A deal on public sector pension reform

The Government has struck a deal with most of the public sector unions to reform pension schemes.

According to Treasury Minister Danny Alexander, an outline agreement on the required changes to public sector pension schemes has been reached in principle.

They claim that the proposals that have been agreed deliver the required cost savings in full.

It appears that a concession has been made which will see more generous accrual rates applied to future pension benefits.

As was previously proposed, future pension benefits in the public sector will be based on career average earnings, rather than the current final salary basis. This means that in many cases those in the public sector will need to work for longer to accumulate the same level of pension benefits.

Higher pension contributions for members will still come into force from next year.

The pension age applied to future accruals, once the new rules are introduced, will increase in line with the state pension age.

With people living longer, changes to the still generous public sector pension schemes was inevitable.

It will be interesting to see the response from union members to these revised proposals.

From what we have seen of the different terms that will be applied to each scheme, we expect to see a reasonable level of confusion as the proposals are digested.

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