The Cabinet Office has said it will not reduce civil servants' pension contribution rates from April, despite a recommendation from the advisory board for the scheme that payments should be cut.
The government has refused to reduce contributions, which should be triggered by a cost-control mechanism, due to uncertainty over the impact of a court case that ruled previous changes to pension schemes were discriminatory.
The Court of Appeal’s December 2018 ruling in the landmark McCloud case found that “transitional protections” introduced in 2015 for older staff in connection with the creation of new pension schemes effectively discriminated against younger firefighters.
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After the then-chief secretary to the Treasury Liz Truss said the ruling could have an impact of £4bn a year on public sector pensions, the government paused the formal revaluation of the civil service scheme that had been expected to lead to a lowering of around 2% in contribution costs.
Despite unions accusing ministers of abusing their power by continuing the pause, the Cabinet Office has confirmed that there will be no reduction in the 2020-21 year after a consultation with unions.
According to the letter seen by CSW, the Cabinet Office said that reducing contributions “would not be appropriate outside the cost cap process, which is currently suspended”, despite advice from the Civil Service Pension Scheme’s advisory board that they should be lowered.
The letter, sent to the national trade union council made up of the FDA, Prospect and PCS civil service unions, added: “Therefore we are unable to agree to you counter proposal of a 2% reduction in member contribution rates or a temporary suspension of member contributions, as per your counter proposal.”
As a result, the government intends to rollover existing contribution rates without the agreement of the unions. The letter says that the Cabinet Office recognises “the strength of feeling on the issue of member contributions”, adding that “I hope we can keep engagement going, particularly to address the cost cap process as soon as the pause is lifted”.
Responding to the letter, Garry Graham, Prospect deputy general secretary, said this would represent the second year in a row in which contribution rates were rolled over despite the likely in contributions that is set to be triggered by the revaluation.
This amounted to a betrayal of civil servants, he said, as the Civil Service Pension Scheme’s advisory board had been “very clear” in its advice to ministers that it would be inappropriate for scheme members to shoulder the cost of the government’s failed legal action in the McCloud case.
“Under the cost cap mechanism and the Scheme Advisory Board recommendations to the minister, which were backed by all unions, member contributions should have been reduced by at least 2% from 1 April last year,” he said.
“Employer representatives and unions are unanimous in our view that members deserve a reduction in their contribution rates.
“The ‘consultation’ undertaken was the most perfunctory I have ever experienced. Prospect will be looking to challenge this decision both legally and industrially working with other unions. Member should be rightfully angry at the way they have been treated.”
Lucille Thirlby, assistant general secretary at the FDA, said the union "strongly opposes a further rollover of the current contributions and the delayed implementation of changes to backdated pay arrangements'.
She told CSW: "We believe it is essential that the Treasury suspension of pension valuation arrangements is lifted as a matter of urgency. The rectification of the cost cap breach must be allowed to proceed.
"For the second year running, this suspension is preventing the reduction of pension contributions being applied to civil service pension scheme members. This reduction would have a significant positive impact on civil servants’ take-home pay, especially as they have had over a decade of pay restraint.
"Alongside the other civil service unions, the FDA will urge the newly appointed minister for implementation to make the case to the Treasuryto lift the suspension of the pension valuation arrangements."