Pensions concession for low-paid workers

No rise for public sector staff on less than £15,000 while higher paid workers will be charged even more The government is to spare the lowest paid public servants from the worst of the increases in their pension contributions in a rush to avoid a mass opt-out. 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. Danny Alexander, the chief secretary to the Treasury, will set out details of the plans to increase 6 million public sector workers’ pension payments, and will attack union leaders who have announced a joint strike on 30 June. 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. Teachers, medics and local government managers could face a doubling in their contributions from next April. The move will potentially divide the union movement making co-ordinated strike action less certain. “If they go down this route it will mean divide and rule,” one union boss said. Unions were also taken aback by the non-negotiable announcement before talks have concluded. In a speech to the Institute for Public Policy Research thinktank Alexander is expected to say: “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 – the average 60 year old is living 10 years longer now than they did in the 70s. 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. We are proposing in particular that the lowest earners will face the least, or even zero increase in their contributions … this is progressive and this is fair. It is something that I as a Liberal Democrat am firmly committed to.” Alexander will make a 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 services 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 their retirement, but it could also cause the 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 ministers are seeking – four in 10 would leave the scheme. Writing in today’s Telegraph Alexander said public sector workers would be making a “colossal mistake” to spurn the government’s pensions deal and sacrifice the best offer they will be made “for years to come”. He urged rank-and-file union members to help “shape” the current reforms now 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 Polly Curtis guardian.co.uk

Posted by on June 16, 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.