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Non-consolidated payments undermine career average pension schemes

Non-consolidated payments undermine career average pension schemes

Alpha and other civil service pension schemes are being undermined by the use of non-consolidated payments to tackle recruitment and retention issues, said Mehtaab Hamid (Health and Safety Executive).



Hamid said many members in his branch, especially the offshore division, were affected by non-consolidated payments. Although he recognised that a non-consolidated payment was better than nothing, it undermined the principle behind career average pension schemes.

“Large non-consolidated market supplements, while being better than lower pay, will in the long run have a significant impact on accrued pension in retirement, undermining the ethos and principles of a career average pension scheme,” he said.

Phil Brown (Met Office), who is the local pensions expert in his branch, had tried to talk positively to members about the Alpha scheme. “But the over-use of non-consolidated payments has led to a severe corruption of that pension scheme,” he said.

Speaking on behalf of the executive, Alan Grey said departments cannot deviate from the 1% pay cap and that it was difficult for employers to overcome the business case hurdles.

“Departments only have one option – non-consolidated and non-pensionable allowances or supplements,” he said.

He warned that a future government would have to pick up the shortfall.

Even where Prospect had been successful in negotiating consolidated allowances, these could be removed with one month’s notice, Grey concluded.

Delegates agreed and endorsed the motion calling on the executive to investigate how widespread the practice is and to challenge the use of large non-consolidated market supplements as a cheaper alternative to elements of pay that are pensionable.