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UK Public Service Pensions Bill aims to save £65bn over 50 years

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  • UK Public Service Pensions Bill aims to save £65bn over 50 years

UK - The UK government has published the Public Service Pensions Bill 2013 as the final stage in its pensions reforms.

It says the Bill, which affects workers in the public sector including local government, will save £65bn (€81bn) over the next 50 years.

This is a significant proportion of the £430bn total that the overall package of reforms is expected to save.

In all, the reforms will cut public service pensions costs by 40%, from 1.5% of GDP without reform, to 0.9% with reform by 2061-62, according to the Office for Budget Responsibility (OBR).

The Bill includes measures to:

Move pensions calculations from a final salary to a career-average basis Make public servants work longer for a full pension, linking their normal pension age to their state pension age, except for the armed forces, police officers and fire fighters Set an employer cost cap to ensure public service pensions remain affordable and sustainable Create a high barrier to changes to specific elements of these pension designs for 25 years Set a common legislative framework and improve the governance arrangements of public service pension schemes.

However, employees 10 years away from their normal pension age on 1 April will not see any change in their possible retirement date, or any reduction in the amount of pension they receive on retirement.

The Bill will also end the pension arrangements for new incumbents of the so-called 'great offices of state' - such as the prime minister, chancellor of the Exchequer, foreign secretary and home secretary - moving new officeholders to a scheme equivalent to that for ministers. 


Though included in the Bill, changes to local government schemes are slightly different from those to other schemes because of the funded nature of local government schemes.

The changes are based on the final report of the Independent Public Service Pensions Commission, published in March 2011.

Chief secretary to the Treasury Danny Alexander said: "This Bill is the final stage in delivering sustainable public service pensions. It will cut the cost to taxpayers by nearly half, while ensuring public sector workers, rightly, continue to receive pensions amongst the very best available.

"This is a good deal for taxpayers and a good deal for public service workers - a settlement for a generation."

Barry McKay, partner at Hymans Robertson, said: "The reforms are necessary because people are living so much longer that the current schemes are becoming unaffordable. That's why they have brought in a cap for employers' costs."

He said using a career average rather than a final salary basis was a good thing because it was fairer for all employees, and lower-paid employees would not be subsidising higher-paid employees to the same extent as at present.

McKay said: "These reformed schemes are still very good-quality DB schemes, and, because of that, the costs are still quite high. Whether or not these schemes are sustainable will probably come down to whether the cap on employer contributions operates effectively.

"There will be a linkage between life expectancy and retirement age so that future pensioners will receive benefit for a similar number of years as at present."

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