Headlines: June 24th, 2005

With opposition growing to the proposed changes in pensions for public sector workers a survey has shown that one outcome could be a stream of resignations and difficulty in recruiting replacements. The survey by Hays, the recruitment consultants, found that one third of finance professionals working in public services would consider moving to the private sector if the Government makes its proposed changes. Seventy per cent of the people surveyed believe they would be worse off under these plans, with 66 per cent viewing the changes as a direct attack on what are currently ‘gold standard’ pension schemes. Nearly half of those asked thought that changes to pensions would negatively affect their organisation’s ability to recruit and retain staff.The findings are directly in line with an earlier survey by the top civil servants union, the fda, which showed that 94% of members were against the introduction of a ‘whole career pension arrangement’ to replace the current ‘final salary’ schemes.

The General Secretaries of Unison and the GMB union have made their opposition clear and called for concerted action to oppose the proposals.

The government is currently reviewing the public sector pension schemes, including the local government scheme, the NHS scheme, the teachers’ pension scheme, the police and fire service schemes and the civil service schemes. The reviews are scheduled to be completed by 2006. The proposal is to raise to 65 the age at which workers are entitled to draw an unreduced pension across most of the public sector pension schemes. In addition, they want to raise from 50 to 55 the minimum age at which workers can apply to draw their pension for reasons other than ill-health. This means that workers between 50 and 55 who are made redundant will no longer be entitled to an immediate pension.

The strongest opposition is to the proposed move from final salary to a career average pension that is calculated every year, with benefits built up on an annual basis. At the end of the career the totals for each year are added and re-valued in line with an inflation index. The new scheme is likely to be cheaper for the government. According to The Times newspaper, December 2005, a career average pension will be 24% lower than final salary pension because people’s salaries normally rise between 1 and 1.5% higher than price inflation. The storm of protest is likely to grow as more public sector workers recognise how they might be affected by the changes.