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Changes to civil service pensions

Changes to civil service pensions

Prospect members in the civil service voted by 4-1 to accept the deal negotiated between unions and the government on the shape of their pension scheme from 2015.

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The new pension scheme, the result of 12 months intense negotiations, was put to all members in the union's civil service sector, with the ballot running during April/May 2012. Members voted 4-1 to accept the deal. Members in the local government and United Kingdom Atomic Energy Authority schemes were balloted separately.

You'll find information about the broader situation in the 'pensions justice' area of our website.

Pensions ballot 2012

Since the current coalition government took office, the issue of public service pensions has never been far from prominence. Both political parties were determined to unpick the agreement made with the previous government, despite the fact that official projections show it put the schemes on a sustainable footing.

The last two years or so have seen long periods of detailed consultation on technical issues, significant engagement with members on pensions, lobbying of Parliament, legal action to the Court of Appeal, protracted negotiations with Ministers and, of course, sector-wide industrial action by Prospect members on 30 November last.

The outcome of this process was the government's final offer for pension arrangements in the public sector from April 2015.

Details of the offer

Members can download details of the Government offer from Prospect's document library. In broad terms the offer provides for:

  • A career average scheme. The new scheme is career average, modelled on the Nuvos scheme for new entrants to the civil service from July 2007.
  • Pension age. For service in the new scheme the pension age will be aligned to the State Pension Age.
  • Accrual. The accrual rate (ie the proportion of salary built up as pension every year) will be 2.32% (higher than the rate of 2.28% specified in the Heads of Agreement or the rate of 2.30% in Nuvos).
  • Indexation. All pension accrued will increase in line with CPI both before and after it is put into payment.
  • Contributions. The average member contribution will be 5.6% of pay (gross of tax relief, the average net rate will be lower).
  • Pension lump sum. Members can convert up to 25% of their pension into a tax-free pension lump sum on retirement.
  • Flexibility. Existing Classic or Premium benefits remain linked to final salary and can be put into payment separately from the new benefits.
  • Protection. Members within 10 years of pension age on 1 April 2012 will remain in their current pension scheme. Members within a further 3.5 years of pension age will have the option to stay in their current scheme for a period after April 2015.
  • Fair deal. Legislation will be introduced to allow members contracted out of the civil service to retain membership of the civil service pension scheme.

Prospect recommended acceptance

The decision to accept or reject the Government's offer is for Prospect members. The elected representatives on our Civil Service Sector Executive have been closely involved in the process over the last two years and felt it was important to tell members what they felt the best option was: the Sector Executive is recommending a "yes" vote.

The Sector Executive's decision came after a long and detailed debate of the issues and consultation with other representatives and Prospect members. The main reasons for the decision to recommend acceptance were:

  • Benefits. No change to public service pension benefits was ever going to be a realistic outcome of this process. An acceptable outcome for the Sector Executive would have been Nuvos benefits for all members for future service. While the final offer falls a little short of this (pension age is higher, though accrual rate is slightly better) it is much closer to the Sector Executive's position than to the Government's opening position. Indeed many members will find that the pension they accrue under the new arrangements could be higher than if they stayed in their current scheme.
  • Industrial action. The proposed terms are the Government's final offer and the best achievable through negotiation. The only option available to Prospect if these terms are rejected is to resume industrial action. However the context is different from the situation when action was organised on 30 November. Then a large number of unions participated. Now many unions are recommending the final offer and so only a smaller group will participate in further strike action. Also, 30 November was a single day of action to show the strength of members' feelings, progress on the Government's offer is likely to require action on a more sustained basis. For these reasons the Sector Executive felt it would be very difficult to secure an improvement to the Government's offer through industrial action.
  • Government response. The Government's offer is conditional on acceptance. If the terms are rejected there is no guarantee that the Government would not implement something worse. The improvements won as a result of the action on 30 November and the lengthy negotiations could be lost. The Government could withdraw protection for those within 10 years of pension age or at risk or privatisation or it could take the improvement in the accrual rate in the new scheme off the table.

The Sector Executive is aware that there is real anger and concern amongst Prospect members about the impact of higher pension contributions, tight pay restraint and the switch to CPI as the basis for increasing pensions. Prospect is committed to continuing to campaign on these issues.

Further details

Prospect provided a range of information members needed to cast an informed ballot. They received a special edition of Public Eye in the run up to the ballot, and provide further literature detailing the proposals. We  already produced a Q&A brief and a set of worked examples.

If you have any questions that are not answered here or in the other literature please email us at pensionsreview@prospect.org.uk