Superannuation Bill

Memorandum from Maria Smith (SU 76)

I am a 50 year old chartered accountant and civil servant, working for 14 years in  the prison service  and previously worked for The Home Office for 3 years so I am familiar with civil service  pay and benefits and how finance is managed.  As an SEO (Manager E in prison service terms ) I am not a very high grade in my role, just a middle ranking official , despite being well qualified. I am unable to make my voice heard by those in the senior civil service ,who make the decisions  but well able to quantify what the financial consequences of the changes proposed will be for staff made redundant if these changes are imposed. 


 I am very concerned at the drastic reduction in job security involved for civil servants which will definitely result from the proposed caps on redundancy and in particular the punitive impact on older , long serving staff , which I feel has not been sufficiently considered in the the discussions during the second reading of the superannuation bill on 7 September. 

I therefore wish to submit what I consider some relevant points to the attention of the superannuation bill committee to consider as part of their scrutiny.


It is well known that older workers - over 50 - have very little prospect of getting another job at a similar level to that they have reached after a long career, if they are made redundant, often after 20 or even 30 or more years loyal service.  A full pension (of half pay in the classic scheme, to which the majority of long serving civil servants belong) is reached only after 40 years service.  The normal retirement age is 60 for long serving staff, although in 2005 an increased retirement age of 65 for new entrants was already agreed.

Under the superan nuation bill proposals, a civil servant who would have reached 40 years service and qualified for a full pension ( ie half final salary) on reaching their earliest retirement age will face a reduction of ¼ of their expected pension, if made redundant 10 years before reaching their minimum retirement age.

This is a catastrophic loss for the individual and their family, which they will never be able to make up. Many however have a potential total service of far less than 40 years, so the impact on them of losing the final years of their working life is far worse still.

Even those on middle incomes before redundancy can be reduced to poverty in old age on the proposed terms, because if they can secure employment again at all, it will often be in a low paid job such as in a supermarket which only just enables them to survive without being able to save at all and many will actually never work again.

We have been told we can buy back pension with our redundancy payments if we wish.

However, if you look at annuity rates, even without any inflation protection, £100,000 only buys an annuity of around £5,000pa. So even the highest paid could only replace a tiny fraction of what they have lost , if made redundant under these proposals. The lowest paid have no ho pe whatsoever of replacing any of the pension they have lost when made redundant.

Women are particularly badly affected, because many work part time while their children are young – which means their pension entitlement builds up more slowly too.

Those who develop serious illnesses such as cancer or heart disease during their years of employment are also particularly badly affected, since death in service benefits form an important part of the package , akin to life assurance, that is lost also when civil servants are made redundant. Those with chronic illnesses however are uninsurable and ca nnot replace that cover at all following redundancy.

In order to build up a sufficient pension, it is necessary to start saving for it at an early age, any pensions advice you read will tell you that. Civil servants had expected this to be provided as part of their salary package and people take the value of the pension and job security into account in deciding to settle for a lower salary than can perhaps be obtained elsewhere. I most certainly took it into account in 1993 , when I joined the civil service at age 33 , at a lower salary (£23,000 compared with £30,000) in my previous job and so does everyone else.

Why is it we are told by a previous government minister that Fred Goodwin (of RBS) had a contractual right to the pension he received , but the same is not applied to civil servants ?

The courts regarded the existing terms as a contractual right for civil servants in the judgement obtained by PCS in May. I’m sure Members of Parliament regard the resettlement grant they receive if they lose their seat (I believe this is £65,000 after being an MP for 5 years ) as their contractual right too – but is that not in fact much like a redundancy payment and also paid from the public purse ?

Although much is made by politicians & media of gold plated public sector pensions, these benefits are actually no more than most private sector employees among the "baby boomer" generation who have retired in the last 10 years & currently receive , but that seems to be forgotten most of the time.

The real problem is not that civil service pensions are unduly generous, but that the younger generation are excluded from the security in retirement which their parents enjoyed . I feel this leads to a risk of inter generational conflict, especially when the younger workers , who themselves have little prospect of a good pension , are then expected with their taxes to support the living standards of the older generation.

Rather than reducing existing benefits to poverty levels, solutions are needed of how the prospects of those without adequate pension provision can be improved.

Much has been made of the fact that 5 out of 6 unions agreed the previous government’s imposed changes to the civil service compensation scheme before PCS challenged this in court and won.

However, I feel it should be pointed out that the only union that consulted their members was PCS – none of the other unions bothered to give their members the chance to vote on the proposals , even though the impact on their members was very significant.

PCS has always held that the only possible reason for wanting to cut redundancy entitlements can be in order to make large scale redundancies at little cost – such as around 600,000 civil servants that is often mentioned in the media.

Having high individual entitlements has prevented compulsory redundancies in the past and would continue to do so. There are alternative savings government departments can make and surplus civil servants in discontinued functions could gainfully be employed to improve tax collection levels and better fraud prevention, for example , which would pay for itself.

Mass redundancies are not the only option.

Another area where we are given misleading information is regarding the level of redundancy payments in the private sector. This is quoted as being paid at statutory levels only, when in fact very many employers pay far more than that. It is mainly those unfortunate enough to work for co mpanies that bec ome insolvent who are limited to this very limited level .

One further point referring to column 230 in the superannuation bill debate on 7 September regarding the request for data to verify the allegation that civil servants enjoy a 6 year compensation package : The request was rejected on the grounds of the disproportionate cost.

It is difficult to see how the cost of obtaining the data of how many cases there are , in which civil servants received redundancy payments of 6 years salary; because any basic accounting system readily allows reports of payments made to be generated. All pension payments in a government dept are made from a single source – in the prison service & home office, all pensions payments , including all payments for redundancy, medical inefficiency etc are made by Capita. It cannot cost much to generate a report showing the amounts paid to all recipients and other benefits such as the number of years pension credited nor for the payroll department to generate another report of their final salary if that is not contained on the Capita data, so the number of years salary can be ascertained.

September 2010