Ministers reveal hikes in workers' pension contributions

28 Jul 11
Civil servants, health workers and teachers face a rise in pension contributions of up to 2.4% next April and up to 6% by 2014/15, the government announced today.

By Lucy Phillips | 28 July 2011

Civil servants, health workers and teachers face a rise in pension contributions of up to 2.4% next April and up to 6% by 2014/15, the government announced today.

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Launching a consultation on changes to pensions for these three groups of public sector workers, ministers said those earning more than £112,000 would bear the greatest increases. Other rises would be staged according to salary band.

Workers on salaries of under £15,000 will not pay any higher contributions. Those earning between £15,000 and £21,000 will make additional contributions of 0.6% from next April and 1.5% by 2014/15. 

The changes, outlined in last year’s Comprehensive Spending Review, are expected to save more than £1bn in 2012/13. The greatest savings will come from the NHS scheme (£530m), followed by the teachers' scheme (£300m) and the civil service scheme (£180m). Another £2.3bn in savings are being sought in 2013/14 and £2.8bn in 2014/15.

The proposals follow the review of public sector pensions by former Labour pensions minister Lord Hutton, which recommended ‘comprehensive reform’. Union negotiations under the previous government in 2009 had also paved the way for greater contributions.

Chief Secretary to the Treasury Danny Alexander said the changes would put public sector pensions on a sustainable path. The highest earners would bear the greatest burden while some 750,000 workers would pay no extra contributions and another million would pay no more than 1.5% extra, he said.

Alexander added:  ‘This is the start of a process, phased over the next three years, that will help set a fairer balance between what employees and the taxpayer contribute towards public sector pensions. We will continue to discuss with unions how to achieve the required savings in the following two years as well as the longer term reforms proposed by Lord Hutton.’

But unions reacted angrily to the proposals, accusing the government of ploughing ahead with their changes before negotiations had finished. They also threatened further industrial action. 

PCS general secretary Mark Serwotka said: ‘These highly detailed proposals show that the government has made its mind up and is not negotiating seriously. It makes a mockery of the ongoing talks.’

Jonathan Baume, general secretary of the senior civil servants’ union, the FDA, said: ‘Any increase in pension contribution rates during a pay freeze and with the current relatively high inflation is completely unjustified.

‘This is nothing more than a pay cut for civil servants as part of the government’s deficit reduction programme. It will do nothing to secure long-term sustainable pensions.’

Sally Hunt, general secretary of the University and College Union, added: ‘Any increase in contributions from members will not aid their retirement; they will raise funds for the Treasury. This is simply a tax on public sector workers.’

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