FactCheck: How generous is Danny Alexander’s pensions deal?
“Yes, we are asking public service workers to contribute more. Yes, we are asking them to work longer, along with the rest of society, but we are offering the chance of a significantly better pension at the end of it for many low and middle income earners.”
Danny Alexander, speech to the House of Commons, 2 November 2011
Cathy Newman checks it out
Millions of public sector workers are preparing to go on strike next week – the biggest industrial action since the Winter of Discontent. Some 20 unions could walk out on November 30 in protest at government plans to make them pay more into their pensions, and work for longer.
Ministers know the action will be disruptive. So they’re doing everything they can to try and persuade the unions to call it off.
Danny Alexander, the Chief Secretary to the Treasury, has one central argument: that the new deal will mean better pensions for many low and middle income earners. But FactCheck has found a flaw in his claims.
Danny Alexander claims his new pensions deal is significantly more generous than the current deal. He does concede that like the rest of us, the public sector will have to work longer and in most cases pay more – but he insists the deal should be enough to silence any further talk of strike action.
“This generous offer should be more than sufficient to allow agreement to be reached with the unions,” he said, warning the unions to call off next week’s strike, as the deal “is conditional upon agreement being reached”.
In his speech, Mr Alexander pointed MPs to a document setting out the deal in detail. It gives examples of the changes to five different public sector workers’ pensions: a teacher, a nurse, a civil servant, a local government chief exec and a local government administrator.
The document ‘Public Sector Pensions: good pensions that last’ claims for example, that a 40 year old male civil servant with 18 years of service would only have to work 18 months more – to the age of 61 years and 6 months – to get his existing pension deal.
And if he retired at 67, the civil servant would be £3,700 better off.
That doesn’t sound too bad. Except last week, a new pensions calculator popped up on the homepage of the Civil Service website. And the problem was – its findings were wildly out of sync with Mr Alexander’s.
The calculator showed that the government’s civil servant would have to work an extra four years under the new deal to get even close his previous pension.
In fact according to the calculator at the age of 64, he’d get £141 less per year.
And if he was to work until 67 – after seven years more work – his “generous” increase would be a total of £2,567 per year – 30 per cent less than Mr Alexander promised.
The calculator has mysteriously disappeared from the Civil Service website. The Cabinet Office told the Public and Commercial Services (PCS) union that it has been taken down for “presentational reasons” and will be back up shortly.
The Treasury told FactCheck: “As many objective observers have noted, we have made a generous offer which is much more than most in the private sector can expect. These differences arise because of different assumptions. The Cabinet Office calculator assumed the member retires on a higher salary than under the HMT example. The HMT example assumed that the member took a three year career break during his working life (thereby reducing the amount paid in).
“Irrespective, in either example, the government clearly meets its commitment that low and middle income earners will, at retirement, get a pension as good if not better than they get now.”
Cathy Newman’s verdict
Last time I looked “significant” meant “meaningful”. So are “many” low and middle income earners in line for a significantly better pensions deal?
On the numbers helpfully crunched by the government’s online calculator, I’d argue not. The average civil servant featured would have to work a whole four years more to get the same pension payout as they’re currently due.
And even if they wait seven years to hang up their boots, retiring at 67, (as the government would like) they’d be just £2,567 a year better off – 30 per cent less than Danny Alexander promised.
No wonder the unions aren’t impressed. I’d say it’s a racing certainty next week’s strikes are on.
The analysis by Emma Thelwell