The union said:They are a threat because any intent to deprive serving employees of their contractual right to a pension at age 60 can only merit outright opposition.They are an opportunity because other proposals in the package could create a fairer pension scheme, which does better than provide an average civil service pension of £4,800 a year, as the current scheme does today.General secretary Paul Noon said he would be putting the proposals to Prospect’s national executive next week with three recommendations:
- any change to the civil service Classic or Premium pension schemes must be by negotiation
- the government must give specialist staff a choice on whether to join the new scheme
- government must respect its contract with existing staff, and not force anyone to work past 60 against their will.
Noon welcomed the fact that the package was up for consultation, and that negotiations between civil service unions and the Cabinet Office would not be constrained by the March 4 cut-off date for the consultation exercise.
On age of retirement, he said that Prospect had fought for many years for a flexible decade of retirement up to age 65. Many specialists have to obtain qualifications or industry experience in their 20s, and under present arrangements could not receive a full pension at age 60. In any case, Noon added that age discrimination will be barred in 2006 so the question of retirement age will become redundant.
On pension age, Noon said the increase in longevity, and hence in pension costs, had to be recognised. "But that is no reason to impose a cut in pension on staff whose jobs are being cut, whose pay has been squeezed, but who carry with them the government’s hopes for public service reform. We will not accept imposed detrimental changes or any new arrangement that sells our members short."
On the switch to a career earnings scheme, Noon welcomed the Cabinet Office assurance that it would be "cost-neutral," which meant it would not be a savings measure. The benefits of a much faster accrual rate (50ths instead of 80ths or 60ths) would balance the loss of final salary. For many staff such a rate would be superior to present arrangements and Prospect would argue for further improvements; it would be a particular benefit for specialists with shorter service. Staff would also be able to work more than 40 years if desired, another benefit for many specialists.
But Noon criticised suggestions by the Cabinet Office that if costs for the new scheme rose in future, so might the contribution rate for members. "Members need some certainty over what they have to pay for their pension, not the threat of an ever-increasing contribution rate."
Noon will advise the NEC to enter negotiations on the government’s proposals, as the government is likewise obliged to do by the terms of the 1972 Superannuation Act.
To those in the media who have criticised the cost of the current civil service final salary scheme, Noon said: "It is misleading to focus on a few high-flyers working in London. Ninety-three per cent of civil servants earn less than £35,000, and the average pension is worth less than £93 a week – barely the cost of a winter coat."
NOTE: In the civil service, pay has for many years been abated before calculation of gross salary, rather than after, to pay for pension costs. That reduction was calculated by the Scott report in 1982 at 8 per cent, which was accepted at the time by Margaret Thatcher and by UK governments ever since.
In other words, civil servants have had to accept lower rates of pay in return for their pension, which itself is lower because of the lower salary on which it is based. It is calculated that this saves the Treasury £220m in pension costs each year. In addition:
- civil servants pay a 1.5% contribution towards the cost of widows and widowers’ pensions
- since 2002, new civil servants pay a 3.5% pension contribution.