Prospect • PublicEye  – February 2015

PUBLICEYEProspect members in public service

www.prospect.org.uk  •  Issue 1, February 2015

The six questions you should ask anyone who wants to be your MPPROSPECT’S CIVIL service executive committee is asking members to contact their MPs and prospective parliamentary candidates to canvas their opinions on a range of issues affecting public servants.

Prospect also sent six “core” questions to the Conservative, Labour and Liberal Democrat parties. They cover: 1 Prospect’s manifesto for good work2 embedding the

positive lessons learnt from the construction of the Olympic park within UK businesses

3 abolishing fees for employment tribunals

4 regulating zero hours contracts

5 sustainable procurement policies to ensure suppliers and contractors provide good opportunities for apprenticeships and graduate trainees

6 the role of modern trade unions in the economy and wider society.The answers will be published in

relevant union publications and on a

one-off, stand-alone Prospect general election website, which will go live soon (ge2015.prospect.org.uk).

Sector president Geoff Fletcher said: “Prospect is not affi liated to any political party and it is not its role to suggest how members should vote. But people do have the right to ask MPs and candidates for their views on proposals that will affect their jobs and the services they provide.

“Please make contact with your local MPs and candidates and use the questions to fi nd out what they think about these issues. The groundwork has already been done in some areas where members have brought the Prospect

Pledge questions to politicians’ attention.”

The union has also drawn up questions on behalf of members in the public sector. They cover: ● an independent review of specialist pay for the civil service ● science ● heritage and defence funding ● equal pay audits.

Your conference, your voicePROSPECT’S civil service sector conference will be held on Wednesday 3 June at the East Midlands conference centre in Nottingham (right). 

The closing date for branches to submit motions, nominations and the names of 

delegates and deputies is 12 noon on Wednesday 4 March. The fi nal agenda will be issued on Wednesday 29 April.

Branch, section and sub-section secretaries can download all the relevant paperwork from http://library.prospect.org.uk/id/2014/01586

PENSIONS AND ABILITY TO ACT IN OUR OWN DEFENCE ARE AT STAKEIN January Treasury minister Priti Patel revealed plans to legislate for a £95,000 cap on redundancy pay-offs for public sector staff earning more than £27,000 a year. 

Deputy general secretary Leslie Manasseh said: “We know a Conservative government would seek to cut civil service jobs at an even greater rate than over the past fi ve years. It is simply unfair to penalise those who leave early because their jobs disappear.”

The Conservatives also intend to make it harder for certain public service unions to call strikes. Ballots affecting 

health, transport, fi re services or schools would need at least a 50% turnout and the backing of 40% of eligible union members. Currently a simple majority is valid in a strike vote. 

But unions say the government has blocked their proposals for making the process fairer and more democratic, and warn that once introduced, the threshold is likely to be extended to all strike ballots.

Manasseh said: “We would all like to see higher participation in ballots. But we are forced by law to use an antiquated system that does not allow for electronic balloting in the workplace, which would lead to higher turnouts.”

He said that while the Conservatives have previously proposed a minimum 50% turnout, even the 40% threshold bore no correlation to any other democratic election process. “If applied to the House of Commons, 86% of Tory MPs currently in place would not have been elected.”

WHERE TO FIND MORE INFORMATION ■ The questions have been sent to all Prospect branch and section secretaries.

You can fi nd them at: https://library.prospect.org.uk//download/2015/00032 ■ A list of politicians who have signed some or all of the Prospect pledges is at

https://library.prospect.org.uk//download/2015/00014 ■ See a Prospect briefi ng note on writing to your MP

https://library.prospect.org.uk//download/2008/00436

‘Prospect is not affi liated to any political party and it is not its role to suggest how members should vote. But people do have the right to ask MPs and candidates for their views on proposals that will affect their jobs’

STEFANO

 CAGN

ON

I

■ Prospect members on the TUC’s ‘Britain Needs a Pay Rise’ demonstration last October. The rights of public sector workers to take industrial action are under threat

Prospect • PublicEye  – February 2015

2 PAY

Published by Prospect, New Prospect House, 8 Leake Street, London SE1 7NN

PublicEye editor: Marie McGrath    E marie.mcgrath@prospect.org.uk    T 020 7902 6615

Printed by: College Hill Press

Public servants take a stand against falling living standardsPROSPECT MEMBERS’ patience with the Westminster government’s public sector pay freeze is wearing thin.

