The story: The government announced proposals to move civil servants away from a defined benefit (DB) pension into a career average revalued (Care) scheme.
The proposals, which are currently under consultation with trade unions and staff, will base employees’ pension on a proportion of the pay earned in each year of employment rather than as a proportion of their final salary. The scheme’s retirement age looks set to rise from 60 to 65.
The proposals will affect new entrants to the scheme from 1 April 2006 and existing members (including staff that join before 5 April 2006) from 1 April 2013. Staff have until 4 March this year to respond to the proposals.
The response: John Wilson, head of research at HSBC Consultants and Actuaries, said that while the trend for final salary scheme closures was slowing down, the civil service proposals were a turn in a new direction. "The move away from defined benefit (DB) schemes becomes particularly profound when you see it happening in the public sector."
Rather than following trends set in the private sector, however, in moving to a Care scheme, public sector bodies are looking to retain some of the risk involved.
"They’re not proposing a move from final salary to pure money purchase, they are exploring the myriad of options that are available between the two ends of the spectrum. I would hope that this would perhaps encourage some private sector employers to do the same."