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Sunday, October 24, 2010

Civil servants to retire on full pensions at 50

Civil servants to retire on full pensions at 50

Generous pensions are being offered to those who take voluntary redundancy as ministers seek to quell revolts against civil servant job cuts

Robert Watts The Times (£)

At least 100,000 public-sector workers who take voluntary redundancy as part of government cuts will be able to retire early on gold-plated pensions.

The generous terms are being offered as ministers seek to quell revolts against the government’s plan to axe 610,000 civil servants, council staff and other state workers over the next five years.

It means public-sector workers can retire at 50 on a full pension. Nobody yet knows the full cost, though estimates put it at a one-off £3 billion. Those earning £60,000 will typically be able to retire on £40,000 a year.

Pensions experts said such deals were unheard of in the private sector and described it as “the last hurrah of the public sector”.

Public-sector workers made redundant are normally given a lump-sum payoff of one month for each year served, which on average works out as a year’s salary.

However, officials who are over 50 who agree to waive this lump sum can start to receive a full pension immediately. Workers who entered the public sector before April 2006 are eligible for the deal.

The Cabinet Office believes that at least 80,000 civil servants across Whitehall will qualify. Tens of thousands in the NHS, local councils and the police will be able to do the same.

John Wright, head of public sector at Hymans Robertson, a leading pensions company, said: “We just do not know what the cost of early redundancies and early retirement will be.

“But it could conceivably take several years before reducing the public-sector head count actually delivers savings.”

John Philpott, chief economist at the Chartered Institute of Personnel and Development, said: “Early retirement in the public sector is much more lucrative because the final-salary schemes are so much more generous.

“You could say this was the last hurrah for the public sector.”

Around 6m public-sector staff are enrolled in final- salary pension schemes, compared with one in 10 in the private sector. Most public-sector workers accrue annual pension rights of 1/60th of their salary for each year they work. Private-sector workers are more vulnerable to the vagaries of the stock market and falling annuities.

A Cabinet Office spokesman said the government wanted to ensure the civil service compensation scheme was fair for civil servants and taxpayers.

“One of the key elements of the proposed scheme is the ability of staff over 50 years old, taking voluntary redundancy, to have the opportunity to forgo their one-off redundancy payment for early access to their pension,” she said.

“This recognises the years of service they have given and the financial commitments they have to maintain. The best employers elsewhere in the public and private sectors offer similar packages.”

Lord Hutton of Furness, the former Labour minister, will next year set out reforms to public-sector pensions. It is expected that the employee contributions of workers will rise by 3% of their salaries.

Comment: So, those who work for the public can retire at 50 and receive a pension of two thirds of their wage, whereas the public must work until 66 and receive a meagre pension which will be the subject of governments cuts! This is fairness?

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