Branches across a range of workplaces are taking alternative forms of industrial action to send the message that “enough is enough”.

In December, professionals and specialists in the Health and Safety Executive took a half day’s action with a co-ordinated walk-out at 1pm from 30 offi ces across the UK.

The dispute follows the branch’s rejection of a 1% pay offer that HSE imposed even though it was overwhelmingly rejected by staff.

Continued action short of a strike will delay on-going casework, but responses to emergencies or planned court appearances will be exempt.

Prospect negotiator Jez Stewart said: “HSE staff do not take industrial action lightly. But they have had enough of working harder than ever to see their dedication and professionalism rewarded with yet another fall in their living standards.”

Stewart pointed out that pay restraint is now impacting on HSE’s ability to recruit and retain staff, and is hampering its ability to deliver a service that the public deserves and expects.

At the Defence Science and Technology Laboratory, management has entered into negotiations with Prospect representatives after members took part in industrial action short of a strike in November and December.

The action was taken in response

to management withdrawing money from the pay pot for discretionary bonuses.

DSTL’s Prospect branch is not opposed to bonuses being paid in exceptional circumstances, but it pointed out that the withdrawal was made without union agreement and that the money would be used to pay bonuses to “favoured” members of staff. As a result, most employees will now receive only 0.9%, rather than an across-the-board consolidated pay rise of 1%.

Members are encouraged by management entering into talks, but are contemplating an escalation of their action if necessary, up to the end of March 2015 when it would have its greatest impact.

Prospect members in the Met Office have voted for industrial action after the employer imposed a pay award for 2014 that was not agreed with the union.

Although the Met Offi ce sought permission from the Treasury to pay more than 1%, that request was denied.

Prospect negotiator Helen Stevens said: “Unfairness is stacking up because the Met Offi ce is unable to operate the pay system as planned.

“People are contributing to the organisation’s improved effi ciency and effectiveness, dealing with the pressures of change and demanding work while their incomes fall in real terms.”

At the UK Hydrographic Office, members suspended their industrial action after apparent progress towards a new pay system.

It now seems that the UK HO is not being granted suffi cient fl exibility to start to fi x the pay system.

The branch is considering reinstating the action and upping the level of activity.

‘HIGHLIGHT PAY FREEZE’UNIONS across England and Wales are backing a campaign to highlight the impact of the cost of living crisis on working people.

The Trades Union Congress is leading two weeks of campaigning and events from 16 February to 1 March 2015.

Civil service sector president Geoff Fletcher urged members across Prospect’s public service branches to use the campaign to highlight the impact of pay freezes in their workplaces.

“The cost of living crisis is not just a low pay problem – even those with steady jobs are struggling to make ends meet,” he said. 

“Fair Pay Fortnight is an opportunity for Prospect members to highlight the impact of pay freezes, below-infl ation rises, job insecurity and more demands with fewer resources on the services they provide.”

 ■ http://fairpayfortnight.org/

Risk of disruption because of pay freeze

Prospect working for a thaw – www.prospect.org.uk/joinus

WARNINGSEVERE WEATHER

Your voice at work

UnchartedWaters…

fair pay for all staff at UKHO

The UKHO pay system has been scuppered – 78% of staff trapped belowthe rate for the job!

Join other UKHO staff already in Prospect fightingfor a fair deal – www.prospect.org.uk/joinus

Forms of industrial action

 ■ withdraw goodwill

 ■  promise not to work overtime

 ■  keep fl exi-time credit at zero each month

 ■  attend union meetings and walk-outs outside core time on occasion

 ■  do not complete timesheets

Quiz time!

Your voice at workwww.prospect.org.uk/joinus

How many flexi hours did Dstl write off at the end of January 2014?

A: 10sB: 100sC: 1,000sD: 10,000s

*FOI reference 2014/06854** Based on Level 5 charge out rate

THE ANSWER IS D – 14,823 HOURS* OF STAFF

EFFORT WAS WIPED OUT OF EXISTENCE.

THAT’S APPROXIMATELY £890K**

WAS IT?

