Yesterday’s budget continued the theme of huge cuts to public services, tax breaks for the higher paid and big business and cuts to benefits for those in need. But it also included some changes to pensions.
The headline for pensions was the Lifetime ISA, but more changes were announced that may affect PCS members.
Higher employer contributions
Public Sector pensions (including the civil service) have valuations like other schemes. Interest rates on corporate bonds are used to determine a plan’s expected risk-free return in the future, or the discount rate. If the discount rate falls, a pension plan needs more assets to generate sufficient investment returns to pay a projected amount of benefits in the future. So while the chancellor said that he wanted to keep public sector pensions “sustainable”, what it actually means is that public sector employers will have to find an extra £2bn for employer pension contributions. There is the concern that this money will only be found by making more cuts to staffing.
Tax on redundancy payments
Tax on redundancy payments has remained the same despite a consultation paper in 2015 suggesting the tax free element should be reduced. However, employers will now have to pay national insurance on redundancy payments over £30K.
This, like the increase to employer pension contributions, is also likely to affect departmental staffing budgets.
PCS will continue to press for full and open discussions with the employers on the implications of both measures.
Reducing free help
The Pensions Advisory Service and Pension Wise, organisations set up to provide free and impartial advice on personal and workplace pensions, will be “restructured”. The Money Advisory Service, another service set up by the government that helps on wider money issues such as debt, borrowing and benefits, will be abolished altogether.
Commenting on these changes, PCS general secretary Mark Serwotka said, “Once again the Tories show their true colours by helping groups of people who support them rather than those that need support.”