Deal reached on public sector pensions

The government has reached an agreement on public sector pensions with trade unions.

Under the agreement, current members of the health, education and civil service schemes will retain their right to retire at 60.

However, the pension age for new entrants into the public sector will be 65 from next year.

Unions representing over 3 million public sector workers had threatened to go on strike if the government’s proposal to increase the pension age to 65 was introduced.

However, business leaders have condemned the deal.

TUC General Secretary Brendan Barber said that the unions had achieved their major objective with the deal. Describing the deal as a “major breakthrough”, Mr Barber said: “The government has accepted that today’s public sector staff should not have their pensions promise broken and need suffer no detriment in their pensions arrangements.

The TUC also said that the government had agreed to base the new public pensions schemes on defined benefits, linked to earnings and index linked.

The union also said that employees would also continue to have the option of retiring at 60, if they made higher contributions into their pension scheme.

Trade and Industry Secretary Alan Johnston also praised the deal, which he described as “a sensible step forward, achieved through proper negotiations, which puts public sector pensions on a sound financial footing.” He said: "The good news that we are living longer means pensions have to adapt. It's been happening in the private sector and today's agreement means it will happen in the public sector as well.

"We should give people flexibility about when they choose to retire, but it's vital that we retain the experience and expertise that older workers have to offer and don't force them into premature retirement at 60.

"Today's deal means that public sector workers will continue to get good quality pensions which are defined benefit, but like the state pension and pensions in the private sector, the normal pension age for new entrants will now be 65.

"Just like most private sector pension reforms, the pension provision of existing scheme members will be protected. Individual scheme negotiations will now agree how this reform will apply to existing employees and what other changes are made.

The discussions between the government and the unions have been ongoing since March. Local government pension schemes are being discussed separately.

The deal will now be recommended to public service unions for endorsement.

However, David Frost, Director General of the British Chambers of Commerce, said: “This is unacceptable from the standpoint of British businesses. The government needed to grasp the nettle and increase the public sector retirement age for existing employees on a sliding scale. They have failed to do this. We are now faced with a situation where public sector pension costs will continue to balloon and the private sector will pick up the tab.”

(KMcA/GB)