Public Service Pensions Bill

Memorandum submitted by The Public and Commercial Services Union (PSP 20)

Public bill committee: Public service pensions bill

Introduction and summary

Summary

1. The Public and Commercial Services Union (PCS) is the largest union in the civil service representing over 266,000 civil servants and other members in both the public and private sector who provide public service work. Many of our members will be directly and in many cases adversely affected by the provisions in the public service pensions bill.

2. Our submission focuses on our members who are part of the Principal Civil Service Pension Scheme (PCSPS) and by-analogy schemes. Our members work in a diverse range of civil service roles, including a range of physically demanding work in the customs division of HM Revenue and Customs, Forestry Commission, Ministry of Defence and others. These individuals are in a combination of final salary schemes (Classic and Premium) and a whole career scheme ‘Nuvos’ that was open to new entrants from 2007 and already has a ‘65’ pension age.

3. Our submission highlights some of our concerns about the bill not least the link to state pension age (clause 9), which is a key issue for our members. We also highlight our other concerns about the bill where there could have more safeguards to protect existing rights, these include:

a. Cost controls (clauses 10-12)

b. Scheme governance (clauses 5 and 6)

c. Consultation (clause 19)

d. Fair deal (clause 26 and schedule 9); and

e. Public bodies (clause 28)

Pension age

4. PCS believes that the key issue in this bill is the link of the scheme age to the state pension age (clause 9). The idea that people will be able to keep working until an ever increasing state pension age, assumes good health and job availability. Evidence provided by recent TUC research [1] show that half a million people approaching state pension age are too ill to work.

5. Disability and poor health are preventing nearly half a million people approaching retirement from working, a figure that will only increase as the state pension age starts to rise, according to a TUC analysis of official labour market data. In the civil service members who had left on grounds of ill health and are under state pension age are sometimes classed as fit for work by the Atos work capability assessment. They are forced back into the labour market still suffering ill health and in practice are unable to find work. There are no statistics available but we are receiving increasing numbers of members approaching us for help in relation to this.

6. Individuals who work on past the time they and their employers believe appropriate, cause not only loss of dignity for the individual but concerns for colleagues and family members as they take on extra responsibilities. Increasing numbers of civil servants take partial retirement, sometimes to access pension lump sums to pay off debt and subsequently leave on ill health grounds. They lose out financially due to the way the scheme works and often end up on state benefits. Raising the state pension age to save money, only to find more people end up on employment and support allowance or jobseeker’s allowance, would be a false economy.

7. Unpaid caring for partners, parents and others saves the state £25 billion per year [2] . Those civil servants who have up to now left for reasons related to caring responsibilities will be forced to keep working not only leaving the burden of care to the ever stretched state but becoming more at risk of losing good health themselves. Working isn’t just about the job one does but travelling and pressures on performance in a competitive workplace.

Cost controls (clauses 10 – 12)

8. To our members their pension is deferred pay. The pension has been a right since 1972 and we would argue that it is an integral part of the pay package. In this time of pay freezes and this year an average of 1% pay increase many members cannot afford to pay more in contributions that would mean a further cut in pay in real terms.

9. We acknowledge that assurances have been offered about cost ceilings and floors but given our experience that increases can be imposed at a time when no actuarial valuation was carried out [1] , we are concerned at the open ended nature of the regulation.

10. The 2010 valuation of the PCSPS was not carried out and this made it difficult to have meaningful negotiations around the reform. Further information provided by the Treasury still does not alleviate concerns around the so called ‘Henry VIII clause’ of this bill - clause 3(3) allowing retrospective changes. This would overwrite existing protections of accrued pension rights in clause 2(3) of Superannuation Act 1972.

11. We understand that secondary legislation using the affirmative parliamentary procedure would have to be laid to bring into force retrospective and adverse changes, but are not reassured that this is enough. The promised 25 year guarantee [3] is not written into the rules to protect accrued rights for staff..

Scheme governance (clauses 5 and 6)

12. The bill aims to put in place good scheme governance arrangements using ‘best practice’ models. Lord Hutton in his report described the civil service scheme management board which has trade union representatives as ‘good’ yet the bill does not refer explicitly to pension boards having a minimum number of employee or employer representatives in the same way that a trustee board would have a minimum number of member nominated trustees.

13. We would want that protection especially as the Treasury has an enormous amount of control in terms of scheme management and governance (clause 13 (4)). The bill does not specify the timing of valuations (clause 10) for example, we would argue that valuations should happen regularly and we would suggest at least every three years.

14. There is a lack of clarity and transparency in terms of information over valuation and the assumptions used. PCS has found when the 2010 valuation was missed this caused difficulties discussing reform. Members are already paying more and will continue to do so yet there may be less information available for them and their representatives to monitor the health of the scheme.

Consultation (clause 19)

15. Although this clause mentions employee representation we would like to see wording which sets out a clear requirement that the consultation should aim to reach an agreement with the employee representatives.

Fair deal (clause 26 and schedule 9)

16. PCS, along with other unions and the TUC, has met Treasury officials on the detail of the new ‘fair deal’ arrangements and welcome the consultation around a new code.

17. We would however like to see the code as part of the bill to protect workers moved to the private sector. We have experience of the problems that arise from pre ‘fair deal transfers’ and re-entry into the public sector so would like to see a strengthening of the code.

Public bodies (clause 28)

18. PCS members in public bodies in many cases will either be brought into the civil service or other public sector schemes and need the protection of accrued rights and benefits of previous schemes.

19. We are concerned that the bill misses an opportunity to protect staff working in public bodies who are not brought into the core scheme. They could lose any kind of defined benefit scheme and end up carrying the risk in a defined contribution scheme. Currently the Commonwealth War Graves Commission is consulting on placing new staff into a defined contribution scheme, whereas existing staff are in a final salary scheme.

20. We believe the bill could help by making a career average scheme the first alternative to final salary continuing defined benefit arrangements.

Conclusion

21. As you can see we are concerned that the bill does not do enough to protect the thousands of low paid public sector workers who have already been faced with jobs cuts, a pay freeze and now extra contributions to their pensions.

22. We believe that linking the scheme age to the state pension age could mean that well planned retirement for staff with long service is further delayed and could cost the taxpayer more in the long term.

23. Finally we also believe that the bill could be strengthened around cost controls, scheme governance and consultation to ensure there are safeguards in place to protect staffs’ existing rights and would call on the committee to ensure these changes are made and agreed to protect the pensions benefits of public sector workers.

November 2012


[1] TUC report, August 2012: http://www.tuc.org.uk/economy/tuc-21355-f0.cfm

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[2] MGM advantage report, October 2011: http://www.mgmadvantage.co.uk/news-centre/new-report-society-undervalues-retired-population/

[3] Danny Alexander said on 20 December 2011, “I have committed that these reforms will be sustained for at least 25 years. The Government intends to include provisions on the face of the forthcoming Public Service Pensions Bill to ensure a high bar is set for future Governments to change the design of the schemes.” http://www.hm-treasury.gov.uk/statement_cst_201211.htm


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Prepared 21st November 2012