Government announces final proposals for public sector pensions reform

9 March 2012 saw the Government announce the final proposals for reform of the PCSPS, NHSPS, and Teachers Pension Schemes, to come into effect from April 2015. Continuing on separately are the LGPS negotiations, which have a different timeframe for implementation.

Based on previous Government press releases, the announcements did not contain any surprises. It was confirmed that:

• Schemes will be based on career averages, with increased retirement ages and employee contributions (except for low earners)

• Final salary linkage will remain for pre-2015 service

• Staff within 13 ½ years of retirement will be partially or fully protected against the changes.

It was also confirmed that the Government intends to retain the “Fair Deal” pension protection for staff transferring from the public to private sectors. Private sector contractors will also be given access to the unfunded schemes, allowing staff to remain members of the appropriate public sector scheme. By removing or reducing the need for GAD certification (a current requirement), contractor’s costs and risks are expected to be reduced if not altogether eliminated.

There is currently little further information available on these developments. The Government will need to clarify key areas, particularly in relation to the position of contractors. Questions that will need to be answered, for instance, include how the retention of salary-linkage for historic service will impact on contractors and whether the schemes will be available for staff transferred out in earlier contracts.

In addition to answering these questions, the Government will need to draft legislation to put its proposals into effect. We will keep you up to date on further developments.

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