Public sector pension age rises to 66

Last updated: Jun 20th, 2011
News by Rebecca Rutt
Pension definition

The pension age for public sector workers will rise to 66, matching state pension age, Treasury minister Danny Alexander has confirmed.

The changes confirmed this past Friday (17 June) will affect six million workers and sparked an angry outcry from unions who say ministers have sabotaged negotiations.

Public sector workers will now have to work for longer and contribute more if they want to continue receiving better pensions than those in the private sector.

Lower-paid workers will be protected from contribution hikes and those earning less than £15,000 won’t have to contribute anything more to their retirement fund, while those earning less than £18,000 will have their contributions capped at 1.5%.

This means higher earners will be forced to pay more to make up the shortfall, although the exact figures have not been confirmed.

Rise in state pension age

The government has already brought forward the rise in the state pension age, which in 2018 will be 65 for both men and women, rising to 66 in 2020.

The current state pension age for public sector workers is 60, and those in the uniformed services (police, army and fire) will be exempt from these linked pension age increases.

Alexander says: "It is absolutely wrong to pretend that public servants can be insulated from the pressures that everyone else is facing. It is unjustifiable that other taxpayers should work longer and pay more tax so public service workers can retire earlier and get more than them."

Read: "Privileged" pensioners should have benefits cut

He argues that the average 60-year-old is living ten years longer now than they did in the 1970s, and says: "It’s only right that public service workers, like everyone else, work that bit longer and contribute that bit longer to their pension."

Anger

Government ministers were not meant to make a decision on this until after the summer, and the early announcement today will anger groups who have been holding back from striking until a settlement had been reached.

Final salary schemes will also be scrapped and replaced with benefits based on a career average.

Brendan Barber, TUC General Secretary, says this is a "deeply inflammatory" public intervention. He complains that many of the detailed proposals set out have not even been put to the TUC negotiators, and the government has yet to give a response to specific proposals tabled by the trade union side.

"I have found over many years that if you are seriously trying to build trust to settle a difficult dispute, you should talk honestly and openly inside the negotiating room and exercise self-restraint outside.

"This speech, and the media-spinning operation around it, has dealt a serious blow to union confidence in the government's good faith in these talks," he adds.

Karen Jennings, UNISON assistant general secretary, mirrors this sentiment. She says it’s a "real shame" Alexander has made these comments while unions are still in the middle of detailed negotiations with the government.
 
"This attack on public sector pensions has nothing to do with a pensions deficit and everything to do with making public sector workers pay to clean up the financial mess left by the city bankers," she adds.

But other groups are pleased by the announcement. John Kelly, spokesperson for Square One Financial Planning, thinks this move couldn’t come soon enough.

He argues: "It is only fair that the whole economy stops subsidising a minority of its population - the public sector - whose pensions are linked to earnings and are therefore unaffected by this attack."

"The UK cannot afford its changing population dynamics. We are all living longer, for which we should all be grateful, but the price is that we need to remain economically active for longer and pay more into our pensions to support longer retirements.

"Going on strike is effectively striking against good health and long life, low inflation and cheap borrowing. Do these public sector strikers really want to return to the alternatives?" he adds.

Your Comments

Good and about time too. Public Sectors Workers cream too much off us and should (with the exceptions above) be made to contribute. We are all on this together. We are not all bankers and are not all responble for the financial mess.

The majority of civil servants earn less than 21k per annum. For the civil servants who earn more than 15k and less than 25k this will really affect them. Civil servants earning more than 21k are currently going through a 3 year pay freeze and many have learnt that their jobs are under threat and face redundancy. Accordingy to the Daily Mail, civil servants earn high salaries, have amazing priveleges and will all receive a golden handshake when they retire. This is not the case and in reality, we work very hard, for little pay which has been accepted in the past as there has been the promise of a pension to add a light at the end of the tunnel. For the majority of civil servants this is a very bleak time. It seems that everyone forgets that civil servants pay taxes too and from what I've gleaned its the self employed business man who manages to escape paying the same amount of taxes everyone else in the country has to.

How can it be legal that someone who has accepted a contract within either public or private sector - perhaps worked in their job for many years is coming close to retirement has worked hard and tried to save for their retirement, only to be INFORMED by BIG BROTHER that because the bankers have made a right cock-up in the city, someone will have to pay for it (not the bankers ofcourse) and therefore the contract they agreed to all those years ago is now null and void and something new has been put in its place... It just is not fair, and I can't even see how it could be legal. Also should all this other new legislation come into force, I understand that existing pensioners, who have probably been paying into the coffers for 50 or longer years, some who will have fought for their country, will NOT be able to take advantage of the new pension arrangements - however others who may(or may not) have made a contribution will be on a higher rate!!!! There is logic for you. The world has gone mad. Who are these idiots. to be able to change pensioners prospects ... many of them seem to be millionaires ..and could not have a clue how ordinary people live, what do they know!! I am seething!!

