Socialist Worker

PCS accepts Gordon Brown’s two-tier pension deal proposal

Issue No. 2034

The government and the PCS civil service workers’ union have released details of new proposals for the pension scheme.

This scheme will apply to new entrants from the middle of 2007. The biggest change is the raising of the normal pension age from 60 to 65.

Socialist Worker opposed accepting this change and continues to oppose a two-tier pension scheme.

But there are other issues as well. The new scheme does have some important concessions by the government, evidence of ministers’ fear of the union’s strength.

In particular, the new scheme will have an accrual rate (the pace at which you build up a pension) of 2.3 percent (just over 1/43rd) per year. So after ten years your pension would be 23 percent of salary earned in those ten years.

This move is an indication of the strength of the PCS. It compares favourably not only to some other public sector schemes, but also to existing schemes. The current schemes have accrual rates of 1.25 percent (1/80th) and 1.67 percent (1/60th).

However, contributions will be at the higher (premium) rate of the present schemes.

And another big change is to move to a career average scheme rather than a final salary scheme. This takes the average of a workers’ income over their life rather than their final salary.

These earnings are uprated by the RPI measure of inflation but do not keep pace with the general rise in earnings over members’ working lives. The higher accrual rate goes some way to offset this – but offers no firm guarantee for the future.

Traditionally the unions have opposed this change, although the PCS claims research shows it will be helpful for a significant number of its members who work in the civil service for up to 12-15 years of their working lives without being promoted to higher paid jobs.

However, a key issue is that the uprating of previous earnings will be by the RPI measure of inflation and not by an earnings index, such as the National Average Earnings Index.

In other words, when your career earnings are averaged, they are proofed only against inflation (at the government’s imperfectly constructed rate) and will not have kept up with the general rise in earnings. The improved accrual rate only partially offsets this.

Further negotiations on the proposals will now continue before going out to union branches for consultation later in the year, followed by a ballot of all members.

Notwithstanding the concessions, the proposals should still be opposed.

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Sat 20 Jan 2007, 00:00 GMT
Issue No. 2034
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