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In October 2005, the government and public sector trade unions agreed a framework for the reform of pension schemes in the health sector, education and civil service.
On 18 October 2005, at a meeting of the Public Services Forum, government ministers and trade unions in the public sector reached a framework agreement that will be applied to the reform of public services pensions in the National Health Service, education and the civil service.
The talks which resulted in the agreement were initiated in March to avoid a planned 24-hour strike by public sector workers over proposed changes to their pension arrangements (UK0504104N). The government had sought to increase the retirement age to 65 in public sector schemes which enable retirement at 60, to move away from final-salary-based pensions and more generally to reduce benefits.
However, the framework principles agreed specify that 'existing scheme members will have the right to suffer no detriment in terms of their normal pension age and will retain their existing pension provision unless individual or collective agreements within sector-specific negotiations are reached which allow changes to those provisions or transition to new schemes'.
New pension schemes will be negotiated to take effect during 2006 under which the normal pension age for new entrants will now be 65. Retirement at 60 will still be possible but with lower pensions or increased contributions. The new schemes 'should continue to guarantee defined benefit provision, linked to an individual’s earnings. Schemes should also offer indexation to protect retired members against rises in the cost of living.'
Commenting on the outcome of the discussions, Alan Johnson, the secretary of state for trade and industry said: 'All sides have worked hard to reach an agreement. A transparent exchange of information has allowed a shared understanding of the challenge and enabled progress to be made. This is a sensible step forward, achieved through proper negotiations, which puts public sector pensions on a sound financial footing.'
Brendan Barber, general secretary of the Trades Union Congress (TUC) welcomed the agreement. He said: 'Working together through the TUC, public service unions have today won a major breakthrough. The government has accepted that today’s public sector staff should not have their pensions promise broken, and need suffer no detriment in their pension arrangements. This has met the major union objective. On top of this, the government has given important guarantees for the future. All new public pension schemes will be based on defined benefits, linked to earnings and index linked. All public service workers will continue to be able to retire at 60 - if that is their wish - into the future.'
Unison’s general secretary, Dave Prentis, said that the government had 'honoured its pensions contract with the nation’s health workers'. He added: 'They will have lifetime protection of their existing pension provision, including their retirement age.'
However, employers’ groups criticised the outcome of the talks, arguing that the government had failed to tackle the pensions deficit. Sir Digby Jones, director-general of the Confederation of British Industry (CBI) said: 'This is a bad deal for the taxpayer. The government has capitulated to the threat of public sector strikes and conceded that 21-year-old civil servants can retire aged 60 in 2044. Lucky them at a time when private sector employees face the reality of longer working lives.'
Detailed negotiations will now take place in each of the sectors covered by the agreement. Separate negotiations are under way in local government, but trade unions have called for the principles of the deal to be applied to the local government pension scheme too.
This information is made available through the European Industrial Relations Observatory (EIRO), as a service to users of the EIROnline database. EIRO is a project of the European Foundation for the Improvement of Living and Working Conditions. However, this information has been neither edited nor approved by the Foundation, which means that it is not responsible for its content and accuracy. This is the responsibility of the EIRO national centre that originated/provided the information. For details see the "About this record" information in this record.