Members are aware that Lord Hutton reported his review findings on Public Sector Pensions on 10th March 2011.
Summary : Pay More, Work Longer…..Get Less
Pay More
Public Sector Pensions has been the subject of a Government commissioned review by Lord Hutton Labour Peer. In his 200 plus page report of findings there are few crumbs of comfort for Public Sector workers including members of the NHS Pension Scheme.
The immediate consequence is that Hutton has recommended members pay extra contributions starting in 2012. He has recommended a 3% increase on average overall phased in from April 2012 a 1% increase would kick in followed by another 1% in 2013 achieving the full increase by 2015. This will mean that most members of the scheme will be paying 50% more Pension contributions than they do now. The Government have predicted there will only be a 1% withdrawal from scheme membership by mostly low paid workers but are unable to supply any evidence. Information since Hutton has reported from surveys indicate that between 15 and 20% of people will leave the scheme before paying huge increases in contribution with plenty of anecdotal evidence on the internet and radio phone-ins that members are already looking at alternative provision or using the money for another big saving commitment that is paying off their mortgage early. It suggests that members earning under £21,000 will be protected.
The NHS is effectively a Pay As You Go Scheme without a central fund the Govt. pay members pensions from scheme members contributions. It states it has to make £2.8 billion a year savings by 2014/15. This will come from the increases in employee contributions phased in from 2012. The estimate of a flat rate increase of 3%+ will achieve this 40% savings in 2012/13; 40% in 2013/14 and 20% in 2014/15.
Work Longer
Hutton’s review links retirement age from the scheme to State Pension Age which will rise to age 66. It doesn’t stop there. It captures members who thought they could go at age 60 but from 2018 will stay on till age 65, from 2020 will stay on longer as the SPA will be 66 and even suggests thereafter that scheme members stay till their 68 years old. No provision for jobs that are in the frontline such as Technicians and Paramedics are included in the review.
Get Less
Even though accrued rights will be preserved scheme members will actually get less than they would get if they retired before these changes are implemented. Effectively the scheme will close preserving the rights you have already accrued and then the following day you will commence the terms of the new scheme, already paying more, having to stay longer and the sting in the tail is what will happen to your money.
Moving Pension Payments Increases to the Consumer Prices Index rather than the current Retail Prices Index. Currently State Benefits will increase in line with CPI and Pensions by next year.
Changing Final Salary to Career Average to calculate the rate of Pension for the rest of your life. The current scheme is based on the best 365 days payments of your last 3 years pay in work. For most people that is beneficial as they can choose to work unsocial hours a year or two before retirement knowing that the increase will boost their pensionable amount. The change Hutton has recommended moves the whole scheme to career average although the accrued rights to the current scheme means there will be slicing up of the pie to determine the pensionable amount based on how many years membership of the current scheme you have at final salary plus the remainder at career average. All new starters after the scheme is changed will be on career average.
A current consultation on the Fair Deal Policy and Discount Rate currently available by following the link which bodes badly for any member of the NHS at risk of being transferred or outsourced to the private sector or social enterprise. When you read the language of this report you realise the “Fair Deal” isn’t for NHS Staff at all but for private providers to be more competitive when bidding against the public sector. Don’t read this link if you are in a bad mood already. http://www.hm-treasury.gov.uk/d/consult_fair_deal_pensions.pdf
Pensions Choice has now become a dog’s breakfast with Staff aged over 50 already determining their decision on the two schemes we currently have. The implications of changing to CPI means that the average overall public service pension of around £7800pa will be £117 a year worse off, an average pension of approx £4,100 pa will be £62 a year worse off and pensions may increase by 3.1% this year when otherwise would have been increased by 4.6%.
What Happens Next? The Unions are busting the myths about public sector pensions being gold plated and costing the country a fortune, neither is true. Average NHS Pensions are less than £4000 per year and for women and part timers the average is less again. The scheme is cash rich and provides H.M. Treasury significantly more revenue than it pays out. The changes are not required for the sustainability of the scheme. An early day motion in Parliament has been signed by 127 MP’s including 13 from Wales from Swansea East, Islwyn, Blaenau Gwent, Ynys Mon, Newport East and West, Torfaen, Caernarfon, Cardiff South, Vale of Clwyd, Gower, Carmarthen East and Merionydd/Nant Conwy. The template letter for your MP is below.
