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Govt confirms public sector pension reform concessions

Treasury Chief Secretary Danny Alexander has confirmed details of concessions offered to trade unions as the Government attempts to avoid strike action over public sector pensions.

Alexander (pictured) issued a statement in the House of Commons outlining plans to increase the ‘cost ceiling’ for Government spending on public pensions and provide certainty for people who are close to retirement.

The revised proposals mean that public sector defined-benefit pensions will now be based on 1/60th accruals, rather than 1/65ths as Lord John Hutton proposed in his independent review.

In addition, the Liberal Democrat MP said “transitional arrangements” will be put in place so no one within 10 years of retirement will see any change in when they retire nor any decrease in the amount of pension they receive.

Alexander said: “I believe this package is affordable. I believe it is also fair, not just to public sector workers, but delivers significant long term savings to taxpayers who will continue to make a significant contribution to their pensions.

“If reform along these lines is agreed, I believe that we will have a deal that can endure for at least 25 years and hopefully longer.

“If reform of this sort is agreed, then no party in this house will need to seek further reform of the overall package. This sustainability is an important prize.

“So I hope that the trade unions will now grasp the opportunity that this new offer represents.”

Responding to the statement, Labour Shadow Treasury Chief Secretary Rachel Reeves said: “We welcome today’s signal the Government is now willing to enter into proper discussions. It is a welcome change from the months of intransigence which have come before.”

She added that Labour would judge the success of the negotiations on whether they deliver a settlement which delivers on affordability, fairness and sustainability.

In a statement the Trades Union Congress said: “We welcome this movement in the Government’s position which has come as a direct result of the strength of feeling and determination shown by public sector workers and the groundswell of support for the TUC’s day of action at the end of this month.”


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There are 20 comments at the moment, we would love to hear your opinion too.

  1. So the Coalition start off by playing hardball – aggressive posturing, saying there’s no more money on the table and this is their best offer.

    Then they get wind of a totally overwhelming vote in favour of strike action by the public sector unions – official results out on Thursday.

    So they suddenly tone down the rhetoric and come back with an improved offer.

    There’s a lesson there somewhere.

  2. Just remind me. Who is it that will be PAYING for these conditions? And just who is it, that makes the decision, who doesn’t have to worry about spending other taxpayers money……? Grrrr

  3. Can we have more IFAs commenting that no-one in the public sector deserves a pension and is actually a parasite. Not seen enough of that lately.

  4. @ fully informed.

    If UK Plc carries on with the current system what is going on in Greece will be repeated here.This should have been addressed 20-30 years ago but no politcal party has ever had the courage to go there. Now there is no choice. Simples!

  5. If only we could see the same u turn from the FSA regarding RDR!!!!

  6. Scott Taylor-Barr 2nd November 2011 at 2:45 pm

    It’s an age old political tactic – tell them it;s going to be terriable and let the Unions (in this case) bang the drum. Then at the 11th hour tell them it might not be quite as bad and they feel they have a victory.
    It’s a power game – the Unions will always argue what is put on the table initially, so put something on the table that is far better/worse than you are happy to agree; then work back to where you were comfortable in the first place.
    The only issue is all the time and money that gets wasted in the meantime while they play their games.

  7. @ Fully Informed

    When these DB arrangements were established, what were the prevailing life expectancy rates and annuity rates at the time and how do they compare to the reality of today?

    Of course it is totally proper for the basis of these schemes to be reassessed and amended. It would be lunacy not to.

  8. @ fully informed

    Grow up. I don’t believe that anyone seriously thinks that. That would be as stupid as me suggesting that the people who create the wealth should be rewarded on the basis of affordability whereas those employed by the wealth-creators to provide a public service should be rewarded solely on the basis of merit?

  9. @Anonymous 1.43pm. Taxpayers end up paying for it. Public Sector employees are taxpayers too – most of them PAYE, so no opportunity to use any of the weaselly avoidance schemes either.

    To be honest, if a few bob of my taxes goes to provide a decent pension for the underpaid nurse who gets vomited on by drunks in A&E – or the copper coping with kids rioting in the street, I think that’s a fair bargain.

    @ Anonymous 2.31pm – The NHS Scheme is in
    suplus to the tune of over £2bn. So any increase in contributions is effectively an extra tax on NHS employees that goes straight to the Treasury.

