Avoiding the bitterest pill

John Monks_cr.jpgJohn Monks calls on Ministers to put agreements over public sector pensions on the face of the Pensions Bill


The Public Services Pensions Bill has its Second Reading in the Lords today. It is not a routine bill and marks a major shift in the world of public sector pensions. 


The growth of occupational pensions was one of the outstanding, if unsung, features of post-war Britain. Today, defined benefit schemes in the private sector are in full-scale retreat, closed to new starters or wound up altogether. As the report by Lord Turner and Baroness Drake showed so well, more and more workers in the private sector are being left with no adequate means of support for their old age, besides the state pension. (Although this is being addressed to some degree by the roll out of compulsory pension provision by employers, along with auto enrolment.)


At the start of the current bill, the government seemed to believe that the gap between public sector provision and the private sector is too glaring – a view that was modified during a series of talks with public sector unions, facilitated by Brendan Barber, the outgoing TUC general secretary. Even so, public service unions remain concerned with pensions becoming more expensive and unaffordable, increased retirement ages and some benefits being cut. It is important that Ministers take these concerns seriously if there is not to be demoralization and dispute. 


The TUC, which negotiated a framework for the talks at sector level, also has concerns, over the bill going into unnecessary detail in some areas, including revaluation rates where it cuts across some of the previously agreed sectoral packages. The bill also has surprising omissions, such as the commitment to the fair deal policy for workers contracted out of public service. And where is Lord Hutton’s recommendation for a review of the link between the state pension age and the normal pension age in public sector schemes? 


Meanwhile, a feature causing significant concern in local government is the inadequate recognition of its scheme as being fully funded and not pay-as-you-go as in other parts of the public sector. Assurances were given by Ministers in the Commons, as they did with concerns over possible Treasury control over local valuations. And ambiguities also need to be clarified is scheme closure, which has the potential to trigger major changes in the local government scheme’s investment strategy. There is also widespread concern that the bill gives Ministers retrospective powers to change pension arrangements.


As Labour agrees with the general thrust of the proposed legislation, it would be helpful to see what has previously been agreed appear on the face of the bill. To not to so would runs the risk of turning existing concerns with the bill into a more bitter-tasting pill. 

Lord John Monks is a backbench Labour Peer and a former General Secretary of the TUC

Published 19th December 2012

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