One of the assertions made either by the uninformed or those who wish to hide from the truth is that Public Sector Pensions are “unfunded”. The truth of the matter, certainly as far as the Civil Service is concerned, is that traditional occupational final-salary pension schemes are fully funded. They are fully funded in three ways.

First, the traditional system of determining Civil Service pay by fair comparison with those doing the same or similar jobs in the Private Sector. An integral (and prime) part of that system was that full account was always taken of the (eventual) provision of a decent pension i.e. each yearly (calculation) start point for a percentage annual pay increase was always lower than it would otherwise have been had an allowance (reduction) not already been made for that pension provision in each & every previous year. Such system, of course, over (say) a 30-40 career, having the effect of greatly reducing the value of both the pay and (subsequently) the pension actually received. A sort of cumulative interest payment system in reverse. Of course, today, pay rises are non-existent generally.

Next, the Thatcher Government. For whatever reason, MrsThatcher hated the Civil Service to the extent that, whatever the fair comparison system revealed, pay rises (and therefore pensions) were artificially restricted. At one point during that period, forerunners of the present Public and Commercial Services (PCS) Union published irrefutable (factual) figures which proved that some 30% had been lost from pay. That penalty (and the aforementioned fair comparison system restriction) feeds through into final-salary schemes to this day, inclusive of both pay (any) & future pension calculations. And, importantly, it always will.

Finally, those currently employed in the Civil Service do, in fact, make a personal monetary contribution directly to their pension provision via regular (normally monthly) salary deductions.

So, in conclusion, traditional Civil Service occupational final-salary pensions are indeed already “fully funded” through past pay restrictions and should now stop being targeted by an unelected Conservative Government & its bedfellows, simply to save money whilst trying to give the impression that they are somehow doing the right thing in the current economic climate.

All final-salary pension scheme provision must be retained in its present form, and the fair comparison system must be reintroduced. Realistically, the pay earned but already given up (as payment for future pension provision) over many, many years can never be recaptured, but at least no more ground would be sacrificed.

Then, and only then, could a fully informed General Public be certain that those who serve their Country within the public service were (given even past losses & restrictions) again being fully & fairly rewarded for their efforts, and not being cheated out of decent pension provision for which full payment has already been made.

Time for those with their own agenda (like some of those quoted in this article) to wake up and enter the real (factual) world.

If the age to end work is 66 set by the torys which I think is wrong it should be 60 for every one.

But they say 66 so if it is 66 for the private sector it should be the same for civil servants whether they are in uniform or not when a police offier or fire person hit 55 they should be move to an office job tille retirment not get a pention and then get a job back in what they was doing so get both.

There should be a cap put on the pention of say 25k but this should also aply to mp's as well but no one as said anythink about cutting there pention.

i work for schools cleaning and kitchens i work extremely hard to live .i will have not had a pay rise for 3 years,last year i lost 3 days holiday that i had worked 10 plus years for .the top people in our council only lost 2 days ,so as usall the lowest paqid lost more.when i come to retire i will be lucky if i get 100 pounds a month . for which i will have paid 33 years contri butions .how someone can say about time beets me .big green monster seems to rearing its ugly head .wouldnt be saying about time if it was them

Quite right that public servants should be treated the same as everyone else in terms of salary, pension and retirement age.
Even if the average life expectancy is rising there are still significant numbers of people in their early 60s who are not in good health or have either physically or mentally stressful jobs that contribute to ill health. Would it be a good idea to introduce a right to work part time over the age of say 63 on a pro rata salary? This would allow us oldies to enjoy some of the benefits of retirement while still at work and would avoid the sudden change from full time to no time which causes problems for a lot of people.

My husband and I worked for different Housing Associations for several years after both working in the private sector. Many of the longer serving employees were ex local authority employees and therefore enjoyed far better pension arrangements than those of us who had been employed directly by the housing association. Their salaries were often also higher given the pay scale structures in their contracts. In may cases it was very obvious from their performance and attitude to the job, which employees had been 'inherited' from the local authority. An unfavourable performance review often led to sickness through 'stress' or a visit to their union representative. My husband and I both experienced this separately in different organisations - surely too much of a coincidence....

Now I may be stupid, but I have always understood that until a contract is torn up and replaced, it is in force. If Mr Alexander is saying that a contract between the Government and its employees can be altered by diktat then it is time he was reminded of the law, something this governement seems very disposed to ignore.
Incidentally most public sector emplyees would hope for about £7,000 in pension after retiring. Says rather a lot about pay levels, doesn't it?

