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Welfare Reform on the Web (July 2011): Pensions - UK

Alexander tells public sector: work longer and get less

N. Morris and A. McSmith

The Independent, June 17th 2011, p.7

The article reports on a planned speech by Danny Alexander, Chief Secretary to the Treasury in which public sector employees will be told that most of them will have to work six years longer before they qualify for pensions. Apart from the lowest-paid, they will also have to pay increased pension contributions from 2012. Mr Alexander will underline that pension rights already built up will not be affected. Under the plans, most public sector workers will pay an extra 3.2 per cent of their salaries into their pensions by 2014. The article also points out that ministers have already signalled their intention to scrap final-salary pension schemes in the public sector.

(See also Daily Telegraph, June 17th 2011, p. 1)

Duncan Smith rejects cross-party pressure on women's pensions

P. Curtis

The Guardian, June 21st 2011, p. 4

Iain Duncan Smith, the work and pensions secretary, has come under fire from government backbenchers over plans to fast-track changes to the pension age, which will leave 500,000 women waiting more than an extra year before they can retire with a state pension. The work and pensions secretary refused to bow to increasing pressure from all sides of the Commons during a debate on the Pensions Bill, saying there would be no change to the timetable and conceding only that he was 'willing to work to get this transition right'.

(See also Daily Telegraph, June 21st 2011, p. 6)

Flight from 140bn council pension pot risks 'chaos on the stock market'

P. Curtis

The Guardian, June 24th 2011, p. 18

The Conservatives' leader in local government has warned that the coalition risks disruption to the stock markets should a mass opt-out of the local government pension scheme jeopardise councils' 140bn investment funds. Lady Eaton used her final interview as chair of the Local Government Association to press the government to reconsider applying a proposed 3.2% increase in pension contributions to the local government scheme, arguing that low-paid workers in the scheme should be given incentives not to leave.

The impact of the 2007-08 changes to public service pensions

Committee of Public Accounts

London: TSO, 2011 (House of Commons papers, session 2010/12; HC 833)

In this report the Committee of Public Accounts expresses its reservations relating to the new pension schemes introduced in 2007-08 for civil servants, National Health Service (NHS) staff and teachers. The schemes were designed to make public service pensions affordable and the changes are likely to reduce costs to taxpayers by 67 billion over 50 years, with costs stabilising at around 1% of Gross Domestic Product (GDP) or 2% of public expenditure. The Committee is concerned that the Treasury did not test the potential impact of changes in relation to some of the key assumptions underpinning the long-term cost projections. In addition, the Treasury has not tested whether reducing the value of pensions would affect the public sector's ability to recruit and retain high quality staff. Three-fifths of the savings to the taxpayer were expected to come from the cost sharing and capping mechanism - a transfer, from employers to employees, of extra costs that arise if pensioners live longer than previously expected. Employees would potentially pay 70% more for their pensions over the next 50 years if life expectancy continues to increase more than predicted. Implementation remains on hold while the Government decides how to respond to the Independent Public Service Pensions Commission (the Hutton Commission). Public service employees do not have a clear understanding of the value of their pensions because they are not provided with clear and intelligible information to enable them to make rational decisions. Further changes to public service pensions are expected as Hutton's recommendations are implemented, but this should bring a period of stability and certainty for long-term public service pensions policy.

Just one in three is paying into a pension

H. Watt

Daily Telegraph, June 23rd 2011, p. 4

Only a third of people are now saving for their retirement, according to an official study. Figures from the Office for National Statistics (ONS) show that 39 per cent of men and 28 per cent of women are paying into a pension scheme in the private sector. In 2002, 52 per cent of men and 41 per cent of women invested in the schemes. Experts have blamed the fall in pension saving on the end of gold-plated final salary schemes in the private sector, which many firms scrapped after Gordon Brown introduced a stealth tax on the funds. The sharp fall in stock markets also hit pension values, which is thought to have dissuaded millions of other people from putting money aside. People retiring are also able to earn far less from their nest-eggs as interest rates are at a record low. The official study of pension savings also found a growing divide between the public and private sectors. The number of employees with pension in the public sector has remained stable, with more than twice as many men and almost three times as many women signed up to pension schemes among government workers. The government believes that auto-enrolment, which begins in 2012 and involves employees being automatically enrolled into pension schemes, will alleviate some of the problems.

Pensions concession for low-paid workers

P. Curtis

The Guardian, June 17th 2011, p. 2

The government is to spare the lowest paid public servants the worst of the increases in their pension contributions in a rush to avoid a mass opt-out. But the decision to protect people earning up to 18,000 from the average increase in contributions to 3.2% of their salary, made after warnings that the pension reforms could price some people out of saving for their future altogether, will mean the higher paid will pay up to 5% more.

Public sector pensions cost every family 1,000 a year, says Cameron

A. Porter

Daily Telegraph, June 29th 2011, p. 4

In a speech to a conference of local government leaders, the Prime Minister has warned that every household is paying 1,000 a year to fund public sector pensions. He argued that the system is unsustainable due to increased longevity.

Reforms risk mass exodus from pension scheme, ministers told

P. Curtis, D. Milmo and J. Tranor

The Guardian, June 23rd 2011, p. 2

The former Labour business secretary who designed the coalition's contentious public sector pension reforms will warn ministers that their plans risk becoming so punitive they could force people out of pension schemes altogether. Lord Hutton of Furness will warn of a 'serious' risk of a mass exodus from the local government pension scheme - which is funded and has 3.5 million members - if contributions are raised too high and no other compensation is provided.

Unison's 1.2m members in strike ballot over pensions

P. Curtis and H. Mulholland

The Guardian, June 14th 2011, p. 2

The trade union Unison is preparing to ballot 1.2m state employees for sustained strike action in what would be the strongest industrial act of defiance yet against the government's cuts programme. Dave Prentis, the general secretary, said his local government and NHS members were moving towards strike action that would see huge swaths of the public sector grind to a halt in the autumn unless the government backs down over pensions. The National Union of Teachers and the normally moderate Association of Lecturers and Teachers will announce on Tuesday the result of their strike ballots. The civil service union PCS will follow on Wednesday. If, as expected, the strikes are approved, 750,000 state employees will walk out on 30 June, bringing schools, colleges, universities, courts, ports and job centres to a standstill.

(See also The Guardian, June 15th 2011, p. 4, June 16th 2011, p. 8-9, June 22nd 2011, p. 2 and June 28th, p. 6)

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