Prospect union believes that Dstl should not further reduce the consolidated pay for all staff to pay for

temporary withdrawable allowances (TWAs)Join us now if you think this is a reasonable request

Prospect • PublicEye  – February 20153PAY

Competency-based progressionCOMPETENCY-BASED progression could help tackle the problem of employees doing the same job being paid different salaries, says Prospect.

The union commissioned a report from Incomes Data Services in 2013 which provided evidence and arguments to support competency-based progression for professional and specialist staff.

IDS said features that can be considered best practice in progression systems include:

● clear career paths ● clarity about the requirements ● relevant skills/competencies ● regular reviews and appraisals ● trained line managers ● an active role for employees ● a reasonable timeframe

to progress.Prospect deputy general secretary

Leslie Manasseh urged reps to use the report to engage employers.

■ Download the IDS report from https://library.prospect.org.uk/id/2013/01654

MAKING THE CASE FOR SPECIALIST AND PROFESSIONAL SKILLS THE demands on government will become more diffi cult to meet without a more strategic approach to building specialist skills, Prospect told Westminster’s public administration committee in November.

Deputy general secretary Leslie Manasseh gave evidence to the committee’s inquiry into ‘Building civil service skills for the future’.

 ■ You can download Prospect’s written evidence from https://library.prospect.org.uk//download/2014/00950

 ■ Read other evidence via http://bit.ly/pac_cs_skills 

Work your properhours on 27 February!WORK Your Proper Hours Day, on 27 February 2015, is the day when the average person who does unpaid overtime fi nishes the unpaid days they do every year, and starts earning for themselves. People who did unpaid overtime in 2013 effectively gave their employers more than £28bn worth of free work.

 ■ If you would like to organise activity in your workplace on 27 February, please visit www.worksmart.org.uk/workyourproperhoursday/ for hints, tips and resources.

■ HSE members at Rose Court in London make their message loud and clear. Below, members in Bristol, Bootle and Newcastle did the same

Prospect • PublicEye  – February 2015

4 PERFORMANCE MANAGEMENT

“The term ‘decimate’ has its origins in the Roman army where, to snuff out the risk of mutiny or punish disobedience, one in 10 soldiers in a cohort would be killed. In a nice twist, it was usually fellow soldiers who were forced to carry out the clubbings and stonings”

Performance management will fail if it is seen as a ‘blunt instrumentof control’

its origins in the

mutiny or punish

one in 10 soldiers in a cohort would

nice twist, it was

A new paper from the Work Foundation examines why performance management is failing in so many organisations and what can make it succeed. Penny Vevers reports

TWO YEARS after the civil service ignored trade union advice and imposed its new performance management system, thousands are suffering from its negative effects, with managers forced to identify the 10% lowest performers in teams and any pay increases linked to the marks awarded to staff.

What’s more, Prospect has uncovered patterns of institutional discrimination, showing that disabled and minority ethnic civil servants and those aged over 50 are valued less than the colleagues they work with (see Profi le, December 2014).

A new paper by Professor Stephen Bevan of the Work Foundation states that too many organisations still persist in using “corrupting performance management to deliver short-term objectives – often with damaging and self-defeating consequences”.

The professor launched his paper at a joint event with Prospect in December that examined the contemporary role of human resources, including the part it plays in achieving good work and its impact on performance management.

In the paper he stresses that performance management will fail if staff see it as a “blunt instrument of control”.

Bevan’s fi rst published research on performance management in 1991 found back then that it “was often no more than a poorly administered and unpopular annual appraisal with a somewhat random (and often discriminatory) link to a performance bonus for those who did best, or those best at ‘gaming’ the system.

“It was an HR-owned and administered set of paper-based procedures which many line managers resented and which probably did little to drive performance improvement.”

Little progress has been made in many 21st-century workplaces, despite the growing body of evidence about what works and what doesn’t.

Poor procedures in many organisations are alienating managers; forced distribution creates a culture of fear; and attempts to deliver too many processes means performance management under-delivers on all of them, Bevan reports.

He says that to work well, performance management “needs to become a natural part of the way the organisation and its managers operate, rather than a paper-based bureaucratic system which is widely resented because it is seen as interrupting ‘real’ work”.

Success relies heavily on dialogue, development and employee consent. Perceived fairness, respect and trust are vital, the paper argues.

Performance payWhen used to deliver individual performance pay, performance management can “become the focus of tension and anxiety, or even feelings of inequity or resentment wildly out of proportion compared to the amount of cash on offer – especially during a time of low infl ation and austerity”, Bevan says.

