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Discussions have now concluded with health, education and civil service unions on details for new public service pension schemes to be introduced from 2015.

Heads of Agreement on the main elements of scheme design were reached on 20 December 2011 for the NHS Pension Scheme, the Principal Civil Service Pension Scheme and the Teachers’ Pension Scheme.  Further work on the remaining details has taken place between departments and trades unions. Discussions have now concluded for these schemes and Proposed Final Agreements, based on the Heads of Agreement reached on 20 December, have been published recently by departments.

These Proposed Final Agreements remain in line with the approach set out in Lord Hutton’s report and will mean that public service pensions remain among the very best available. The agreements also continue to deliver the Government’s key objectives on linking Normal Pensions Age to State Pension Age and moving to schemes based on career average salary, while protecting those closest to retirement. While most workers will be asked to retire later and pay more towards their pension, at the same time, most low and middle earners working a full career will receive pension benefits at least as good, if not better, than they get now.  Those less than ten years from their Normal Pension Age on 1 April 2012 will continue to be protected from these changes.

Details agreed include, a process with trades unions for assessing the equalities impacts of these reforms; clarification on death in service and other ancillary benefits, such as the treatment of members who leave active service but rejoin within five years; and options for members to contribute more in order to top up their pension if they choose to retire early. The enhanced cost ceilings set on 2 November 2011 remain unchanged, with no additional money made available.

The majority of unions have agreed to take these Proposed Final Agreements to their Executives as the outcome of negotiations. In parallel with this process, the Government has begun working on the implementation of these scheme designs and will introduce legislation as soon as parliamentary time allows, so that new schemes can be in place by 2015.

Chief Secretary to the Treasury, Danny Alexander, said:

"The conclusion of talks at scheme level follows constructive discussion with unions on the final details of the Heads of Agreement set out last year.

“These agreements mean that public servants who have dedicated their lives to serving the public will rightly continue to receive pensions that are among the very best available, while delivering the Government’s key objectives in full.

“This is a fair deal for public service workers and an affordable deal for the taxpayer.”

For the Local Government Pensions Scheme (LGPS) the Government, the LGA and trades unions agreed principles for further discussions on 20 December 2011, based on the Government’s key objectives of linking Normal Pension Age to State Pensions Age and moving to a career average scheme. All parties are working to agree the design of a new scheme by April 2012, for introduction in April 2014. These discussions are ongoing.

Notes for Editors

1. The Government is committed to an average increase of 3.2 percentage points in member contributions, as set out at the Spending Review and phased in over three years from April 2012. The Government is not proposing any further increase in total employee scheme contribution rates.

2. In July 2011, the Government agreed a process with trades unions for taking forward Lord Hutton’s proposals for long-term reform of public service pensions through scheme-specific talks. To provide the parameters for talks with trades unions, the Government set out initial cost ceilings at the beginning of October 2011. These cost ceilings set out the combined employee and taxpayer contributions. 

3. Following these discussions, the Government increased these cost ceilings, making its offer 8 per cent more generous. On 20 December 2011, Heads of Agreement on the main elements of scheme design were reached within these cost ceilings for the NHS Pension Scheme, the Principal Civil Service Pension Scheme, the Teachers’ Pension Scheme and the Local Government Pensions Scheme.

4. The Department of Health, the Cabinet Office and the Department for Education, have today published the proposed final detailed design for their pensions schemes, following the conclusion of talks with unions. These proposed agreements can be found on departmental websites.

5. Heads of Agreement for the Firefighters’ Pensions Scheme were set out on 9 February 2012. The remaining details are being finalised in discussions.

6. Discussions on police, armed forces and judiciary are a separate process and proposals will be brought forward in due course.