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An explanation of the government's pension offer letter

19 December 2011

The government made an offer to the unions on 15 December in relation to the civil service pension scheme.

The letter sought the agreement of negotiators that the offer would be recommended to union executives with a view to agreement. PCS has responded today (Monday 19 December) that these proposals will be put to the national executive committee, but that they will not be recommended as they do not provide a basis for agreement.

Click to download the letters:

  Letter from government 15 Dec 2011

  Letter to Francis Maude 19 Dec 2011

During negotiations the government has shown little flexibility on the key issues in the dispute. The offer will mean that all civil servants will pay more, all aged under 50 will work longer, and all will get less in retirement.

The offer

The government plans that current civil service pension schemes (Classic, Classic Plus, Premium and NUVOS) will close and will be replaced by a new scheme on 1 April 2015. The government’s offer relates to this new pension scheme. Those within 10 years of pension age will remain in the current schemes – all others will be offered the new scheme. There is some protection for those just over 10 years from retirement as well.

The government’s offer starts from the assumption that the new scheme is based on the NUVOS scheme. However, the value of the existing NUVOS scheme was significantly reduced when the government decided to change the inflation indexation from RPI to CPI. A NUVOS pension is not based on a final salary but a career average salary. Career average salary is calculated by taking a percentage of each annual salary (2.3%) and up-rating it by inflation. By cutting the inflation indicator from RPI to CPI, the government at a stroke reduced the value of the existing NUVOS scheme.

Click to see how career average schemes work:

  How CARE works

Paying more

There are two elements to the government plans for increasing contributions:

  • From 1 April 2012. The government has confirmed plans to introduce increased contributions for all public sector pension members (including those within 10 years of retirement), by an average of 3.2% of salary, phased in over 3 years. The PCS pension calculator gives information about the increased contributions.
     
  • From 1 April 2015. The contribution rate, which will apply to the new scheme, will be for all except the lowest paid - 5.6% of salary.

How much will you lose - use the PCS pension calculator?

Working longer

  • The new scheme will have a pension age (the age at which scheme members can receive an unreduced pension) in line with the state pension age (SPA). How this will work in practice has still to be discussed. Classic and Premium schemes have a pension age of 60, and NUVOS has a pension age of 65. The state pension age will rise to 68. People born on or after 6 April 1960 but before 6 April 1961 will have an SPA between 66 and 67. People born on or after 6 April 1961 will have an SPA of 67 or higher.

Getting less

  • After retirement - inflationary pension increases will increase by CPI, rather than RPI, which will mean that over a normal 20 year retirement, pensions will be worth up to 20% less.

How much will you lose? - use the PCS pension calculator

Pensions raid is legalised theft - Mark Serwotka in the New Statesman

PCS rejects latest proposal - media release 19 December 2011

Read our ‘Fair pensions for all’ booklet

There is an alternative - economic arguments against the cuts

It’s time to take sides - join PCS

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