Outcome Of Tug Of War On Pension Funding Could Lead To Big Cuts In Schools And NHS Says GMB
Schools and hospitals are facing backdoor cuts of £1 billion if department ministers loose tug of war with Treasury over how pay as you go pensions schemes are paid for says GMB
GMB, the union for public sector workers, responded to the press release from HM Treasury on pay as you go public service pension scheme funding. See notes to editors for HM Treasury Press Release dated 13 March 2014.
Brian Strutton GMB National Officer for Public Services said "Schools and hospitals are facing backdoor cuts to fund pre-election tax cuts if department ministers loose tug of war with Treasury over how pay as you go pensions schemes are paid for.
Pay as you go schemes are currently topped up with funds from general taxation by Treasury.
The Chancellor wants to transfer all these cost to each department but does not want to transfer the matching funds to meet these costs. He wants to keep the nearly £1 billion to make room for tax cuts.
This sleight of hand means schools and hospitals in particular will be faced with stealth cost increases which they cannot afford. The figures are huge and will lead to big cuts if Osborne is not stopped.
On pay as you go pensions GMB has established the following data from HM Treasury:
For schools, and other bodies, which have teachers in the Teacher’s Pension Scheme will pay an extra £330m to the scheme in 2015-16. The change for the Teacher’s Pension Scheme is being introduced in September 2015, to align with the academic year. So the impact for the Teacher’s Pension Scheme will be £560m from 2016-17, which will be the first full financial year that the new contribution rate is paid.
NHS employers will pay an extra £125m, and civil service employers and extra £275m in 2015\16. The new rates for the civil service and NHS will be payable from 1 April 2015.
Therefore in 2015-16 departments/employers in those three schemes pay £730m more and in 2016-17 £960m more.
The Lib Dems must protect schools and hospitals."
Contact Brian Strutton 07860 606 137 or Phil McEvoy 0208 947 3131 or GMB press office 07921 289880
Notes to editors
HM Treasury Press Release 13 March 2014
Public service pension reform nears conclusion
One of the final elements of the government’s comprehensive public service pension reform programme has been set out by the Chief Secretary to the Treasury, Danny Alexander, today.
The government’s policy on valuations of the main public service pension schemes and plans for an employer cost cap were published in Public Service Pensions: Actuarial valuations and the employer cost cap mechanism’ today.
The reforms are part of wider changes which will deliver better value for the taxpayer, while keeping the pensions offered to public service workers among the very best available. Employees and pensioners will be unaffected by today’s announcement.
The government can confirm today that the near-final valuations by the Government Actuary’s Department are expected to reveal that the current contribution rates are insufficient to meet the full costs of the schemes in the future. If current rates were allowed to continue, the shortfall would be nearly £1 billion a year across the teachers’, civil service and NHS schemes.
The final results will be published over the coming months and changes to employer contribution rates will come into force in 2015. Where the new valuations show that they have not been paying enough into the schemes, employers (e.g. in government departments, education and health sectors) will need to increase their contributions in line with the results of the new valuations.
The government’s full package of long term public service pension reforms, including raising retirement ages and increasing member contributions, are forecast to save almost £430 billion over the next five decades. These changes will help to put the long term public finances back on a sustainable footing.
As part of the reforms, it is necessary to establish exactly what the pension schemes cost. The government is therefore in the final stages of conducting the most comprehensive valuation of the schemes ever, and assessing whether public service employers have made the proper level of contributions in the past.
The Chief Secretary also outlined details of a new cost cap mechanism for the new public service pension schemes. This framework will ensure that the long terms costs are always controlled, providing protection for the taxpayer and ensuring that the risks of changes in costs are shared equitably with scheme members and employers. This fulfils a recommendation in Lord Hutton’s review into public service pensions to introduce employer cost caps for the schemes.
Chief Secretary to the Treasury, Danny Alexander, said
“An excellent pension has long been part of the reward for a career serving the public. It is only possible to ensure that public service workers continue to have among the best pensions available if we also control the costs in the long term.
Our reforms overall will save nearly £500 billion. Ongoing analysis of what is a fair contribution is the final stage of the reforms, which will ensure that long term costs of public service pensions remain under control and are fairly distributed between employees, employers and taxpayer.”
Notes for Editors
1. The final valuations and rates will be published over the coming months.
2. New Regulations and Directions which will govern the valuation process and the employer cost caps have been published on 11 March 2014. Further details about the government’s policy on actuarial valuations and the employer cost cap can be found in the document “Public Service Pensions: Actuarial valuations and the employer cost cap mechanism’. More information is available at
1. Valuations measure both the contributions necessary to pay the costs of pension benefits being earned now, and whether sufficient contributions have been paid to meet the costs of pension benefits that have already been earned – i.e. the costs of past as well as future commitments. Shortfalls in the employer contribution rates can arise from increases in both of these types of costs.
2. For NHS and Civil Service, new rates will be paid by the employer from 1 April 2015.
3. The Teachers’ Pension Scheme is for teachers in state schools, independent schools, the Further Education sector and also the Higher Education sector. In the Teachers’ Pension Scheme the new rates will be paid from 1 September 2015. This aligns with the academic year.
4. The level of the public service pension cost caps will also be set out when the valuation reports are published.
5. This government has already taken action to ensure that members of the schemes pay a fair contribution to the costs of the schemes.