The UK faces a wave of industrial unrest if the recommendations of a report on public sector pension reform due to be published later this week are adopted.
A Treasury review, conducted by former Labour Cabinet minister Lord Hutton, is expected to propose sweeping changes to the pension system, which include axing ‘gold-plated’ financial salary pension schemes and replacing them with schemes based on workers’ average earnings over the course of their career.
Personnel would keep the final salary pension contributions they have made to date and the changes would only apply to new ones, however.
Hutton’s report will also call for the development of a formula to enable regular automatic reviews in order to deal with increases in life expectancy. Such a mechanism would either involve raising contributions, reducing the amount earned in a pension each year or increasing the pension age if people continue to live for longer.
The proposals will likewise suggest that public servants should not be able to draw their pension in full until the age of 65 and the ceiling should rise in line with planned increases to the state pension age. Many existing staff, although not newer entrants, currently retire at 60.
According to official estimates, there is now a £4 billion gap between current pension payments made to retired public sector workers and the total pot of employer and employee contributions. This shortfall is expected to rise to £10.3 billion over the next five years and is already 20 times larger than it was in 2005.
But Mary Maguire, a spokesperson for Unison, warned the Daily Telegraph that the proposed moves were a “recipe for industrial unrest”.
“We don’t want our members to have to go on strike to defend their pensions. A strike is the last resort but it is the only weapon our members would have to stop something like that happening – in the face of a pay freeze, with inflation at 4-5%, and facing job cuts,” she said.
Brian Strutton, national secretary of the GMB union, agreed: “On top of job losses and pay freezes, the erosion of pensions will be the final straw that will trigger not only strikes but a mass withdrawal from pension schemes in favour of welfare dependency. How does that benefit the taxpayer or society?” he said.
The warnings echo concerns expressed from within the Conservative party. Baroness Margaret Eaton, Tory leader of the Local Government Assocation, criticised the planned reforms last month over worries that if they led public sector workers to opt out of pension schemes, it would store up trouble for the future.
