered by this first written offer, made last week. The stakes were raised further on Thursday when two of the biggest and most militant unions, the Public and Commercial Services Union and Unite, signed an accord pledging to fight “vicious” spending cuts. The leaked “discussion paper”, written by the chief secretary to the treasury Danny Alexander, reveals that the government proposes to raise the retirement age to 66 for most state employees, and replace final salary schemes with pensions based on career salary averages. Contributions will increase by 3.3 percentage points with some protection for those earning less than £15,000 or £18,000.But it goes further, changing the rate of accruals so that the proportion of the average salary accrued for each year worked is reduced. Currently new teachers accrue one 60th of their final salary for every year they work, meaning they have to work for thirty years to receive half their annual salary in pension when they retire. The models in the paper suggest that this should rise to either one 80th, 90th or 100th, of the salary accrued for each year worked. It means some public sector workers would have to work ten years longer to get half of their average salary. Treasury sources stressed that the paper was simply a discussion paper, and not the final formal offer and that the accruals rates should not be taken in isolation from the rest of the package as a sign of the scheme’s generosity. But a source close to the talks said: “This is not the basis for negotiations and much, much worse than we expected.” Francis Maude, the Cabinet Office minister leading the talks, said in a speech to senior civil servants on Thursday that civil service pensions would “remain among the very best available” and that all pensions already accrued would be honoured. He added: “However, it is a fact that people are living longer, which means that pensions are costing significantly more. We cannot expect other taxpayers to fund the increased costs of our pensions, particularly at a time when for many of them their pension benefits have been significantly reduced.” Public sector pensions Civil service Public services policy Public sector cuts Public finance Danny Alexander Trade unions Polly Curtis guardian.co.uk

Posted by on May 19, 2011. Filed under News, Politics, World News. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.