The cost cap process was part of the agreement on civil service pension reform in 2015.

It was introduced to offer taxpayers and employees protection from unexpected changes in pension costs.

Where the cost of providing the benefits within the pension scheme has changed from the levels set when reformed pension schemes were introduced in 2015, steps must be taken to return costs to that level.

The costs of operating the reformed pension scheme are less than anticipated – which should have led to member contributions being reduced and their benefits improved.

But the Cabinet Office is now “consulting” on effectively rolling over employee contribution rates for the coming year (see table below).

This contradicts the Scheme Advisory Board’s advice (headed up by the Chief People Officer for the civil service) and the position of all the civil service unions.

Prospect deputy general secretary Garry Graham said: “If the SAB recommendations had been implemented from 1 April last year, members would already be benefiting from at least a 2% reduction in contributions, improved accrual, a progressive contribution structure and improvements to death benefit.

“It’s outrageous that the government is failing to honour commitments in a deal that it said was “sustainable” and would endure for at least 25 years.”

The letter from the Cabinet Office on the consultation says the reason for a rollover is the “pause” to the valuation process imposed by the Treasury while age discrimination litigation (the McCloud case) was underway.

Graham pointed out that the litigation process has ended and there is a level of legal clarity about the implications of the court’s judgements.

“Both the unions and the SAB have been clear that any cost impact arising out of the McCloud judgement should be dealt with separately from the cost cap mechanism.”

Unions have relayed this to the Minister in the Cabinet Office and their understanding is that he is taking the matter up with the Treasury.

Graham pointed out that the Cabinet Office letter includes positive proposals to deal with backdated pay increases.

The unions are seeking a meeting with the minister. Prospect is also looking to work with fellow unions and its branches and members to bring pressure to bear.

 

2020/21 contributions rates based on revalorised 2019/20 rates

Annualised rate of pensionable earnings (£)             Member contribution rate        

From                                       To

£0                                            £22,600                       4.6%

£22,601                                   £54,900                       5.45%

£54,901                                   £150,000                     7.35%

£150,001                                 –                                  8.05%