2007 changes: background

PCSPS pension changes: brief background to the changes

The PCSPS underwent major reform in 2002 when the 'Premium' section was introduced. This offered a final salary pension with a normal pension age of 60, pension accrual rate of 1/60th, the option to convert pension into lump sum and a contribution rate of 3.5%.

pension logoHowever, before the year was even out the government announced further reforms in the Pensions Green Paper published in December 2002. This expressed the government's intention to increase normal pension age for public sector pension schemes from 60 to 65.

Two years later the Cabinet Office issued specific proposals for the PCSPS in its document 'Building a Sustainable Future'. The proposals were to apply to:

  • new entrants from April 2006
  • existing staff from April 2013 (but with accruals before April 2013 protected).

The main features of the new scheme were to be:

  • normal pension age of 65
  • 'whole career' scheme design means your pension is based on each individual year's pensionable pay. Pension benefits are therefore related to pay throughout career rather than final earnings just before retirement.

Faced with proposals to increase normal pension age right across the public sector, the relevant unions combined to campaign for a change in policy. As a result of this pressure the government agreed to review their proposals. Following intensive negotiations, the Public Sector Forum agreement on pensions was reached in October 2005. This allowed for existing staff to retain current pension arrangements while confirming a commitment to sustainable, high quality, defined-benefit pension provision for new entrants.

In December 2006 Cabinet Office Minister Pat McFadden wrote to the Council of Civil Service Unions providing outline proposals. These included:

  • existing staff to continue in current scheme, some scope for improvements
  • whole-career, index-linked, pension age 65 scheme for new entrants
  • cost-sharing to be introduced from 2012 with average employer contribution capped at 20%

The CCSU responded positively, acknowledging the government's position on cost-sharing but not agreeing with it.

From December 2006, Prospect and the other civil service unions were involved in technical discussions on the implementation of these proposals. The final version of the proposals was agreed in June 2007.

From 18 June-20 July 2007 members in the civil service and related areas were balloted on their acceptance of major changes to their pension scheme. The result was an overwhelming acceptance of the deal, by a 99% majority.