in a notice to members, the Public and Commercial Services union (PCS) explains why the government’s pensions offer is bad news for all members.
The union says: ‘In this PCS guide to separating the fact from the fiction in the government’s pensions offer on 2 November 2011, we test direct quotes from Treasury Secretary Danny Alexander’s statement in the House of Commons against the reality.
Government claim: “The lowest paid and people 10 years from retirement will be protected, and public service pensions will still be among the very best available.”
Reality: The lowest paid will not be protected – they will still be forced to work longer (up to 68) and suffer the indexation changes which will devalue their pension. The government has said that workers earning less than £15,000 (FTE) will not pay any extra contributions – this protection only covers 4% of PCS members.
Those within 10 years of retirement still face paying higher contributions equivalent to nearly a day’s pay every month (an extra £63.36 a month for the average member), and will lose over £16,000 in retirement as their pension will be uprated by the lower CPI measure of inflation rather than RPI.
Government claim: “I have listened to the argument that those closest to retirement should not have to face any change at all. That is the approach that has been taken over the years in relation to increases to the state pension age, and I think it is fair to apply that here too.”
Reality: This is the government’s main selling point of the new offer – and it is not true. Those within 10 years of retirement (i.e. 50-plus in Classic or Premium or 55-plus in nuvos) will still face extra pensions contributions of 3.2% (£63.36 a month for the average member) between now and retirement.
In addition, their pension will still be downgraded in value due to the indexation change from RPI to CPI. This alone would cost the average PCS member £16,400 over a 20 year retirement.
While this is only a partial concession for older workers, it is of no benefit at all to the majority of civil servants who are under 50 (or 55 in nuvos). PCS continues to seek a negotiated settlement in the interests of our whole membership, and future generations.
Government claim: “Our objective is to put in place new schemes that are affordable and fair for taxpayers and public service workers, and that can be sustained for decades to come.”
Reality: Public sector pensions already are affordable, due to the reforms we agreed in 2007. The Hutton report shows the costs of public sector pensions falling. The National Audit Office assessed our pensions schemes in December 2010 and found the 2007 deal “reduces costs to taxpayers by 14 per cent”.
The Public Accounts Committee found in May 2011, “the Treasury has not set out clearly what level of spending it considers sustainable in the long term. Instead, officials appeared to define affordability on the basis of public perception” – which is why they are keen to present a false impression to the public about our pensions.
Again the government is trying to create a false divide between public sector workers and taxpayers. Public sector workers are taxpayers too. If pensions are slashed then the cost will still be borne by taxpayers, through increased claims for means-tested benefits in retirement.
Government claim: “Everything that public servants have earned until the point of change, they will keep, and those things will be paid out in the terms expected . . . No public sector worker needs to have anything to fear for the entitlements that they have already built up.”
Reality: This is not true; by imposing the change in indexation from RPI to CPI, the average PCS member would lose £16,400 over a 20 year retirement.
Alongside other unions and the Civil Service Pensioners Alliance, we have taken the government to the High Court to argue that this change was not only unfair but illegal. We are determined to protect your pension by legal means as well as industrial and through negotiation.
Government claim: “The taxpayer needs to be properly protected from the risks associated with further increases in life expectancy, by linking the scheme normal pension age to state pension age.”
Reality: We agreed a deal with the last Labour government that took precisely these changes into account. It meant a new pension age of 65 for new starters across the public sector. Based on the changes in the 2007 deal the projected cost of public sector pensions is falling, despite growing life expectancy.
Funding better pensions is a political choice. The UK state pension is worse than in every comparable EU country. France currently spends 12% of its GDP on pensions and Germany over 10%, but the UK only spends 6%.
Government claim: “Pensions would remain considerably better than those available in the private sector.”
Reality: This is classic divide and rule – and is a complete diversion from the issue at hand. We do not want an equality of misery whereby public sector pensions are driven down to the patchy and poor level in the private sector.
One-quarter of all tax relief on pensions, amounting to more than £10bn annually, goes to the richest 1% in the country. We hear about gold-plated public sector pensions, yet the real gilded pensions are to be found in the boardrooms of private companies that have abandoned provision for their workforces.
Government claim: “Reform is essential because the costs of public service pensions have risen dramatically over the last few decades.”
Reality: This is very misleading. It is true that public sector pensions cost, as Alexander said “just under 1% of GDP in 1970, they account for around 2% of GDP today”.
However, due to the changes agreed in 2007, the Hutton report shows that public sector pension costs will fall from 1.9% today down to 1.4%. The Public Accounts Committee has said that the changes will mean: “costs stabilising at around 1% of Gross Domestic Product (GDP)”.
The government’s latest document, published on 2 November 2011, shows that pension costs will reduce under the 2007 deal to the level they were in the mid-1980s.
These proposed new reforms are a tax on public sector workers to pay for the banking crisis and this government’s failure to generate economic growth.’
The Unite union has also exposed Alexander for using misleading data to attempt to manipulate public opinion over public sector pensions.
He made the extraordinary claim that a nurse with a full career, retiring on a salary of £34,200 would receive a pension of £22,800 a year under the proposed scheme whereas under current arrangements they would only get £17,300.
But an analysis by Unite’s pensions experts found that this example was based on a comparison of a nurse working for 43 years and retiring at age 68 in the proposed scheme and a nurse working for 35 years and retiring at age 60 in the current scheme.
So under the proposed scheme the pension quoted involves working and contributing for eight years more and receiving the pension for eight years less.
Unite calculations indicate that if a like for like basis of comparison is made, based on working to the same age and the same length of service, then the proposed scheme produces worse benefits at every age up to 68.
Retiring at age 60, at the top of pay band 6, earning £34,200 the nurse would be 40 per cent worse off and at 65 the nurse would be 20 per cent worse off.
Alexander also claimed that under transitional proposals those ten years or less from retirement age are assured there will be no detriment to their retirement income.
When you include the loss of purchasing power during retirement on account of the indexation change to the lower CPI measure of inflation the change could reduce the value of total pension income paid during a typical retirement by a further 11 per cent.
Alexander also failed to mention that the nurse and many other public sector workers will face a 50 per cent increase in their contributions, costing the nurse a further £1000 a year gross, or £65 a month after tax.