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Public sector pensions: Extra payments revealed

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Media captionMark Serwotka of PCS: "It's unfair and we are determined to resist it"

More than two million public service employees have been told they will have to pay £1.1bn in extra pension contributions from April 2012.

The extra money from NHS workers, teachers and civil servants come as the government looks to shave £1.2bn off its pension bill next year.

The maximum rise will be 2.4 percentage points from April.

The increases are the first of three consecutive annual increases being planned by the government.

Burden shifted

The initial proposals affect 2.5 million people at first: NHS workers and teachers in England and Wales, and civil servants in England, Scotland and Wales.

Similar plans are in the offing for firefighters and the police, and possibly for local government staff as well.

The government has estimated that 750,000 of the NHS, civil service and teaching staff earning less than £15,000 a year will not pay any extra contributions at all.

But many more staff will now be asked to make smaller increases in their contributions than first thought.

In general it has proposed that people earning between £15,000 and £21,000 (up from the previously suggested limit of £18,000) will pay 0.6 percentage points more from next April.

However, in two of the schemes for which detailed proposals have now been published, this aspect has been watered down.

For teachers, the Department for Education, in its own consultation response, has proposed that the 0.6 percentage point rise should apply to salaries up to £26,000.

This is designed to deter younger, newly-qualified, teachers from leaving the scheme.

For the NHS scheme, the 0.6 percentage point rise will apply to those earning up to £26,557.

This means the burden of raising the extra contributions in these two schemes has been shifted towards higher paid staff.

Russell Hobby, general secretary of the National Association of Head Teachers (NAHT) said: "The government had made up its mind a long time ago to raid the teachers pension scheme. We now have the privilege of commenting on how efficiently it plans to do so."

Maximum contributions

The government wants those earning above these levels to pay larger increases of up to 2.4 percentage points more in 2012-13.

Image caption The proposed changes prompted a strike and a march in London on 30 June

This, for example, would take the total contribution to a maximum of 5.9% for civil servants earning more than £60,000.

The highest paid NHS staff, such as doctors, now face a maximum contribution rate of 10.9% once they earn at least £110,273.

The highest paid teachers would pay a maximum 8.8% of their salaries into their scheme once they earn £112,000.

The additional contribution rates for civil servants, which have also been published, kick in at significantly lower salary levels than for teachers and NHS staff.

For example, at a salary of £30,000, teachers will pay additional contributions of 0.9 percentage points, but civil servants will face additional contributions of 1.6 percentage points.

However, civil servants' existing contribution rates are generally low in comparison.

Proposed increases in pension contributions

NHS Teachers Civil servants
Annual salary Now From 2012 Annual salary Now From 2012 Annual salary Now* From 2012*
Average pension £7,000 Average pension £10,000 Average pension £6,200

Source: Cabinet Office, Department of Health, Department for Education

*Lower figure is for classic pension scheme and the higher figure for other schemes

Up to £15,000

5.00%

5.00%

Up to £14,999

6.4%

6.4%

Up to £15,000

1.5% - 3.5%

1.5% - 3.5%

£15,001 - £21,175

5.00%

5.60%

£15,000 - £25,999

6.4%

7.0%

£15,001 - £21,000

1.5% - 3.5%

2.1% - 4.1%

£21,176 - £26,557

6.50%

7.14%

£26,000 - £31,999

6.4%

7.3%

£21,001 - £30,000

1.5% - 3.5%

2.7% - 4.7%

£26,558 - £48,982

6.50%

7.69%

£32,000 - £39,999

6.4%

7.6%

£30,001 - £50,000

1.5% - 3.5%

3.1% - 5.1%

£48,983 - £69,931

6.50%

8.48%

£40,000 - £74,999

6.4%

8.0%

£50,001 - £60,000

1.5% - 3.5%

3.5% - 5.5%

£69,932 - £110,273

7.50%

9.85%

£75,000 - £111,999

6.4%

8.4%

Over £60,000

1.5% - 3.5%

3.9% - 5.9%

Over £110,273

8.50%

10.90%

Over £112,000

6.4%

8.8%

More to come

The Treasury said that in the next financial year the proposals would save £530m in the NHS pension scheme, around £300m from the teachers' scheme and £180m in the civil service scheme.

The government had already said it was going to consult scheme-by-scheme on further increases in contributions in 2013-14 and 2014-15.

But a union leader accused the government of "playground games" by making the announcement on April's extra contributions now.

"These talks are being put in jeopardy by the crude and naive tactics of government ministers who do not seem to understand the word negotiate," said Dave Prentis, general secretary of Unison.

'Blatant tax'

The government is trying to implement the recommendations of Lord Hutton, the former Labour pensions minister.

His review of the public sector pension schemes, completed earlier this year, recommended higher contributions and the wholesale conversion of existing schemes from final-salary to career-average structures.

The Chief Secretary to the Treasury, Danny Alexander, has previously outlined plans for further additional contributions in later years, along with discussions about pension ages and structures.

However, these first proposals have prompted an angry response from a doctors' union.

"This is nothing about deficit reduction and the affordability of public sector pensions. This is just a blatant tax on pensions," Hamish Meldrum, the chairman of the British Medical Association, told BBC Radio 4's Today programme.

"As far as we know, this money is not going back into any pension scheme, it is going to the Treasury.

He said the NHS scheme went through a major reform three years ago, when contributions increased significantly.

'Difficult' negotiations

Mr Alexander said the details of April's rising contribution rates would be subject to 12 weeks of consultation, and added that they ensured that the government's contributions would be kept under control.

"These are difficult times for everyone - public sector workers included. We are ensuring that those with the broadest shoulders will bear the greatest burden," he said.

However, the union representing senior civil servants said the plans for contributions were "completely unjustified".

"These negotiations will be complex and difficult. However, if we are not able to reach agreement then industrial action is possible," said Jonathan Baume, the general secretary of the FDA union.

Labour said that by leaking the information to newspapers before the official announcement, could affect the outcome of those talks.

"By once again acting in a rash and irresponsible manner ministers seem to be more interested in provoking confrontation with public sector workers than sensible negotiation," said Angela Eagle, shadow chief secretary to the Treasury.

"Making arbitrary announcements through the newspapers in the middle of talks with the trade unions will do nothing to avoid the industrial action nobody wants to see."

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