UK – The UK government has launched a consultation on proposed changes to civil service pension arrangements featuring a shift to average-salary and a change in the retirement age to 65.

“We are setting out a range of proposals intended to modernise the Civil Service pension arrangements while reaffirming our commitment to the principle of a good quality defined benefit pension scheme with a substantial proportion of the cost being met by the employer,” said Cabinet Office minister Ruth Kelly.

The T&G union said civil service workers among its members “expressed their deep concern”.

“Our members play vital roles in the modern day civil service often for lower pay than similar posts in the private sector,” said Peter Allenson, T&G national secretary for public services. “Their pensions are important factors in their career choice. It seems scant reward for their loyalty and commitment to be making changes which, by the government’s own admission, won’t save any money.”

Kelly added: “To ensure the financial sustainability of the civil service and other public service schemes, we propose to raise the pension age to 65. We also want to reflect better the contribution made throughout an individual’s career in the Civil Service, and propose to do this through basing pensions on earnings in each and every year of service.

“Fairness is the key theme running through the proposals. Fairness between civil servants and fairness in the relationship between those working in the public services and those, who, ultimately, fund them.”

The proposed changes will apply to new entrants from 6 April 2006 and staff currently in post from April 1 2013

Watson Wyatt partner Stephen Yeo said: “Career average pension schemes can provide excellent pensions. Indeed they can provide people whose pay rises are less than average with better pensions than they would have received from final salary schemes.

"I estimate that the accrued unfunded liability for public sector pensions was £580 billion at March 2004*. Without reform, it would increase at £46 billion a year. To prevent this liability rising relative to the size of the economy it would be necessary for income tax to rise by 5p in the pound."

Comments to the 52-page ‘Building a sustainable future’ consultation are requested by March 4 2005.