17 Jun 2011

Government confirms rise to public sector pension age

The Government tells public sector workers their retirement age will rise to 66 and they will have to contribute more in pension payments, as the threat of strikes looms at the end of June.

Government confirms rise to public sector pension age

Chief Secretary to the Treasury Danny Alexander has confirmed plans to link public sector retirement to the state pension age of 66, with the exception of the police, army and fire service.

Plans to base pensions on average salaries will increase contributions from public sector workers by an average 3.2 per cent.

In a speech to the IPPR think tank, Mr Alexander said it was “unjustifiable to ask the taxpayer to work longer and pay more so that public sector workers can retire earlier and receive more”.

Mr Alexander criticise unions for being “hell bent” on premature industrial action before discussions are complete and criticised their “heads in the sand” approach.

In a move designed to undermine union chiefs, Mr Alexander warned public sector workers it would be a “colossal mistake” to spurn the Government’s pensions deal and sacrifice the best offer they will be made “for years to come”.

Against the threat of a wave of industrial action, he urged rank-and-file union members to help “shape” the current reforms now or face “uncompromising” change later.

Mr Alexander’s intervention appeared designed to undermine union leaders ahead of a day of strikes by up to 750,000 teachers and civil servants on 30 June.

Members of the Public and Commercial Services union (PCS), National Union of Teachers and the Association of Teachers and Lecturers have already voted in favour of strike.

The strikes are set to close schools and sixth form colleges, jobcentres, government offices and courts. They will also involve prison staff, police community support officers, immigration officials and staff at the DVLA.

‘Necessary’ changes

The Government wants to adopt former Labour Cabinet minister Lord Hutton’s recommendation for final salary pensions to be replaced by those based on career-average earnings.

As a “defined benefit” scheme, the career average system will still be more generous than many private sector workers can hope to join.

Mr Alexander also set out how the Government plans to protect the lowest earners from the changes. Staff on less than £15,000 a year pro rata – roughly 750,000 people – will not face any increase in contributions.

Another 500,000 workers earning between £15,000 and £18,000 will see their contributions rise by no more than 1.5 per cent.

In a further overture to union members, the Government will phase in the contribution increase, with only 40 per cent of the rise taking effect in April next year, 80 per cent in April 2013 and in full from 2014.

None of the changes affect pensions earned up to the present, including final salary benefits.