Systems dominated by pay also mean many of the wider benefi ts to the organisation can become “twice as diffi cult to achieve”.

In these circumstances, performance management is indistinguishable from performance-related pay in the eyes of staff, and becomes “a lightning rod for a swathe of other staff concerns”. Furthermore, managers become apologists for, rather than advocates of, the processes they are trying to implement.

A web-based survey by the Corporate Leadership Council in 2002 sampled 19,000

Prospect • PublicEye  – February 20155PAY

PROSPECT ADVICE TO MEMBERS:IF IT’S WRONG, CHALLENGE IT

MEMBERS in the civil service are encouraged to challenge their marking if it does not refl ect their performance. 

If not closely monitored and challenged, the process may be used to force managed exits and drive down pay, Prospect warns on its dedicated web pages – bit.ly/Prosp_pm

Feedback from members has highlighted concerns that employees from ethnic minorities, disabled or part-time workers are disproportionately 

likely to get lower ratings. These fears are confi rmed by robust evidence gathered through a series of parliamentary questions. See bit.ly/pm_disc. 

Other barriers identifi ed include ambiguous language; confusing performance descriptors; inconsistent application; and a lack of trust or confi dence in the system.

 ■ To order printed copies of Prospect’s quick guides for members and managers, please contact centralservices@prospect.org.uk

employers and managers from 34 organisations, covering seven industries and 29 countries.

The study isolated the unique impact of 106 performance strategies and created a list of drivers in rank order of their impact on individual performance.

Not all activities carried equal weight in terms of improving performance. Only nine had a more than 25% impact, with fairness and accuracy, at 39.1%, the single most important driver.

Other drivers to score well included: ● employee understanding of standards ● being able to take risks and fail without this

refl ecting on a person’s competence score ● good internal communication ● focus on strengths rather than weaknesses

● feedback that helps employees do their job better.

Financial incentives scored badly. Their impact on a person’s intent to stay in an organisation was 19.1% and on commitment 13.1%, but the impact on

improving individual performance was only 2% – “almost negligible”.

Forced rankingIn the past Bevan has compared forced

ranking in schemes to decimation, explaining: “… the term ‘decimate’ has its origins in the

Roman army where, to snuff out the risk of mutiny or punish disobedience,

one in 10 soldiers in a cohort would be killed.

“In a nice twist, it was usually fellow soldiers who were forced to carry out the clubbings

and stonings.” (bit.ly/bevan_HRmag)

His latest paper expands on these concerns. A chapter on “Forced distribution, the why and how” analyses a common scenario to illustrate that distortions can occur if managers are made to place

certain proportions of staff in a team in each of the top, middle and bottom categories.

The effects include: ● pushing managers to make “relative”

assessments of their staff instead of assessing their contribution against a set of “absolute” performance objectives. Individuals who would score well against their objectives will still get a lower mark because there are “too many” higher performers in the team.

● two people on the same team who are equally effective at meeting their objectives can receive different ratings and, aligned to that, different performance pay

● an impact on equality of opportunity, because assessments rely on different, and more subjective, performance criteria

● a danger of becoming embroiled in technical debates that can drain the capacity of performance management to be a powerful vehicle for feedback, motivation and improvement.

Professor Bevan concludes: “If PM can be confi gured as a continuous process of dialogue and review between line manager and direct report – rather than a high-stakes, set-piece annual assessment process – then it can become a strongly developmental and supportive process which may stand more chance of improving performance.

“This does not mean that the dialogue will not, on occasion, need to be diffi cult and uncomfortable if performance is not up to scratch or if challenging feedback needs to be given.

“However, reducing the potential richness of a high-touch PM process to a simple rating and a ‘pass-fail’ pay award seems a waste of precious managerial time and effort if all it achieves is an increase in fear and insecurity.”

On the way forward, Professor Bevan says the challenge is not so much the search for a new “big idea” but the need for organisations to answer the question: “How can we make this an instrument of motivation rather than of control?”

As his paper demonstrates, there is still a long way to go.