    Not quite sure how that equates to Greece.

  10. I wholeheartedly agree that everyone who is working in our country and contributing to society deserves a good retirement pension. Speaking as a person who deals with pension provision daily, why should public sector workers have benefits that very few private sector workers will ever achieve. Is anyone aware how much an individual needs to save each month to achieve a two thirds pension?

    Some of these individuals have contributed nothing towards their pension. Perhaps if they lost their job and had to speak to an adviser they would realise how well off they will still be under the new proposals.

    We are a broken nation Get Real Please!!!!

  11. @strummerville

    The point being made was that over generous pension schemes/ rules in Greece is proving to be one of their biggest problems. As could be the case in UK if changes are not imposed. £1.3 trillion and counting seems to be quite a big problem already.

  12. Why Ask IFA’s to add supporting comments recommending dilution of public service pensions. These people pay into their pensionand expect a pension income from it.
    I am an IFA and advise people to join occupational schemes becuase they offer superior benefits to the private pension, volatile fund related costly alternatives.
    I also advise people (subject to afforability) to put as much aside as possible so they can retire early. Is this a sin! Sadly the wealthy retire earlier, live longer and contribute little to society.
    Taxation is social accountability and if it allows some members of society to gain a pension income and some financial independence, so much the better.
    @Informed seems to suggest certain members of society should be put out to grass just before death. Hardly fair is it?

  13. Do you ever publicise any real comments????

  14. Why do people hide behind “Anonymous” entries. If you want to be taken seriously and can Stand by your confictions, Be proud to name yourself. You get more respect and by understanding each person’s point of view should lead to consensual agreement. Sadly Government is no longer about discussion; more dictation

  15. To Strummerville

    Your whole salary and benefits you receive and the pension contributions you pay etc are made up of private sector workers taxes.

    The taxes you pay are just recycled taxes paid initially by private sector workers.

    The public sector are tax consumers not tax producers. The Public Sector produces no NEW taxes to the Inland Revenue

    Governments have no money of their own they either tax it from the private sector, borrow it or print it.

  16. @Anonymous at 5:26pm

    You assume I’m a public sector worker – you’re wrong.

    Any civilised society will have an element of tax consumers – unless you want to reach a situation where we each have to pay the fire brigade to turn up when our house is on fire, or get an invoice from the police when they catch the person who mugged us.

  17. Strummerville | 2 Nov 2011 2:51 pm

    The NHS Scheme is in
    suplus to the tune of over £2bn. So any increase in contributions is effectively an extra tax on NHS employees that goes straight to the Treasury.


    The NHS scheme is unfunded. It can’t therefore have a surplus, since there’s no underlying fund to support it. This argument is trotted out time and time again by the unions, and shows a serious lack of understanding as to how the scheme is structured.

    The surplus to which the unions refer simply means that the contributions paid by the taxpayer (currently 14% of salary) are too high. It does not, in any way, shape or form, make the schemes affordable. In fact, the truth, unfortunately, is quite the opposite.

    No-one’s saying that public sector workers shouldn’t get a decent pension, but the benefits provided should be comparable to the average private sector scheme. In other words, defined contribution, with regular employer contributions of, say, 5% per annum.

    It is wholly unfair to expect private sector workers to continue to pay for gold-plated pensions which they themselves couldn’t afford in their wildest dreams. Don’t you think?

  18. Fully informed | 2 Nov 2011 2:15 pm

    Can we have more IFAs commenting that no-one in the public sector deserves a pension and is actually a parasite. Not seen enough of that lately.


    I have never seen anyone here comment that no one in the public sector deserves a pension.

  19. Strummerville | 2 Nov 2011 2:51 pm

    The NHS Scheme is in suplus to the tune of over £2bn.


    The NHS pension scheme has a deficit of some £220 billion!!

    There may now be a small surplus in annual contribtuoins but even that only came about after increasing contribtuions for higher earners in the last few years and will likely be temporary if we keep going at teh same rate.

  20. lets be clear the issue isn’t the value of the benefits per se but also the number of people within central and local government schemes….i think when i last looked it was circa 40% of the working population ….up from 10% a 100 years ago….not a surprise under a labour government

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