The government has proposed to change the rules around early access to pensions in the civil service, tracking 10 years behind state pension age, according to a new consultation over reforms to the Civil Service Compensation Scheme.
The Cabinet Office had launched a consultation to this effect in 2017, but on August 15 it published a new document with updated proposals to be discussed with trade unions as it considered that a long time has elapsed since the initial consultation, to which the government never responded.
The impetus for the original proposals was the need to put the public sector on a sustainable footing, something the government’s new supplementary consultation document argues is more pressing in the current economic environment.
The government recently announced measures it hopes will bring public sector exit payments under control, erecting a system of reporting requirements that could see civil servants nearing retirement need permission from a secretary of state to take away exit payments totalling more than £95,000, with pension strain costs likely to lead to larger payments.
The government has taken steps to reform public sector pension schemes and consequently most public sector workers will be expected over time to work longer, most to state pension age, before they take their pension
Cabinet Office
A number of other proposals for reining in the costs of the civil service have been made since the 2017 consultation, including one to reduce the size of the service back to 2016 levels after it expanded to cope with Brexit and the Covid-19 pandemic.
The supplementary document explains that the history of these reforms remains relevant to the process, and likewise agreements previously struck with trades unions, but it stressed that past agreements should not be seen “as in any way limiting the points that the unions may now put forward”.
“The government seeks any views that the unions now wish to communicate, whether they be a reiteration of previous points, different views or additional matters,” it said.
The pensions implications
Though the CSCS is not itself a pension scheme, several of its benefits have pension impacts and considerations, and these are in part the subject of the supplementary consultation.
The consultation lists seven principles for reform: supporting employers in restructuring their workforce; creating “significant savings” on the current costs of exits and ensuring “appropriate use of taxpayers’ money”; ensuring any access to early pensions “remains appropriate”; ensuring efficiency compensation payments are “appropriate for a modern workplace; supporting flexible use of voluntary exits; implementing reforms agreed with trades unions “where possible;” and to align the reforms with the principles expected across the public sector.
Pension implications are mentioned in relation to the second and third point. In the first instance, the government explained that the costs of the 2010 compensation scheme had been greater than expected, in part because the demographic of those using it was different than had been supposed.
A greater proportion of members with long service, or those in the 50-54 age group, made use of the scheme, and these people were “entitled to employer-funded access to their pension, which is generally the form of exit that carries the greatest cost to the employer”, it said.
The government’s position is that the costs of the 2010 scheme remain too high, leading to its proposals for reforms to exit payments and associated costs.
In relation to the third point, on making early access to pensions “appropriate”, the government explained that its principle was founded on the belief that people should be able to work for longer and remain economically active later in life.
“In recent years, the government has taken steps to reform public sector pension schemes and consequently most public sector workers will be expected over time to work longer, most to state pension age, before they take their pension,” it explained.
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“As the state pension age is now 66 (and is proposed to increase to 67 in 2028), this will rebalance the proportion of adult life spent in retirement.
“It therefore makes sense to reform early access to pensions from the [CSCS] to mirror these principles and to increase early access to track 10 years behind state pension age.”
This would mean any civil servant under age 56 would not be eligible for an early pension, even if they have a protected minimum pension age, the document added.
