Public sector pensions: Work longer and pay more, says Danny Alexander

Chief secretary to Treasury to confirm that pension age for public servants will rise to match state pension age, which is increasing to 66 Public sector workers must accept they will have to work longer and pay more into their pension pots in order to guarantee that they continue to receive better pensions than those in the private sector, Danny Alexander, the chief secretary to the Treasury, has said. Alexander will announce key details of the new pension plan for six million public servants in a speech to the Institute for Public Policy Research thinktank on Friday. He will confirm that the pension age for public servants will rise to match the state pension age – which itself is rising to 66 – although police and firefighters will spared. The generous final salary schemes will be scrapped and replaced with benefits based on a career average. Most controversially, contributions will rise, taking more money out of civil servants’ pay packets. “People in this country are living longer – we’re seeing longevity increase by 10 years since the 1970s, and that’s predicted to go further in the future,” Alexander told BBC Radio 4′s Today programme. “That’s why we’re increasing the state pension age – it will go up to 66 from 2020 – and that’s why we’re recommending there is an increase in pension contributions. “If we make those changes – alongside changes going on for every other person in this country – then we can protect something which is very important, that people who give their working life in service to the public continue to receive among the very best pensions in retirement.” Unions will hold emergency talks on Friday to decide how to respond to the government’s intervention. Ministers had not been expected to formalise plans until after pension talks have concluded later in the summer, and Alexander’s announcement will anger those who have been holding back from industrial action in the hope that a settlement could be reach. Brian Strutton, a negotiator for the GMB union, told the BBC that if Alexander’s plans were non-negotiable, it would be a “show-stopper”. Under details of the plans, the lowest-paid public servants are to be spared he worst of the increases to their pension contributions in a rush to avoid a mass opt-out, Alexander said. But the decision to protect people earning up to £18,000 from the average increase of 3.2% of their salary – made after warnings that the pension reforms could price some people out of saving for their future altogether – will mean the higher paid will pay up to 5% more. Alexander will announce that workers earning less than £15,000 will be spared any increase, and those earning less than £18,000 will have their contributions capped at 1.5%. The increases will be phased in over three years from next April to lessen the blow. Higher earners –including teachers, medics and local government managers – could face a doubling of their contributions from next April. The move could potentially divide the union movement, making co-ordinated strike action across the whole of the public sector less certain and sector-by-sector action more likely. “If they go down this route, it will mean divide and rule,” one union leader said. Alexander is expected to tell his audience: “It is disappointing that there are a minority of unions who seem hell bent on premature strike action before discussions are even complete. “It may be that those who oppose this change think that they can force the government to change its mind. This head in the sand approach is a colossal mistake. This government will reform public service pensions, and this is the time to shape that change, not try to block it. “People are living much longer … this advance comes at a price. It is unjustifiable to ask the taxpayer to work longer and pay more so that public sector workers can retire earlier and receive more themselves. “The changes to contributions from April next year are vital to putting pensions on a fair and affordable footing. But as we promised in the spending review we will protect the low paid and phase in the changes.” Alexander will promise that “low and middle income” earners in the public sector will get benefits at retirement that are “broadly” as good as they are now. He will stress that all accrued rights will be unaffected, that the police, army and fire service will be exempted from the increases in the pension age, and that defined benefit schemes will remain. There are concerns that a mass opt-out from the local government pension scheme would not only add to the state’s welfare bill in workers’ retirement but could also cause investment funds to shrink or even collapse, taking billions of pounds out of the economy. One union survey suggested that if local government workers had to pay the additional three percentage points into their pensions – the average increase being sought by ministers – four in 10 would leave the scheme. Writing in the Telegraph , Alexander said public sector workers would be making a “colossal mistake” to spurn the government’s pensions deal and would be sacrifcing the best offer they will get “for years to come”. He urged rank and file union members to help “shape” the current reforms or face “uncompromising” change later. Mark Serwotka, the general secretary of the Public and Commercial Services Union, which will strike on 30 June, said: “We’ve been heavily criticised by the government for balloting for industrial action while talks are ongoing, and yet Danny Alexander will apparently admit they’re not planning to change their minds. “Every expert who has looked at this recently has confirmed that the changes we agreed just a few years ago have put public sector pensions on a sustainable footing, so these cuts are unnecessary and deliberately provocative.” Public sector pensions Public services policy Public sector pay Danny Alexander Economic policy Liberal Democrats Liberal-Conservative coalition Trade unions Polly Curtis guardian.co.uk

Posted by on June 17, 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.