Public Sector Pensions

Last week thousands of teachers and civil servants went on strike over pension plans they say will mean them working longer and paying more. The planned 24-hour walkout involved members of the National Union of Teachers (NUT), the Association of Teachers and Lecturers (ATL), the University and College Union and the Public and Commercial Services (PCS) union.

Talks had been ongoing with the Government and TUC leader Brendan Barber had welcomed the Government's willingness to enter into separate discussions about the local government pension scheme, based on ministers' recognition that the funding of that scheme was different.

More talks are now due to take place next month. The Public sector union Unison, which had threatened to ballot its 1.2 million workers for strike action if the latest talks proved unsatisfactory, said no ballot would be called at this stage. And Unison leader Dave Prentis said after the meetings that he thought the Government was willing to treat the negotiations seriously.

This action has come about because the Coalition Government has been conducting a thorough review of pensions. The Independent Public Service Pension Commission, led by the former Labour Work and Pensions Secretary Lord Hutton, published an interim report in October last year. As a result the Government accepted the conclusions in the Spending Review that public service pensions should remain a gold standard, continuing to provide some form of defined benefit and that there should be no race to the bottom of pension provision.

The Government is committed to changing progressively the level of employee contributions in order to make savings of £1.8 billion a year by 2014-15. We believe this is right and fair. When public service pension schemes were established in the 1950s, taxpayers made half the contributions. Today, they make up two thirds of the contributions, and the unfunded bill is set to rise to £33 billion by 2015-16.

The Commission’s final report came out in March. The Government accepts Lord Hutton’s recommendations as a basis for its public consultation. As a result it will set out proposals in the autumn that are affordable, sustainable and fair to both the public sector workforce and the taxpayer.

At the same time the Government has also launched a public consultation on the Fair Deal. As you know, Fair Deal is a non-statutory policy that applies to pension provision for public sector staff when they are compulsorily transferred to a non-public sector employer. Under Fair Deal the new employer is expected to make available a similar pension scheme for the transferred staff and enable the transfer of public service pension benefits.

Hutton and his team have concluded that “current pension structures, combined with the requirement to provide comparable pensions (Fair Deal), are a barrier to non-public service providers, potentially making it more difficult to achieve efficiencies and innovation in public service delivery.”

The Transfer of Undertakings (Protection of Employment) Regulations (TUPE) protects employees who are compulsorily transferred to a new employer and provides for minimum levels of pension protection. This consultation does not cover TUPE.

This is an ongoing process and please be assured that my colleagues and I are following it very closely; we are fully aware of people’s concerns. Both sides of the debate have a responsibility to see the talks through and I would urge public workers not to strike while they are ongoing. Public sector pensions will still be among the very best, with a guaranteed pension which in reality very few private sector staff now enjoy. We are just proposing they will be paid later because people live longer and that public sector staff will pay more, for a fairer balance between what they pay and what other taxpayers pay.