- Increasing the date at which full pension is available from age 60 to age 65. Benefits would still be available at age 60 but this would be considered an early retirement.
- the Civil Service & NHS Schemes move from Final Salary benefits to Career Average Earnings, a move which will have a less significant impact on those likely to have lower salary growth than the high flyers within the schemes.
- To abolish the “gold standard” schemes to produce more of a level playing field for all staff in public sector schemes.
- To revise the tax free lump sum options available to members to provide more choice and flexibility.
- Ill health early retirement benefits to be reformed.
There has been much recent press comment about the continuing row between the Government and the Public Sector Unions over proposed pension reform. So why should we be interested in this local difficulty/skirmish? Well basically because it is us as tax payers who will ultimately pick up the bill for the decisions taken and ultimately any government climb down similar to that of John Prescott prior to the election could see us all with increased tax to pay. The Government has rightly identified that the growth in the number of workers in the public sector, the level of salary inflation and probably most significantly the impact of improved longevity all threaten to push public spending on pensions above the stated objective of costing no more than 2.1% of GDP. The government also wishes to move towards a system where private provision accounts for 60% of the total rather than the 40% currently. The most recent life expectancy figures published recently by the Continuous Mortality Investigation Bureau show mortality rates around 30% lower for both males and females in their late 60’s, the equivalent of an improvement rate of over 4% per year. This information comes hot on the heals of similar findings from the Pensions Policy Institute PPI) who’s research director, Chris Curry commented that “unskilled manual workers, who are likely to have the lowest life expectancy, can still expect to live 16 years after state pension age.” Ultimately paying out pensions for more people for longer will be likely to put a significant additional strain on the public purse and has therefore necessitated government action to try to control sponsor cost inevitable. The key proposals suggest:-