The immediate threat of top earners’ pension contributions being doubled has faded temporarily as the unions and ministers agreed to keep the talks going.
Danny Alexander, Chief Secretary to the Treasury and Brendan Barber, TUC General Secretary, have agreed that negotiations on contribution hike will be considered on a scheme by scheme basis. This was decided in a written ministerial statement on 19 July after exchange of correspondences.
There will be no hike in pensions contributions for people earning less than £15,000 and not more than 1.5 per cent for people earning up to £21,000 by 2014-15, said Mr. Alexander.
Though the higher earners contribution is set to go up, the government has proposed a 6 per cent hike cap (before tax relief) by 2014-15. However, this will double in some cases with the contributions of few NHS doctors set to go up by 14.5 per cent of pay. The ministerial statement however, clarified that the hike will amount to a modest 2.4 per cent in 2012-13 on pro-rata basis.
The armed forced have been exempted from any contributions hike.
“(The government) was committed to securing the full spending review savings of £2.3bn in 2013–14 and £2.8bn in 2014–15, requiring each scheme to find savings equivalent to a 3.2 percentage point increase”, said Mr. Alexander in his statement.
“Local government, the government recognises that the funded nature of the scheme puts it in a different position and will discuss whether there are alternative ways to deliver some or all of the savings,” his statement added.
The government will ask the schemes to provide initial proposals for reform in headline terms by October 2011 to ensure adherence to the April 2012 deadline.
Welcoming the government’s decision, Martin Johnson of the Association of Teachers and Lecturers said: “ATL is willing to join talks with the government about the Teachers’ Pension Scheme, but the talks will achieve nothing unless the government permits free negotiations on the whole package, including pension contributions and retirement age.”
The TUC, similarly clarified that by agreeing to continue negotiations, the unions have neither accepted the government’s reforms proposals nor the change in indexation process from RPI (Retail Price Index) to CPI (Consumer Price Index).