UK pension battle heats up

On Wednesday last week (November 2) the UK Government set out an offer – widely regarded as generous – to workers on public service pensions. However, unions still plan to go ahead with a “day of action” on November 30 – considered to be the widest industrial action in the country since the 1920s.

The offer to workers, which will halve the burden to taxpayers of supporting the system, includes a more generous accrual rate, representing an 8 per cent increase since the Government’s October offer.

The new offer means workers will have to work for longer, and contribute more, but the Government has exempted anyone within 10 years of their pension age on April 1, 2012.

In July, the Government agreed a process with the unions for taking forward Lord Hutton’s proposals for long-term reform through scheme-specific talks.

While many have reported this latest reform package as generous, the unions seem adamant about sticking to their strike plans, which will involve up to three million workers.

Commenting on the reaction of the unions, the Daily Telegraph’s editorial on Wednesday last week reported: “They seem incapable of understanding the nature of the economic crisis facing the country, or the financial implications of an ageing workforce.”

The reforms are due to come into force from 2015, and are conditional on agreement being reached in scheme-by-scheme talks.

According to a Government statement, the offer means that, unlike many in the private sector, public service workers will continue to have access to a guaranteed benefit in retirement, which is not subject to market fluctuations or fees.

For a public service worker to buy a similar pension on the private market, they would typically need to contribute around one-third of their salary every year, the Chief Secretary to the Treasury, Danny Alexander (pictured), says.

To provide the parameters for talks with trade unions, the Government set out initial cost ceilings at the beginning of October. The Government is not proposing any further increase in the total employee scheme contribution rates on top of the proposed 3.2 percentage points increase in contributions already announced.

The Government says it is now up to trade unions to come forward with detailed proposals within these ceilings by the end of the year.