In a further erosion of the concept of global final salary pension provision, The UK Treasury has just announced their plans to drastically reduce the cost base for the provision of public sector pensions.
Their efforts to reduce by 50% the cost to the tax payer for this sectors pension provision will result in the government saving approximately £65bn over the next 50 years. This would account for a large proportion of the total savings hoped for by the Treasury of £430bn in the overall costs of those pensions.
The main thrust of the savings being proposed in ‘The Public Service Pensions Bill’ is the abolition of the concept of a final salary scheme for civil servants and this being replaced with a career average income pension scheme. At the same time these civil servants will also be expected to work longer before receiving their pensions. An exception here is being made for the armed forces, the police, and fire-fighters. Here their pensions will be linked to their normal state pension retirement date.
A buffer has also been included, however, for those who are currently within 10 years of retirement (to be calculated from April 1st 2012). This group will see no change in their retirement age (or date) or any decrease in their presently anticipated pension amount.
Confirming that the present and future pension provision for civil servants is still amongst the best available in the UK, Danny Alexander, the Chief Secretary to the Treasury was quoted as saying about this bill that: “It will cut the cost to taxpayers by nearly a half, while ensuring that public sector workers, rightly, continue to receive pensions amongst the very best available.”
This action is seen to be a continuation of the erosion of final salary pension provision here in the UK, so careful forward planning must be undertaken by not only private sector workers but now public sector workers as well to ensure that a comfortable retirement income will be made available, when that time comes.
Contact us for guidance and assistance in this regard.
Professional advice is essential
When it comes to looking after our retirement planning and investments, vigilance and professional advice are essential. If you are wondering what to do, contact Robert Bruce Associates for individual assistance.
NOTHING IN THIS ARTICLE SHOULD BE SEEN AS GIVING INDIVIDUAL FINANCIAL ADVICE.