The Treasury today set out the government's progress on public service pension reform - announcing consultations and plans for talks with unions.
The key points are:
- The government has decided to slow the pace of the 3.2 percentage point increase in employer contribution by phasing it in gradually over three years.
- Separate scheme specific discussions will make proposals by the end of October on how these savings are achieved.
- The government has made clear that lower earners should be protected from the impact of any contribution increases.
- No increase in employee contributions for those earning less that £15,000.
- No more than a 1.5 percentage point increase in total by 2014/15 for those earning up to £21,000.
- Government claims these two measures mean 750,000 people should pay no extra contributions and another 1 million should pay no more than 1.5% extra. This amounts to a 0.6 percentage point increase in 2012/13 on a pro-rata basis.
- Cap on the maximum increase of 6 percentage points (before tax relief) by 2014/15 for high earners - amounting to a 2.4 percentage point cap in 2012/13 on a pro-rata basis.
- Consultations on the first year contribution rates (2012/2013) will begin end of this month and be completed by the end of October. The contribution rate rises will be implemented by April 2012 for unfunded schemes.
- Government says it recognises the funded nature of the Local Government Pension Scheme puts it in a different position and will discuss whether there are alternative ways to deliver some or all of the savings in respect of contribution increases.
- Armed forces will continue to be exempt from any increase in member contributions.
The Treasury also restated its aims for reforms:
- To get £1.2bn of savings during 2012/13 generated from member contribution increases.
- First year savings for 2012/2013 are 40% of the average 3.2 percentage point increase in member contributions put forward by Chancellor George Osborne last year.
- Aim to get savings of £2.3bn in 2013/14.
- Aim to get savings of £2.8bn - the intended figure put forward by Chancellor Osborne - in 2014/15. This is equivalent to 3.2 percentage point increase.
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