Labour’s proposed changes to civil servant pensions could push future retirees into a life in “poverty”, unions have warned.
Last month, reports surfaced that Chancellor Rachel Reeves was floating paying for higher public worker salaries in exchange for pension plans which reward lesser returns.
Under the rumoured proposal, teachers, nurses and civil servants could be given thousands of pounds more in their current pay packets but will have to accept lower pension benefits.
However, the National Education Union (NEC) is sounding the alarm that Britons will have to choose between “poverty now or in retirement”.
The union’s secretary Daniel Kebede explained: “Public sector workers want to be rewarded fairly for the difficult job they do.”
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Analysts are sounding the alarm over rumoured pension overhaul
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“They want fair pay and they want to defer some of their earnings so they can live a dignified retirement with a fair pension. The choice should not be poverty now or poverty in retirement.”
Pensions for public sector workers are forecast to cost each household around £173,000 with taxpayers have to pay £208billion in the last 10 years to make up for a savings shortfall.
In December 2024, it is understood that cabinet office permanent secretary Cat Little suggested the idea of giving higher wages to civil servants for lesser pensions.
Based on a transcript provided to the Cabinet Office, she said: “What’s the balance between pay and pensions? How do we really focus and segment our pay on the skills that we most need to recruit and retain within the civil service?
Public sector workers could get a retirement savings boost
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“I think it’s really difficult to look at pay and reward in isolation. You’ve got to look at the whole operating model, which is why I’m spending a lot of my time on the operating model because you can’t just look at pay and reward without understanding what the benefit and the conditions to change pay would be.”
Outside of the NEC, other unions have spoken out publicly against the rumoured pension system overhaul, citing the likely impact it will have on their members in retirement.
Richard Munn, Unite’s national officer for health, said: “This is nothing more than rearranging the deckchairs on the Titanic. The real issue is about providing more investment in public services.
“Lower pensions would force workers to work even longer, when too many are already being forced out of the health service before reaching pension age due to illness and ill health.”
Dr Vishal Sharma, the chair of the consultants committee at the British Medical Association (BMA), added: “Doctors’ pay has been eroded over the last decade by successive real terms pay cuts.
“The value of our pensions has also been severely reduced due to a combination of a reduction in pay, pension reforms and pension taxation. It would be neither fair nor reasonable to suggest that our loss in pay can be addressed by further raiding our pensions.”
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In the past, pension analysts have proposed the move with some arguing it would equal public and private sector pay. Experts have suggested it will also relieve the state of its biggest financial expense.
As it stands, the Government is projected to spend £54.3billionn on public sector pensions next year, with the current outstanding bill sitting at an estimated £4.9trillion.I
It is understood that the Treasury has not yet been consulted on any of the rumoured changes to public sector pensions.
A Cabinet Office spokesman said: “We are focused on supporting the civil service with the necessary tools it needs to deliver change for working people.”