I was very impressed with one business manager from the private sector on the TV over the weekend who while arguing that public sector pensions should be adjusted to matched those in the private sector, did recognise that to do this public sector pay would have to rise massively. One thing often overlooked by many complaining about public sector pensions, is that while they still have final salary pensions they don't have the pay of the private sector. The pension is often considered to be a compensation for this.

As for the 'unfunded' pensions this is bizarre, as we are told for instance the NHS pension costs 20% of the pay bill, employees pay up to 8.5% with employers paying 14%. So where has this money gone to and shouldn't it be ring fenced for pensions?

Please dont forget that PSW dont just get this pension they to PAY INTO it the same as everyone else, its not freebie from the state purse

Well said - you have shut up some of the people who did not realise that this was the case.

I can't understand the small minded people on this web page who are on about public service workers creaming off the tax money they pay as said in one of your blogs the public service workers pay taxes as well and over and above that pay for their OWN RETIREMENT PENSION which is also taxed not like you spongers who just pay national insurance and expect everything flung at your for nothing get your facts before you start blabbing

I joined the civil service in 2007 just as they changed (reduced) the pension. On my pension I have to work until I am 65 or take a reduced pension at 60. Previous pensions I have paid into have been added to my pension pot and my pension is to be based on what I have paid into it. It makes me mad when I keep hearing all this talk about the fantastic pension civil servants get - not all of us will!!

Further more, there is inequality of pay within the government sectors. People on similar grade doing the same jobs in DWP find themselves on lower salaries than those in HMRC how can that be fair?

Stop branding all civil servants as getting golden handshakes, it not only depends on when you joined the pension scheme, but where you work.

You do not understand the meaning of the word "funded". It has nothing to do with the traditional system of determining Civil Service pay by fair comparison, Mrs Thatcher's likes and dislikes or whether Civil Servants pay contributions towards their pension provision. If a pension scheme is funded both the employees and employers contributions are paid into a fund, which is administered separately, usually by trustees,and invested and pensions are paid from this fund. In the public sector only the Local Government pension schemes are funded. In all of the other schemes, Civil Service, Health, Teachers, Fire, Police and the Armed Forces, the contributions paid by the employees are paid into general taxation and the pensions are paid out of general taxation. That is the way they were set up and that is the problem. The Local Government pension schemes are set up under an Act of Parliament which requires them to be valued by actuaries every five years to ensure that the funds are capable of meeting their obligations to their contributors.

Two things;

Where is the evidence we are living longer? I cannot see the big step change in people living longer. I think we should probe deeper into this as this is quite easily used as the reason but just taken as said and accepted.

The sensible people in the public sector like in the private sector who have worked half their working career should be recognised and not have the carpet pulled from under them. Many have planned for retirement and now only have half a career left to make up the shortfall, which is too late. The Government should phase this new scheme over a longer period to allow for those sensible people who have planned their future, who in many cases lessen the burden of the benefits system upon retirement.

"Quote: those in the uniformed services (police, army and fire) will be exempt from these linked pension age increases."

In these austere times, we're ALL being asked to tighten our belts, so why should ANYONE be exempt from paying their contribution? Apparently we're "all in this together", so why then are Military personnel guaranteed a job for life, free housing, free furnishings and property maintenance, free boarding school education for their children, housing allowances in lieu of opting out of 'married quarters', etc, etc... whilst at the same time contributing absolutely nothing towards their enhanced pensions, which are payable at age 55?

After retirement, they are given one of many 'jobs for the boys' with yet another pension in the mix, so, please tell me, how that is fair in comparison - and don't come back with something about fighing in wherever we shouldn't be in the first place. They took the Queen's shilling and a vast majority have spent their careers in an office or logistics environment - not on the front line ...

i am a woman who will be 55 in 10 days time. I receive lower than average pay as a civil servant. Not only do i have to reach 66 before i can receive state pension it now looks like i can't retire from the civil service at 60 even though my terms & conditions said i would when i joined. My friends that are 60 receive there pension soon. They are 5 years older than me. Why should i work another 11 years to catch up with them? I will be on strike on 30 June, the day before my 55th birthday. Then i will take annual leave for my birthday as usual. Won't be such a celebration this year!

Interesting isn't it? When the government began stealing from the private pensions, so much money that they stopped growing on their own, (and still does) the outcry didn't mean strking against our colleagues or customers. It simply meant that we knew we had to work more years before we retired. In an actuarial sense, because for most of us this has meant the majority of years have been fingered by the government, the fact is that I would have to work until 78 to replicate what I would have retired on before the damage. Since that is patently not possible, I and millions like me will retire on less pension than I envisaged. Therefore the correspondant above who is horrified that they can change a pension deal should be grateful this is 2011 rather than 1997. We shall both be retiring on less than we originally anticipated because the government changed it.

