Business

Civil service pensions 'not unaffordable', unions say

Iron and steel workers demonstrate in Marseille during a nationwide strike called by unions against the pension overhaul: June 24, 2010
Image caption Pension cuts have provoked protests across Europe this year

Civil service unions have said it is a myth that their members' pension scheme is unaffordable.

The government is reviewing all public service pensions schemes, to find ways of making them cheaper to fund.

The unions say the civil service scheme was reformed significantly in 2007 and further cuts in its benefits would amount to a huge pay cut for staff.

The independent review, led by former Labour pension minister John Hutton, will report this autumn.

The unions cite evidence from both the Treasury and the National Audit Office (NAO) showing, they say, that "the civil service pension scheme is both affordable and sustainable in the short, medium and long term".

"We totally reject the premise for this review, that our members' pensions are unaffordable and unreformed, and we have made this case very clearly to the Hutton commission," said Mark Serwotka, general secretary of the largest civil service union, the PCS.

Pension review

In recent months the arrangements for the various public sector pension schemes have been attacked by a variety of reports

They have all argued that the pension schemes are too expensive to keep in their present form and must be cut back.

The coalition government shares that view and recently established an independent review, under Mr Hutton, to propose some new policies for funding them.

But the PCS and the Council of Civil Service Unions reject this view.

They point out that in 2007 the civil service scheme was made cheaper by being made a career average scheme, rather than a final salary one, for new joiners.

These more recent recruits will also have a higher pension age of 65 instead of 60.

The unions also argue that the government's recently stated intention to alter the basis of inflation-proofing, for both deferred pensions and those in payment, will automatically cut the cost of all public service schemes by tens of billions of pounds.

Quoting Treasury figures published in 2008, the unions say that the cost of the unfunded public sector pension schemes was 1% of the country's total economic output (GDP) in 2007-08, and will rise to just 1.2% by 2057.

They also cite a recent report from the National Audit Office (NAO) which calculated that the civil service pension scheme on its own currently costs 0.3% of the UK's gross domestic product, a proportion that will be roughly the same in 50 years' time.

However, the NAO said that for all unfunded public sector schemes "projected payments are estimated to reach a peak of 1.9% of GDP between 2018-19 and 2033-34 then fall to 1.7% by 2059-60".

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