■ Performance Management: HR Thoroughbred or Beast of Burden? Professor Stephen Bevan, Work Foundation, December 2014, www.theworkfoundation.com

PROSPECT ADVICE TO MEMBERS:

the process may be used to force managed exits and drive down pay, Prospect warns on its dedicated web pages – bit.ly/Prosp_pm

Feedback from members has highlighted concerns that employees from ethnic minorities, disabled or part-time workers are disproportionately 

● feedback that helps employees do their job better.

Financial incentives scored badly. Their impact on a person’s intent to stay in an organisation was 19.1% and on commitment 13.1%, but the impact on

improving individual performance was only 2% – “almost negligible”.

Forced rankingIn the past Bevan has compared forced

ranking in schemes to decimation, explaining: “… the term ‘decimate’ has its origins in the

Roman army where, to snuff out the risk of mutiny or punish disobedience,

one in 10 soldiers in a cohort would be killed.

“In a nice twist, it was usually fellow soldiers who were forced to carry out the clubbings

and stonings.” (bit.ly/bevan_HRmag)

His latest paper expands on these concerns. A chapter on “Forced distribution, the why and how” analyses a common scenario to illustrate that distortions can occur if managers are made to place

certain proportions of staff in a team in each of the top, middle and bottom categories.

“Reducing the potential richness of a high-touch PM process to a simple rating and a ‘pass-fail’ pay award seems a waste of precious managerial time and effort if all it achieves is an increase in fear and insecurity”

Prospect • PublicEye  – February 2015

6 PENSIONS

Civil service pension scheme contribution rates have increased since April 2012. Prospect’s pension officer Neil Walsh explains the background and outlines changes coming into effect from April 2015

THE PCSPS reforms that Prospect members voted to accept in 2012 provided for the average member contribution rate to be unchanged from April 2015 – it will remain at 5.6%.

However the current government imposed increases averaging 3.2% of pay between April 2012 and April 2014. The increases were tiered, with higher-earning members facing larger increases. The increases were not part of the reform agreements that Prospect members voted on in 2012.

Members opposed these increases because they believe they are having to bear an unfair and disproportionate share of the cost of meeting the government’s fiscal targets.

One contribution structure The PCSPS will move from two member contribution structures to one when the Alpha scheme is introduced in April 2015.

Members who joined the PCSPS before October 2002, and did not opt to join another section of the scheme, originally paid contributions of 1.5% of salary.

This has since risen to an average of 4.7% because of the increases imposed by the current government.

All other members originally paid 3.5% of salary – now an average of 6.7%.

The differences in contributions can be attributed, in large part, to differences in benefits.

For example, the value of benefits from the Premium section of the scheme introduced in October 2002 are worth approximately 2% more of pay than the value of Classic benefits available to members who joined before October 2002.

The 2% of pay is the difference in member contributions between the schemes.

However, once most members move to the same benefit structure under Alpha, the justification for two member contribution structures is greatly reduced.

From April 2015, the single

contribution structure will apply to all members, regardless of the section of the scheme they are in (Classic, Premium, Nuvos or Alpha), with one exception detailed below.

The average member contribution rate under this structure will be 5.6%. As currently, the contributions will be tiered by earnings.

However the bands will be

Prospect wrestles with Cabinet Office to temper impact of increased contributions

determined by actual earnings rather than full-time equivalent earnings and which may lead to a lower contribution rate for part-time workers.

This addresses one of the biggest complaints expressed by members when tiered contribution rates were first introduced.

However a single contribution rate will generally result in higher contributions for members currently in Classic and lower contributions for members currently in Classic Plus, Premium or Nuvos.

Unfairness for members not joining the Apha schemeThese changes to contributions can be justified for those who are joining Alpha because the benefits are also changing. But the contribution changes are also being applied to members who are staying in the same section of the scheme.

Prospect did raise this unfairness with the Cabinet Office, but the government refused to change its position. As a result, Prospect focused

A single contribution rate will generally result in higher contributions for members currently in Classic and lower contributions for members currently in Classic Plus, Premium or Nuvos

 † continued page 7

on minimising the impact on those facing the steepest contribution increases from April 2015 – part-time workers, those earning less than £15,000pa and those earning between £45,001pa to £150,000pa.

Prospect and the Cabinet Office did manage to agree measures to minimise the impact on members in these bands.

The member contribution structure from April 2015 is outlined in the tables on this page:

The Classic table reflects the transitional protection for members of this scheme earning less than £15,000. Their contribution rate will increase in stages: 3% from April 2015, 3.8% from April 2016, 4.6% from April 2017.

