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Civil servants ‘get 40pc boost’ from public sector pension ‘cuts’

By DPF Admin11th December 2015August 6th, 2019Area Updates, Latest News, Northern Updates, Southern Updates

New analysis claims local government and the civil service have gained from pension reforms – but firefighters, police and NHS staff are tens of thousands of pounds worse off.

Major reforms to public sector pensions have given civil servants and local councillors higher payouts while cutting in half the pensions paid to teachers, police offers and firefighters, a report claims.

Under an austerity drive in April, ministers made a series of changes to “unsustainable” public pensions, forcing staff to work longer for less in retirement.

The reforms were supposed to share the cuts equally across the public sector.

But new analysis suggests that “key workers” in the NHS, education and emergency services shouldered most of the burden.

The National Institute of Economic and Social Research (NIESR) found that, amid the threat of strike action, some unions secured better terms than others from the Government.

Rather than suffering, local government employees and civil servants in fact gained up to 43 per cent from the changes, the analysis showed.

In some cases, they will be £35,000 better off over retirement due to concessions agreed with union representatives.

By contrast, firemen can expect 50 per cent less in retirement, equal to £115,000. NHS workers and teachers will be as much as 28 per cent, or £60,000, worse off. Police will be around £100,000 worse off, the report said.

The Treasury last night said it did not recognise the calculations.

“We are determined to deliver a fair deal for taxpayers, which is why we’ve reformed public sector pensions and ended the unfair final salary schemes which disproportionately benefit high earners,” a spokesman said, adding that the reforms would save the Exchequer £430bn by 2061-62.

Chiara Rosazza Bondibene, author of the NIESR report, said: “The negotiations seem to have been more successful for some public sector workers than others.

“Did the government mean there to be such a large redistribution of pension wealth away from such key workers as the police, firefighters, teachers and nurses?”

Public sector workers were in 2011 told their pensions would be cut under radical reforms outlined in a review by Lord Hutton, the former Labour cabinet minister.

The changes, implemented in April this year, included raising by around five years the age at which staff could claim retirement benefits.

Pension payouts are now calculated as a percentage of a worker's average career earnings, rather than their final salary. Staff must also pay more into the schemes.

To sweeten the deal, the Government allowed workers to build up large pensions more quickly.

A firefighter on a £30,000 salary now accrues around £508 in annual pension for each year in work, up from £375.

Under the terms for local government workers, a councillor on the same salary accrues around £612 a year, up from £375.

Ms Rosazza Bondibene found that unions who secured the best “accrual rates” successfully negated the effect of higher contributions and longer working lives.

However, experts cast doubt on the figures. John Ralfe, an independent pensions consultant, said: “Although there are minor differences amongst the different schemes, the official annual cost calculated by the Government Actuary is very similar for the NHS, teachers, civil service and local government.

“The bigger picture is the huge gulf between public sector and private sector pensions. Public sector employees still have a guaranteed inflation linked pension for life, underwritten by the taxpayer versus private sector workers who have to take their own investment risk and risk of living too long. This gulf is unsustainable and will have to addressed sooner or later.”

Other experts said the figures were a warning sign. Michael Johnson, of the Centre for Policy Studies, said: “It [the local government pension scheme] will collapse”.

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