UK - The UK government has unveiled plans to link the normal pension age to the state pension age and phase out final salary pensions across the entire public sector.

Speaking at an Institute of Public Policy Research (IPPR) event, chief secretary to the Treasury Danny Alexander announced the changes.

Unions decried the announcement as "gunboat diplomacy", as it coincided with ongoing negotiations on pension reform and the threat of widespread public sector strikes.

Justifying the shift from final salary to career-average revalued earnings (CARE), Alexander said: "A career average scheme would guard against the risks and costs that come from individuals jumping to higher salaries in the last few years of their career.

"It would mean everyone will get broadly the same amount for every pound they put in.  This would be an inherently fairer system for the future."

He further explained that linking normal pension age to state pension age would allow both state pension payments and those accrued in occupational pensions to be drawn down at the same time.

Additionally, as the retirement age was set to increase to 66 by the end of the decade, it would seek to rebalance the amount of time spent in retirement - a key issue raised by Lord John Hutton in his report on public sector pension reform.

"Through this change, we would move the proportion of adult life spent in retirement for public service workers back to about a third - that's roughly where it was in the 1980s," Alexander said.

He further noted that Hutton's recommendations on uniformed services would be taken into account, meaning that police and armed forces would still be allowed to retire at 60, reflecting the "unique nature of their work".

The proposals were welcomed by some in the pensions industry, while public sector unions heaped scorn upon them.

Joanne Segars, chief executive at the National Association of Pension Funds, said it was "clear" the government needed to act to limit the impact of contribution increases across public sector retirement schemes.

However, she struck a more cautious note, despite praising the phased increase to contribution hikes.

"Even with these changes, there is still a real threat that too many average earners will quit their pension, especially at a time of flat wages and tight household budgets."

Consultancy Hymans Robertson warned that extending the contribution hikes to all workers earning more than £15,000 per annum would potentially spell problems for the schemes in the future.

Ronnie Bowie, senior partner at the company, said: "Our instinct is that the opt-outs will be higher than the government is counting on, which will put the burden back on the state for providing for these people who do opt-out when they reach retirement."

He added: "There is a risk this won't work out as well as the government hopes."

Public sector unions were less forgiving of Alexander's proposals, accusing the government of "gunboat diplomacy", as well as pre-empting ongoing discussions on the reforms.

Gail Cartmail, assistant general secretary at Unite, attacked the chief secretary directly.

"It is completely wrong of Danny Alexander to hit the media airwaves to make detailed announcements on the current negotiations," she said. "It is tantamount to bombing the talks.

"We have moved in the flash of a media soundbite from tough, detailed negotiations to gunboat diplomacy by the Treasury."

She also criticised that specific contribution increases had not even been raised in the discussions between the Trades Union Congress and government representatives.

Jonathan Baume, general secretary of public sector union FDA, said he was increasingly under the impression the negotiations were doomed to failure as long as the Treasury was in charge.

He added: "The chief secretary's comments effectively pre-determine the outcome of the negotiations currently underway between the public sector unions and the government."

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