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. 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.

The CS Pension position since May 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 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).

The CS Pension position since May 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.

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.

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

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).

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.

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.

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).

Civil Service Pensions Tiered 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, % 2.1% 3.5% 4.1% £21,000 £21, % 2.7% 3.5% 4.7% £30,000 £30, % 3.1% 3.5% 5.1% £50,000 £50, % 3.5% 3.5% 5.5% £60,000 Over£60, % 3.9% 3.5% 5.9%

Civil Service Pensions Where next? Reduced net pay wef April 2012 (tax relief is given on the increase but you still pay more!). More contribution increases planned for to a target of an average of 3.2% increase. Change to career average pension by 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*.

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

Civil Service Pensions Questions

Civil Service Pensions The 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 a smaller pension and pay more for it!