The Early Day Motion states: “That this House notes the Government’s proposal to use the Consumer Price Index (CPI) rather than the Retail Price Index (RPI) for the price indexation of benefits, tax credits and public service pensions; further notes that the CPI is consistently lower than the RPI ..”
Your MP, House of Commons London
SW1A 0AA
Dear
INDEX-LINKING OF PENSIONS AND BENEFITS
You will, no doubt, be aware that the Government proposed to change the index-linking arrangements for pensions and benefits. The Government intends to replace the Retail Prices Index with the Consumer Prices Index. This will leave millions of pensioners much worse off financially and will force some of them, particularly women, into poverty.
The Government makes much of its “triple lock” guarantee for the basic state pension but this will not apply to the Second State Pension, nor will it apply to occupational pensions. Nor will it improve the lot of state pensioners in the short to medium term because prices are forecast to outstrip earnings for some time to come.
The CPI is usually about 1% less than the RPI. The OBR forecasts that by 2017 the CPI will result in pension increases of 8.5% less than the RPI would have produced. The Emergency Budget Red Book said that by 2015 pensioners would be collectively worse off to the tune of £6 billion. Lord Hutton has said that public sector pensioners would be between 15% and 25% worse of over a life time. These are losses too large for pensioners to bear. The financial penalty will stretch far beyond the term of the Parliament, during which time the Government hopes to resolve the current financial deficit.
The Government has not consulted the UK Statistics Authority over the change and the Authority does not agree that the CPI, as it currently stands, represents a proper measure of inflation. The Government, itself, is committed to including housing costs within the CPI index but does not expect to be able to do so before 2012. The purpose of Section 150 of the Social Security Administration Act 1992 is to protect the value of pensions against the ravages of inflation, which pensioners do not cause. A Minister who lays an increase order on the basis of a measure which does not reflect the “general level prices” specified in the Act would be acting outwith this legal responsibilities.
Therefore, a number of Members of Parliament have lad EDM 1032 in the following terms:
That this House notes the Government’s proposal to use the Consumer Price Index (CPI) rather than the Retail Price Index (RPI) for the price indexation of benefits, tax credits and public service pensions; further notes that the CPI is consistently lower than the RPI; expresses concern over the impact that this will have on the incomes of pensioners and other vulnerable groups; recognises the concerns held by the Royal Statistical Society and the UK Statistics Authority that CPI excludes many housing costs which are borne by the majority of pensioner households; and calls on the Government to take these concerns into account and postpone the change from RPI to CPI until the appropriateness of CPI as a measure of price increases borne by pensioner households can be fully evaluated.
This is a matter of grave concern to pensioners. There is no good reason why we should suffer a lifetime of financial detriment to solve a short-term deficit, which is not of our making.
I, therefore, ask you to support EDM 1032 and to make suitable representations to Ministers.
I look forward to hearing from you.
Yours sincerely
What Happens Next?
Assuming you’ve got friends and colleagues to fill up your MP’s in tray you can join our campaign to fight for our pensions.
Each branch to have a Pensions Champion indicated on the RMS system and a number of Pensions Contacts in the field distributing materials and speaking with members.
I am the Pensions Champion for our branch (11353 South and East Wales Ambulance Branch UNISON)
Become a Pensions Contact for your workplace
There will be Regional Consultations involving all staff and all branch activists.
When surveyed in consultation last year on the pay freeze over 90% of UNISON members stated there were prepared to take industrial action to protect their pension.
The Government will take the Hutton Report and consider it’s findings in June 2011 and decide what road they then take. It could get worse.
There is a Regional Leads Campaign with 16 points of activity and in our branch we are having our first Pensions meeting in April at Taffs Well Rugby Club on the 13th April 2011. ALL WELCOME. I have shared the powerpoint presentation with many colleagues and happy to forward it to you. The UNISON branch has voted to share information with other Unions
Pensions was a big issue amongst members in London on the 26th March 2011 for the “March for the Alternative” to Hyde Park
It affects you …..your retirement age will change….your plans will change too ….because you didn’t consider this…..
RETIREMENT AGE
For those now 34 or younger it would be 68.
For those between 34 and 42 it is 67.
For those between 42 to around 57 it will be 66.
That’s how long they want you to work for.
Joseph Conaghan
Elected member UNISON NHS Staff Council