The £47,001+ earnings band will start at £48,472 from April 2016, rising to £51,006 from April 2017 and £51,516 from April 2018.

■■ More■information■on■contribution■rates■is■at:■www.civilservicepensionscheme.org.uk/members/contribution-rates/future-contribution-rates/

PAY BAND CONTRIBUTION RATEMEMBERS CURRENTLY IN CLASSIC PLUS, PREMIUM OR NUVOS£0 to £20,000 4.6%£20,001 to £47,000 5.45%£47,000 to £150,000 7.35%£150,000 + 8.05%

MEMBERS CURRENTLY IN CLASSIC £0 to £15,000 3.0%£15,001 to £20,000 4.6%£20,001 to £47,000 5.45%£47,001 to £150,000 7.35%£150,000 + 8.05%

RESEARCH COUNCILS PENSION SCHEMETHE Research Councils Pension Scheme (RCPS) has always operated by-analogy to the Principal Civil Service Pension Scheme (PCSPS). This has meant that any reforms to the PCSPS have also been implemented by the RCPS. 

Last October, the RCPS wrote to members to say that their scheme would continue as it is beyond the April 2015 date for the introduction of Alpha for PCSPS members. 

Retaining the current RCPS benefits beyond April 2015 is on an interim basis until a decision is made about how the scheme is to be reformed. Future options include continuing to operate as a 

separate scheme or being incorporated into the PCSPS.  

The ultimate deadline for implementing any reform is 31 March 2018. By this date, new pension arrangements similar to Alpha will apply to RCPS members who are not covered by certain protections (eg members of the scheme on 1 April 2012 who were within 10 years of pension age will retain their existing pension arrangements). 

Prospect is represented on the RCPS management board which is considering options for reform. We will update members as soon as further information becomes available.   

7 PENSIONS

 † from page 6

Prospect • PublicEye  – February 20158PENSIONS

One of the most significant reforms of the PCSPS will be implemented in April when hundreds of thousands of scheme members move from their current section to the new Alpha arrangements agreed as part of public service pension reform in 2012

MEMBERS WHO were in the scheme on 1 April 2012 and were within 10 years of pension age (ie 50 or above for members of Classic, Classic Plus, Premium or 55 or above for those in Nuvos) will remain in their current section.

Members who were in the scheme on 1 April 2012 and were between 13.5 years and 10 years of pension age recently went through an option exercise to choose between joining Alpha on 1 April 2015 or a later date.

All other members will join Alpha on 1 April 2015.

Career averageThe way benefi ts are built up in Alpha is very different to how they are built up in Classic, Classic Plus or Premium. Those sections offer fi nal salary benefi ts (ie pensions calculated by reference to salary close to the point of leaving the scheme).

Alpha, like Nuvos, is a career average scheme. Members in Alpha accrue a proportion of their salary as a pension every year. This pension is increased in line with infl ation while they are members of the scheme. It is added to in subsequent years by the relevant proportion of salary in those years. This process effectively produces a pension that is linked to a member’s (infl ation adjusted) average salary throughout their time in the scheme.

Career average schemes are a form of defi ned benefi t pension provision. They provide a benefi t calculated by reference to a formula so the pension is known once the salary levels and length of service in the scheme are known.

Members of these schemes do not face the risk associated with investment performance or changing life expectancy.

Prospect supports career average schemes because they tend to distribute benefi ts more proportionately among the membership as a whole.

It is important to note that fi nal salary benefi ts members have built up in the PCSPS will remain linked to fi nal salary calculated when they leave the scheme overall and not at the point they join Alpha.

Career average benefi ts are effectively linked to the average salary while in the career average scheme and not average salary throughout employment in the civil service.

Pension ageAnother key feature of Alpha is that normal pension age is linked to State Pension Age. State Pension Age is gradually increasing (eg it will increase to 67 between 2026 and 2028). Under legislation passed last year, State

Pension Age will be regularly reviewed and is expected to increase further as and when estimates of life expectancy increase.

As with fi nal salary benefi ts already earned, it is important to remember that benefi ts earned before moving to Alpha with a pension age lower than State Pension Age (ie 60 in the fi nal salary sections or 65 in Nuvos) are protected and can still be drawn unreduced from this age.

