Would you like to have the choice of taking higher take-home pay at the expense of less-generous pension contributions? https://t.co/XDecEiapZ6
— Civil Service World (@CSWnews) July 31, 2024
The government should scrap success profiles and offer civil servants the choice of having higher take-home pay at the expense of less-generous pension contributions, the Institute for Government has said.
The Whitehall-focused think tank has presented Keir Starmer with a 20-point plan to address problems with the civil service that have dogged his prime-ministerial predecessors…
One such measure it puts forward is giving officials the opportunity to choose how pay and pension entitlements are balanced in their reward package as a way to counter the falling value of real-terms pay. It says departments could potentially offset some recruitment difficulties if they were able to give staff the chance to have higher take-home pay at the expense of less-generous pension contributions.
The LGPS already has a 50/50 scheme which allows members who can’t afford full participation to get partial benefits for 50% of the required monthly contribution.
The Civil service equivalent is called Partnership, you can read the details here
Neil Walsh of Prosect points this out on X
Civil servants already have this choice. They can join Partnership, pay no contributions, increase take-home pay, employer pays lower pension contributions.
I do not recommend doing this (if opting for Partnership at least consider if you can afford matching contributions). https://t.co/koQU8kKHmn
— Prospect Pension (@ProspectPension) August 1, 2024
Those who like the idea of Government de-risking its off balance sheet liabilities will favor a flex approach like 50/50 or Partnership. That use of these flex-options is limited suggests that the appetite for better pensions is stronger than for immediate gratification.
But that a leading think-tank has no idea these options exist, suggests that they are low on civil-servants and other public sector’s agenda.
The answer to the question in the title seems yes and no. Yes people want options but “no” they’d rather have better pensions thank you.
This is a great idea but only if the underlying arithmetic and understanding is improved.
Civil service defined benefit (DB) accrual in March 2024 was calculated on the basis of a discount rate of CPI+2.4% pa (historical accrual was closer to CPI+3% pa). Future benefits from 6th April 2024 (employer contributions) are based on a discount rate of CPI+1.7% pa, albeit mostly only independent schools (paying cash to the Teachers Scheme) noticed. The discount rate is designed to reflect UK GDP growth.
Which rate might be preferred for a pay rise calculation or alternative Partnership contribution?
Perhaps the existing £1.5bn of index linked (other) National Debt might then be recognised for the intergenerational transfer (Ponzi scheme) that it currently is, not to mention the £400bn+ crystalised deficit admitted with the April change.
If alternative defined contribution (DC) benefits were similarly accumulated, I look forward to H M Treasury explaining why the expected growth should be awarded instead of the actual growth. This actuarial valuation hypocrisy is currently required by Regulation for the DB schemes. A Freedom of Information release from the Government Actuary’s Department revealed the significance of such –
“Approximated potential impact on NHSPS (E&W) 2012 valuation (if 2012 valuation had allowed for 8 years of GDP experience):• around a six-fold increase in deficit at 2012 valuation from £10.3bn to around £60.2bn• around a six-fold increase in deficit reduction contributions from 2.2% of pp to 12.9% of pp, increasing the employer contribution rate to around 25% of pp”
That may shed a difference perspective on the Partnership employer contributions (before and after the next age discrimination case).