Pensions Campaign Update Dec 2011
Pensions Proposals – Progress and Challenges
The Government has moved its negotiating position in the following respects:
(i) It has adjusted scheme specific cost ceilings to 21.7% from 20.1%, thereby allowing an improved accrual rate of 1/60. This is the same accrual rate that applies to those who have a Normal Pension Age of 65.
(ii) The Government has proposed a transitional arrangement for those who will reach their normal pension age within 10 years from 1 April 2012.
The Government’s revised position is a significant move but it was not enough to bring a halt to the action on 30 November.
The Government is still refusing to budge on the following areas:
(i) The proposed increase in contribution rates over the next three-year period will move contributions from 6.4% to an average of 9.6%. Without a scheme valuation which would inform unions of the impact of reforms agreed in 2006/07 and of subsequent changes in assumptions on mortality it is difficult to see the contribution increases as anything other than a tax grab on public sector workers, and nothing to do with the affordability of schemes.
(ii) The transitional arrangements proposed require considerable detailed scrutiny. It is not clear, for example, if transitional arrangements will allow transitional pensions to continue on a final salary basis or what will happen should a teacher elect to work beyond the transitional period. This is under discussion at the present but to date, there is no clear outcome.
(iii) The transitional arrangements do nothing for younger teachers, who face having to work until 66, 67 or even 68 and who are most likely to opt out of scheme membership.
(iv) The Government is not prepared to reconsider changing the indexation of pensions from Retail Price Index to Consumer Price Index.
(v) The promise of no future reform for a generation is a promise no government can give. No government can bind its successors. To make such an offer is simply disingenuous.
EIS Assistant Secretary Drew Morrice explains the current position on the Government’s planned pension reform.
The 30 November strike action demonstrates to Government the degree of unanimity across public sector unions against the proposed contribution increases and scheme redesigns. Unions which have hitherto never taken industrial action joined in on 30 November.
This includes the National Association of Head Teachers (NAHT), the primary heads’ organisation in England, the Association of Head Teachers and Deputes in Scotland, and the First Division Association (FDA), the union for civil service managers. For the EIS, this was the first national action for a quarter of a century.
The scale of the action on 30 November obviously led ministers to rethink their approach to public sector pensions. Francis Maude, of course, embarked on a frolic, suggesting that unions take 15 minutes’ strike action which would avoid pay being deducted but he also threatened that the revised offer might be withdrawn.
Danny Alexander stated that the revised offer is "as good as it will be”, while the Prime Minister condemned action while negotiations are taking place. Headless chickens come to mind.
The position of the Scottish Government remains unclear. In the summer, the Scottish Government stated that it was opposed to increasing contributions but that it believed that the Hutton Report raised issues it wished to discuss.
The Scottish Government has decided to implement the contribution increases and has consulted on the first stage of contribution increases in the Scottish Teachers’ Superannuation Scheme (STSS) and National Health Service Scheme. However, to date, apart from leaks of correspondence between John Swinney and Danny Alexander, we are none the wiser regarding when, or if, there will be scheme specific discussions in Scotland.
The next few months will be crucial. The unions, through the TUC, have made it clear that they are not opposed to reforms which may include some increases in contributions.
However, to date we believe that the scale of contribution increases proposed has more to do with deficit reduction and less to do with scheme viability. When Government seems intent on seeking to tax lump sums on pensions and on tearing up a whole raft of employment rights then it is clear that there are fundamental ideological issues underpinning the Government’s approach to the rights of trade unions and to negotiation.
Whether there is scope for a different approach in Scotland will not be clear unless the Scottish Government shows its hand. Previously, regulations in Scotland have merely "put a kilt” on scheme design established at UK level through the Teachers’ Superannuation Working Party.
While any regulations regarding the STSS requires Treasury approval, the opportunity for a different approach to scheme design in Scotland is being lost.
The Scottish Government is not facing up to its responsibility for the STSS, but is content to condemn the Westminster Government for driving the proposed changes, yet shows no commitment to a "Scottish Solution”.
