Pension Talks to go on

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20 July 2011

The Government announced yesterday that the negotiations with Public Service trade unions on reforms to the various Public Service Pension Schemes would be extended. In addition to the central negotiations it was confirmed that over the next number of months there will be bi-lateral negotiations on scheme specific issues covering the Civil Service., NHS, Teachers, Firefighters, Police and the Local Government Pension Schemes.

The bi-lateral negotiations will examine on a scheme by scheme basis the implications of the Hutton Report recommendations, contribution increases, cap and share arrangements interface with the Government’s plans to fix employer cost ceilings and new scheme design principals. The negotiations are targeted to be completed by the end of October this year.

The central negotiations will run in parallel with the scheme specific negotiations. The issues for the central negotiations include discussions on consistent and transparent financial assumptions and valuation methodology for cost ceilings.

Contribution Increases

The Government remains tied to its Spending Review announcement for contribution increases, commencing in April 2012. For the 2012/13 year the Government is aiming to secure £1.2bn extra from the unfunded schemes ie all schemes other than the Local Government Pension Scheme (LGPS) which is a funded scheme and the Armed Forces who will be exempt from any contribution increase. The bi-lateral negotiations will strongly focus on how the Governments plans will impact on each scheme.

The LGPS negotiations will consider how equivalent savings can be secured.

Over the period 1 April 2012 – 31 March 2015 the Government has confirmed that it is committed to total savings of £6.3 billion. This is equivalent to each scheme having to find savings of 3.2%. The savings for years 2013/14 and 2014/15 may not necessarily come from contribution increases and this will form part of the bi-lateral negotiations.

The Government also confirmed its position in respect of protection for low earners. The proposals are that there should be no increase in member contributions for those earning under £15,000 and no more than a 1.5% point increase in total for those earning up to £21,000 by 2014/15 (this amounts to a 0.6% increase in April 2012 on a pro-rata basis).

The total increase will be capped at 6% by 2014/15 for those earning above £21,000, equivalent to a 2.4% increase in April 2012 on a pro rata basis. There is scope in the negotiations for graduated increases on the basis of earnings via use of salary bands, such as those currently in use in the Health Service and LGPS Schemes.

Retirement Age

The Government confirmed again it’s acceptance of Lord Hutton’s proposal to tie the Normal Pension Age (NPA) ie minimum scheme retirement age to the State Pension Age (SPA). The SPA is to increase to age 66 by April 2020.

Unions Position

It was made clear to the Government that whilst the unions are prepared to continue with the negotiations both at the central level with the Treasury and Cabinet Office and to commence the scheme specific bi-lateral negotiations, the unions have not agreed to or accepted any of the Government’s objectives or the change in indexation from RPI to CPI.

The indexation change is subject to legal challenge by trade unions and a number of Pensioner organisations. The challenge is via a Judicial Review, which is due to commence in the High Court in London on 25 October.

Northern Ireland

The negotiations with the Government cover only the position for England and Wales, ultimately Pension Scheme arrangements are a matter for the devolved administrations. That said, however, the Schemes in Northern Ireland are either by - analogy schemes or very closely mirror their English counterpart. In addition, Lord Hutton has made it clear that he expects the devolved administrations to adopt his recommendations and to follow any changes to the English/Welsh Schemes.

NIPSA Response

NIPSA’s position on the attacks to Public Service Pensions was confirmed at Conference in June with the adoption of Composite Motion No 93 and Emergency Motion No 1. NIPSA is committed to defending Public Service Pensions and to working with other Public Service trade unions in joint campaigns, including participation in industrial action to defend the pension entitlements of public servants.

NIPSA is in discussions with other Public Service trade unions and will ensure that it is fully engaged in the Scheme specific discussions that will commence shortly.

NIPSA is disappointed that the central negotiations with Government have so far produced little movement on the Government and Hutton’s proposals and will continue to prepare the ground for industrial action to defend Public Service Pensions.

The next issue of NIPSA Reports will carry a detailed analysis on the up to date position in respect of plans to reform Public Service Pensions.

Bumper Graham

Assistant General Secretary

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