Government's pensions leaflet short on facts
7 Oct 2011 08:16 PM
A Cabinet Office pensions leaflet sent to staff is woefully short on detail and does nothing to allay fears the government is intent on forcing people to pay more and work longer, for less in retirement.
PCS and the other unions are in talks with the government but we have consistently criticised ministers for refusing to negotiate properly and failing to provide adequate information.
Here we answer the main points in the leaflet, which was issued to staff yesterday and is available to download.
Claim: "In June 2010 the government commissioned an independent review to look into all public service pensions."
Reality: Despite being conducted by a former Labour cabinet minister, the review was far from independent. Its first remit was to consider the "growing disparity between public service and private sector pension provision" in relation to "mobility between public and private sectors and pensions as a barrier to greater plurality of provision of public services".
Claim: "The review concluded that current pension arrangements, including those for the Civil Service, need to be reformed."
Reality: Given the political nature of the remit – making public services more attractive to the private sector – it was no surprise Hutton recommended cuts.
But we negotiated reforms in 2002 with the introduction of the premium scheme and again in 2007 when we agreed the nuvos career average scheme, with a good benefit structure and a 65 retirement age.
In 2010, the National Audit Office confirmed our view that the changes meant our schemes were affordable now and sustainable in future. This analysis assumes pensions will continue to be uprated in line with the retail prices index.
The changes proposed by the government are intended to save £2.8 billion, but not a single penny of this is destined for the pensions schemes, it will go straight to the Treasury as a tax on public sector workers, to help pay off a budget deficit that they had no part in creating.
Claim: "The proposed reforms will not change the fact that a civil service pension will remain a very effective way to save for your retirement."
Reality: This conveniently ignores the fact that for most people it will cost a lot more to save for a pension that will end up being worth a lot less than the current scheme.
Claim: "You will keep the pension and lump sum you have already earned. This is often referred to as ‘accrued rights’. These will be protected."
Reality: This is the law and even ministers understand that we would challenge any threat to this in the courts, with every likelihood of success.
Claim: "You will keep a guaranteed level of pension. This kind of pension scheme is often known as a ‘defined benefit scheme.’ This will not be changed in a new scheme. This means that when you retire you will receive a guaranteed amount of pension every year based on a proportion of your salary. This is quite rare."
Reality: This is almost comical. Of course it will be guaranteed, but the proposals guarantee civil servants will have to pay more and work longer for a lower pension when they retire.
While it is scandalous what has happened to pensions in the private sector in recent years, the answer is not to equalise the misery. We want fair pensions for all.
Claim: "The government has changed the way civil service pensions are increased in retirement, moving from basing these calculations on the retail prices index to the consumer prices index. This came in to effect in April 2011. The change also affects the way in which the pension builds up in nuvos."
Reality: This is perhaps the biggest insult of all in the leaflet. This is the sum total of the information provided about what amounts to the largest ever single cut in the value of public sector pensions.
Switching from RPI to CPI wiped billions of pounds off the value of pensions overnight, representing a 20% cut. As well as affecting those in retirement and receiving a pension, it reduces the year on year calculation of benefits for members in the nuvos scheme.
This change was introduced in the budget in June 2010 without any consultation or negotiation and we have subsequently been told it is non-negotiable. PCS and other unions are challenging this by way of a judicial review in the High Court which opens on 25 October.
Claim: "Your employer will still meet the bulk of the cost of providing your pension."
Reality: This is misleading. It ignores the fact that civil service pay has traditionally been kept lower than in the private sector and other areas of the public sector, to take account of pensions. In the 1980s, the Scott inquiry into the value of pensions observed:
"The adjustments to take account of the differences between the civil service pension scheme and the analogue (private sector) schemes effectively mean that civil servants pay a sizeable contribution towards their pension, but, because the main part of this contribution is made in the form of a reduction in gross pay, this is not often realised. The effective contribution by civil servants, at around 8 per cent of pensionable pay, is getting on for twice the average direct contribution by employees in the analogue schemes."
A Treasury document on managing staff transfers from 2000 (pdf) also states that in the civil service "employee pay is somewhat lower than it would otherwise be, to reflect the value of the pension scheme".
And recent analysis by Incomes Data Services showed pay rates in the civil service were up to 24% less than equivalent jobs in the private sector.
Conclusion: Despite the government's continuing misleading claims – echoed most recently by prime minister David Cameron in his speech to the Tory party conference, where he repeated the lie that public sector pensions were "unaffordable" – these changes are neither necessary nor fair.
We will continue to oppose attempts to force public servants to pay more and work longer for less in retirement, and we are co-ordinating with other unions to prepare for a strike of up to three million public sector workers on 30 November.
Download the pensions leaflet
Civil service pensions leaflet (pdf)