In the old days artifically lower pay for Civil Servants compared to private sector workers was probably true, but these days the margin is minmial, if it exists at all. Just accept, that until now, Public Sector workers have had it good.

As a current Civil Servant due to leave on a Voluntary Exit(Voluntary Redundancy)
I could not have expressed the above comments better.
Having been a Civil servant for nearly 40 years my pension is certainly not "gold plated" and due to the fact that my Salary is frozen for three years and contributions will rise my pension is unlikely to be worth more in three years time than it is now.

To the lady wondering whether government intevention in her pension is legal, I would say wake up and smell the coffee. I am one of millions in the private sector who pays for my own pension. The government' robbery in 1997 from all pension holders in the private sector of the share dividend benefit by taxing it, has ensured that pensions do not grow as they would have done.
In my case, my retirement date on planned pension savings was timed for 65. If I want the same pension, and |I can't make up the government's robbery, I will retire around 71. This of course assumes I will stay employed until that time. Either way, the robbery is STILL going on!

The retirement age for local government workers is presently 65 and not 60 as stated.

Do you realize that the vast majority of Public Sector workers are on pay well below the National average,this is acceptable to them only bacause they receive a fair pension on retirement.

'We' are COMMITTED to increase our foreign aid to £12.8B, like we PROMISED we would. Where it goes, nobody knows.

We are BOUND by treaty to prop up the Euro and bail out Greece (£13B and rising), Ireland (£6B), Portugal (£7B) (& probably soon, Spain).

We are morally OBLIGATED to give £750M to world vaccination programme.

We HAD to bail out banks to tune of £850B.

Yet, we can't honour our CONTRACT/OBLIGATION/AGREEMENT/PROMISE with the people of our own country because we can't afford it!

Yes, I am one who doesn't want to work longer and pay more for a smaller pension than the country promised me, until we start to renege on the other promises we can't afford. (In addition to still paying the bankers bonuses, MP's expenses/pensions, the benefit money which goes straight to the bookies, tobacco shop, or boozer, fighting other people's wars, asylum seekers, losing £200B in tax avoidance by companies and individuals).

In the 80/90's, there was a great pensions miss-selling scandal and people were compensated for bad advice, etc. I and many others have made critical life and financial decisions based on the contract I signed. I kept my side of the bargain, so will the government compensate me for breaking their's? When a government breaks its contract with even some of its own people, all people should be very worried!

I also think it so sad to see the clamour of people wanting to see the pensions of others dragged down to the lowest level. That will really help the economy in the future! What they ought be doing is demanding the government pay back the money they have stolen from private pensions. For a source of funding, see some of wastage listed above. Some people will only be happy when all pensions - and by association, wages are driven down to the lowest common denominator.

And remember, I also am a taxpayer and contributor to my pension, thank you!

Two comments I heard recently on TV from civil servants. "I earn a low wage and desrve a good pension" "I could not work past 58". I think these people need to get a reality check. I would expect the majority of people on low wages would like a good pension and everyone would like to retire at 58 on a full pension. What do they think makes them better than the rest of us that they should not feel the pain like the rest of us. The Civil Sevice pension requirement is too much for us as a country to bear and it is just wrong that these people should expect every one else to work longer and longer so they can have an easy, guaranteed retirement. This seems like a case of every one is equal but some are more equal than others

Public service workers do NOT pay for their pensions...they contribute towards them.
The 'employer' makes up the remainder.

I, like many others, are sick and tired of our taxes going towards paying for teachers as well as others when we get much less pay and smaller pensions ourselves.

I am from a family of teachers and have many friends who teach.
Don't believe any teacher who says they work every evening and over weekends too.
Since the advent of STATS the same lessons are used year in year out.

I'd love to have 12 + weeks holiday a year...even if I worked the equivalent of one of those weeks during the 12 .

Time to get real ... stop being selfish, smell the coffee and don't expect the support you crave from people who resent their taxes going towards keeping you.

I am livid at the government over their handling of this. If they feel this is fair lets see them lead by example!! I anticipate going on strike over this and on speaking to my colleagues who have forgone wage increases promised previously by the government this is the final straw!! By keeping us in work until we drop it will also deprive the youth of employment and result in higher unemployment in the long term! This can only have disastrous results on our economy and I can see our economy going the way of japan.

I remember the comment placed in the public domain that stated that we were all in it together ! If this is to be a credible comment, maybe we should ALL have the same inflation protection that our M.P.`s have with their pensions. Especially any short fall in value that is made up from the public purse.
Bright guy the last Prime Minister, it was HIS pension that came out the winner here. No consideration for others. It is noted that all the quick thinking new guys & girls in goverment have not attempted to reverse any of the actions that protect their pensions and place them back under the influence of market forces !