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ISU Conference 18/19thOctober 2011 Pension Presentation by Tony Simons

ISU Conference 18/19thOctober 2011 Pension Presentation by Tony Simons. The CS Pension position since May 2010. The new coalition Government inherited a huge financial deficit. They decided to target Civil Service Pensions as a cost-saving measure.

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ISU Conference 18/19thOctober 2011 Pension Presentation by Tony Simons

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  1. ISU Conference 18/19thOctober 2011 Pension Presentation by Tony Simons

  2. The CS Pension position sinceMay 2010 • The new coalition Government inherited a huge financial deficit. • They decided to target Civil Service Pensions as a cost-saving measure. • Lord Hutton appointed to conduct a review of all Public Sector Pensions. • Pension ‘reform’ completed by the life of this Parliament (2015). • All pensions and state benefits to increase in line with the lower CPI than RPI wef April 2011.

  3. The CS Pension position sinceMay 2010 cont. • Lord Hutton’s report has been published. • Inflation is rising at over double forecast. • Consultation on the first changes to CSP concluded and new rates set for 2012. • CSP members/pensioners have started to suffer under the RPI/CPI change. - The difference in rates for 2011 were 1.5% (CPI 3.1%, RPI 4.6% - Sep 2010).

  4. The CS Pension position sinceMay 2010 cont. • This situation started in 1997 – and was no fault of any Trade Union or Civil Servant. • The villain is GORDON BROWN – How: - He taxed Private Pension funds effectively reducing private sector pensions. • This widened the gap between Private & Public Sector Pensions, fuelling the demand for reform (reduction) of Public Sector Pensions. • Has led to the current changes, anxieties and uncertainty for members.

  5. Lord Hutton’s Report • October 2010 – Interim report published - This gave some clues to the future of CSP. • March 2011 – Full report published – all 216 pages! • Covers all Public Service Pension Schemes • Lord Hutton has called for the report to be accepted in full by the Government. • First change consultation ends 20/10/11.

  6. Lord Hutton Interim Report • Interim report into Public Sector Pensions including PCSPS published – 170 pages • Main report to be published Spring 2011 in time for the budget Key proposals now for short term savings: • Increase contributions – preferred option • Change benefit structure • Contract public service pensions into S2P

  7. Lord Hutton’s Full Report(edited highlights) • Increased Contributions – the first round of increases for 2012 have been set. • Increases in contributions for 2013/4/5 to be the subject of future consultation. • Tiered contribution rates according to earnings. • That the new scheme is in place before the end of this Parliament (2015).

  8. Lord Hutton’s Full Report(edited highlights) cont. • Career average pension • Indexation of pension ‘pot’ linked to average earnings during accrual period* (NUVOS accrual is RPI/CPI). • Change in Normal Pension Age from 60/65 to State Pension Age (exceptions for uniformed services*). • CSP + State Pension to form an adequate level of pension.

  9. Lord Hutton’s Full Report(edited highlights) cont. • Will continue to be a defined benefit scheme. • Will continue to be part of the remuneration package. • Honour accrued rights under existing schemes with final salary link for this element of CSP. • Abolition of abatement.

  10. Lord Hutton’s Full Report(edited highlights) cont. • Flexible retirement (still with actuarial reduction)*. • Regular Pension Benefit statements* • Change to a common framework for all Public Service Pensions* • Changes by legislation. • Consultation and agreement at a central level (Cabinet Office).

  11. Civil Service PensionsTiered Contribution Rates 2012 Classic Scheme Premium/Classic Plus/Nuvos Full time Current contribution Proposed rate Current contribution Proposed rate pay rate rate April 2012 rate April 2012 Up to 1.5% 1.5% 3.5% 3.5% £15,000 £15,001- 1.5% 2.1% 3.5% 4.1% £21,000 £21,001- 1.5% 2.7% 3.5% 4.7% £30,000 £30,001- 1.5% 3.1% 3.5% 5.1% £50,000 £50,001- 1.5% 3.5% 3.5% 5.5% £60,000 Over£60,000 1.5% 3.9% 3.5% 5.9%

  12. Civil Service PensionsWhere next? • Reduced net pay wef April 2012 (tax relief is given on the increase but you still pay more!). • More contribution increases planned for 2013-2015 to a target of an average of 3.2% increase. • Change to career average pension by 2015. • Change of Normal Pension Age to be in line with State Pension Age. • CSP together with State Pension to make an adequate level of pension*.

  13. Civil Service PensionsWhere next? Cont. Advantages of changes – abolition of abatement and reserved rights up to 2015. Disadvantages of changes – everything else: Reduced pension* Working longer Lower benefits Earning Indexation link

  14. Civil Service Pensions Questions

  15. Civil Service PensionsThe next steps That is up to you; Paul and Lucy will now open the discussion on the way forward and what action is open to you over this issue – what you have to remember is: Work for longer, for asmaller pension and pay more for it!

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