Public Service Pensions : Good Pensions That Last

In this paper the Government sets out its preferred scheme design for public service pensions.

It is built on the foundations laid by Lord Hutton in his report (Independent Public Service Pensions Commission: final report, 2011, ISBN 9780108510410).

The cost of public service pensions paid out has risen by over a third over the last ten years to GBP32 billion a year.

Reforms to date have been insufficient to reverse the increase in costs of public service schemes from rising longevity.

The Government's offer is: benefits already earned are protected; for those in final salary schemes, those past benefits will be linked to their final salary when they leave the scheme or retire; public service workers with ten years or less to their current pension age, will see no change in when they can retire; Government will continue to pay more overall toward pension benefits than the workforce. The scheme design will ensure: guaranteed, index-linked pension benefits on retirement; an accrual rate of 1/60ths and earnings indexation for benefits while still working in the public service; fairer distribution of benefits across the workforce; and, that most low and middle earners working a full career will receive pension benefits at least as good as they get now.

But in return, the Government is asking public service workers to pay more towards their pensions and work a bit longer.

The Government's offer is conditional on the trades unions and the Government reaching agreement on the reforms.