The government has confirmed that it will keep the contribution rates for the Civil Service Pension Scheme unchanged in 2019-20 despite the cost of the scheme falling below a threshold that should trigger a reduction for civil servants.
The Cabinet Office announced on Monday that civil servants' contributions into the scheme would remain unchanged “as an interim measure until the valuation process has been completed”.
A valuation of the Civil Service Pension Scheme had identified that the cost of the scheme had fallen below the target cost, which trade unions have calculated should trigger a 2% reduction in contributions.
However, the government announced in January that it will pause part of its work on the valuation of public service pensions – including the Civil Service Pension Scheme – due to an ongoing court case.
Chief secretary to the Treasury Liz Truss has said a December judgement from the Court of Appeal on “transactional protection” offered to some scheme members could have a £4bn a year impact on public sector pension finances. She said the decision meant it was “not now possible to assess the value of the current public service pension arrangements with any clarity”.
Following Truss’ statement, the Cabinet Office consulted on keeping the contribution rates – which range from 4.6% for civil servants earning up to £21,637 to 8.05% for those earning £150,001 and above – unchanged despite the scheme falling below the cost cap floor.
In the document confirming the government’s plan, the Cabinet Office stated that a joint response from the FDA, PCS, Prospect and Prison Officer Association trade unions “indicated that they were unwilling to agree the proposal unless further assurances were given in respect of the cost cap remedy and, absent those assurances, proposed a counter proposal of a reduction in contribution rates”.
Although the report stated that the Cabinet Office had “carefully considered the response from the FDA, PCS, POA and Prospect”, it concluded they were “unable to give the assurances requested”. It added that “further, the unions’ representations and counter proposal did not persuade the minister to make any changes to the proposal that was initially consulted on”.
As a result, “for the year ending 31 March 2020, the proposal is to retain the contribution rates and associated salary bands which are applicable up to 31 March 2019. The cost of accruing pension scheme benefits will remain the same for scheme members”.
Responding to the decision, PCS general secretary Mark Serwotka said that the union “deplored the imposition of this roll over of contribution rates into 2019-20, as our members are already paying too much for their pensions, which have already dwindled in value”.
He added: “The government are depriving them of money that is owed to them already, and PCS are considering our next steps to challenge this and obtain justice for our members.”
Prospect deputy general secretary Garry Graham told CSW that the government had decided “to effectively roll over contribution rates despite clear indications that the CSPS has fallen below cost estimates and triggering the need for benefit improvements”.
He added that Prospect and other unions had proposed a range of benefit improvements, including significant reductions in member contributions.
“We recognise as a result of separate legal challenges to other public sector schemes that there is a level of uncertainty and the government is seeking right to appeal at the moment,” he said but “it is deeply disappointing that the minister was unable to give the commitment that if they win their legal case that they would come forward with a range of benefit improvements – including importantly a significant reduction to member contributions”.
After a decade of pay constraint across the civil service, such a move would have been “seen as a signal of good faith”, by civil servants, Graham added.