Ministers rumbled over misleading pensions figures

Posted: November 23, 2011 in Uncategorized

Ministers’ misleading claims that their proposals for public sector pensions will mean better retirement packages for some have been exposed by PCS using the government’s own figures.

On 2 November, when the government made its latest offer, prime minister David Cameron told the Commons: “I can tell the House that low and middle-income earners will actually get more from their public sector pensions.”

Publishing a document, ‘Public Service Pensions: good pensions that last’, chief secretary to the treasury Danny Alexander also claimed on the same day: “…we are offering the chance of a significantly better pension at the end of it for many low and middle income earners.”

The document makes a similar claim and used case studies to illustrate the point.

But a pensions calculator placed on the civil service website by the Cabinet Office last week – then hurriedly removed, but not before we saved a copy – confirms the proposals deliver year on year lower pensions than existing schemes.

Ministers must correct misleading figures – Mark Serwotka

Case study B in the Treasury document is a civil servant on £22,000 a year with 18 years’ service who will be 40 when the new scheme is introduced in 2015.

The figures given show retiring at 60 under the existing scheme and working just 18 months longer under the new scheme would give them the same pension of £9,100.

But, as reported by Channel 4 News last night and on its FactCheck blog, the calculator gives a very different outcome to the same example.

It shows the Treasury underestimates the case study’s pension and that even working four years more, they would still get less. The calculator shows: pension at 60 under the existing scheme, £13,932; retiring at 64 years under the new scheme, £13,791.

The total pension the civil servant would miss out on under the new scheme by working to 64 would be £87,888 over a normal retirement, including:

  • Four years of pension at £13,932 a year (£55,728)
  • Additional pension by working to 64 of £1,608 a year, totalling £32,160 over a normal retirement of 20 years.

The same civil servant will still be required to pay extra pension contributions of at least £704 a year from April 2015 onwards – including the additional four years working until 64. This totals £16,896. The switch in indexation from RPI to CPI would also cost them around £21,500 over a normal retirement.

The calculator confirms we are right to oppose the plans because civil servants will be required to pay more and work longer for less in retirement.

From the outset the government has tried to mislead the public and public servants. This confirms ministers have also given misleading and inaccurate information to parliament and they must correct it and apologise.

Update, 2pm 23 November 2011: John McDonnell MP has this afternoon raised a point of order in the Commons, citing these serious discrepancies and calling on ministers to return to the House to explain them.

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