The normal pension age of a scheme is not the age that members must work until. Pension can be drawn at any age from Minimum Pension Age (currently 50 or 55 for members of the PCSPS although it is proposed that this will increase in line with increases to State Pension Age).

Rather than choosing to retire at an arbitrary age, or after an arbitrary length of service as may have been the case in the past, the advent of the Alpha scheme is

likely to result in a more fl exible approach to retirement in the future.

This is likely to involve more part-time working and scheme members deciding to retire when the circumstances suit rather than when they hit a particular age. The relevant circumstances are likely to be when they can answer the following questions positively:(1) Do I want to retire?(2) Have I built up enough pension to have a comfortable

standard of living in retirement?The key is how much pension is built up in the Alpha

scheme at any age. This will be affected by pension age – the higher the normal pension age, the more an actuarial reduction will be applied to the pension awarded at any given age below normal pension age. It will also depend on other factors, particularly the accrual rate in the scheme.

Accrual rateThe accrual rate in a pension scheme is the proportion

of salary built up as a pension every year. In Classic the accrual rate (expressed as a fraction) is 1/80th (or 1.25% as a percentage). In Classic Plus and Premium it is 1/60th (or

Countdown to Alpha scheme

 † continued page 9

PartnershipMORE than 7,000 people eligible to join the civil service pension scheme have opted for the defined contribution arrangement known as Partnership. This scheme has not been subject to the same process of reform as the defined benefit sections of the PCSPS, but the Cabinet Office did consult on changes to Partnership towards the end of 2014.

1.67%). In Nuvos it is 2.3%.The accrual rate in Alpha is 2.32% – this is higher than

the accrual rate for any of the existing sections of the PCSPS (this also allows for the pension lump sum that is available from the Classic section).

This higher accrual rate means that pension is built up faster in Alpha than in the existing sections of the scheme.

Comparing Alpha to existing sections of the PCSPSIt is natural to compare the new pension arrangements to the existing sections of the scheme. However members must look beyond superficial differences because simple comparisons of single features of the schemes will not capture the real impact of joining Alpha.

For example, an important difference between Alpha and the new schemes is the increase in pension age. But moving from a scheme with a pension age of 60 to one with a pension age of, say, 68 does not mean the member will have to work eight years longer.

The accrual rate in Alpha is higher than the accrual rate in the final salary schemes. So a member who worked until 68 would receive a substantially higher pension than they would have received from the current, final salary sections of the PCSPS.

Most members will not want to work until 68. If they retire and draw their Alpha pension earlier it will attract an actuarial reduction. The reduction is directly related to the age the Alpha pension is drawn – the longer before pension age this happens, the greater the reduction.

There are generally two factors at play when comparing the pension payable from Alpha to the pension from the current sections of the PCSPS:

● the higher pension age in Alpha will generally produce a lower pension at most ages; the effect is more pronounced the earlier Alpha pension is drawn

● the higher accrual rate in Alpha will generally produce a higher pension, regardless of the age the Alpha pension is drawn.

These factors will combine to generally produce a

higher pension than the existing schemes at current normal pension ages, but a higher pension from Alpha at State Pension Age.

For most members there will be an age between the normal pension ages of the current sections of the PCSPS and Alpha at which the pension accrued would be the same. This age will depend on a number of factors and members’ own circumstances. But it is quite possible that a Premium member would have accrued the same pension from Alpha as they would have accrued if they had stayed in Premium by age 63.

Action did lead to improvementsAlpha pension is calculated on a very different basis to the existing final salary sections of the PCSPS. When members start to receive pension projections from the scheme some will discover that, despite the higher pension age, Alpha could actually deliver a higher pension than the current section of the scheme would have.

From April 2015, employers will also have to contribute more than they currently do to provide civil service pension benefits (although this is attributable to technical changes in valuing the benefits).

This outcome was not delivered because the government wanted to be generous to civil servants. It was a direct result of the action that Prospect members and millions of other public sector workers took on 30 November 2011.

That action led to improvements in the government’s final proposals that produced an outcome much closer to Prospect’s opening position on public service pension reform than the government’s opening offer.Prospect • PublicEye  – February 2015

PENSIONS9

COVERAGE OF CIVIL SERVICE PENSIONS ON PAGES 6,7,8 AND 9

 † from page 8

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