Questions and Answers for scheme members
1 What is the Government doing to Civil Service and By – Analogy
Cabinet Office Minister, Pat McFadden MP, has written to the Council of Civil
Service Unions (CCSU) outlining the Government’s plans for changes to Civil
Service and By – Analogy scheme pensions. The key features are set out in
the Office Notice to staff.
2 Why can’t the Government leave our pensions alone?
People are generally living and working for longer and public service pension
arrangements need to reflect these changes. The Government and the public
service unions agreed, in negotiations in 2005, that new entrants would
receive pensions reflecting a pension age of 65. But the Government also
agreed that existing public servants’ schemes would continue to provide a
pension at 60.
Both the Government and the trades unions recognise that public service
pension schemes need to be sustainable in the long term. This means that
they need to be able to respond to future cost increases in a way which is fair
to tax payers as well as to staff. So, if costs increase in the future over and
above the level currently expected, the Government intends to share the
effect of this between employers and staff rather than employers paying the
full extra cost (see Q6).
3 Why will new entrants get a different sort of pension?
As well as having a pension age of 65, rather than 60, the Civil Service and
By – Ananlogy schemes for new entrants joining on or after 1 July 2007 will
be designed to reflect earnings throughout members’ careers. This is
intended to produce a fairer outcome for members generally, especially those
whose earnings peak in mid-career and those who do not spend their entire
career within their scheme. There are further details in the new scheme
4 What does this mean for me now?
Nothing – you will still be able to retire and take your pension without
reduction at age 60 and it will be based on your service and your final salary
(as defined in scheme rules).
4a I thought my pension was changing in 2013?
The proposals published on 9 January 2007 replace those set out in the
consultation document Building a Sustainable Future (published on 9
4b I’m in classic. Can I transfer to classic plus?
No. The Pension Choices exercise in 2002 was a one-off opportunity to
change into a new scheme.
4c I’m retiring in April 2007. Will this affect me?
There won’t be any effect on your pension. But if you are re-employed in the
future, you may find that any further pension build-up is in the new scheme.
4e I chose not to join the pension scheme. What happens to me?
If you change your mind in the future you will “opt in” to the same pension
scheme you opted out of.
4f I have a deferred pension. Is that affected by these proposals?
5 Will my scheme change in the future?
Cabinet Office will discuss, with the Civil Service unions, the possibility of
agreeing changes to scheme rules to introduce flexibilities permitted by recent
tax changes (for example a higher tax free lump sum). Any additional
features for current staff are unlikely to be introduced before July 2007 and
may be later.
In the event that scheme costs increase unexpectedly in the future, Cabinet
Office will discuss with Civil Service unions and employers, how the increased
costs are to be paid for.
5a Will you extend unmarried partner benefits to classic?
Highly unlikely. This was one of the reasons we offered members the option,
in 2002, to go into premium or classic plus.
6 Will I have to pay more for my pension?
The Government’s plans do not include changes to your contribution rate.
For the time being, you will carry on paying 1.5% of pensionable earnings if
you are a member of classic and 3.5% of pensionable earnings if you are a
member of premium or of classic plus.
For the future, the Government has made clear that, if there are unexpected
changes in scheme costs at future actuarial valuations, the effect will be
shared between employers and employees and that average Civil Service
employer contributions will be capped at a maximum of 20% of pay (their
average employer contribution is currently 19.4% of pay). This does not
necessarily mean that you will pay more in the future – costs may not
increase and, even if they do, Cabinet Office will consider – with unions and
employers – the best way of solving the problem. For instance, a more
acceptable solution might be to change the way benefits build up in the future.
The Government does not expect any change to happen as a result of its
cost-sharing plans before 2012 at the earliest.
6a What do you mean by “unexpected costs”?
At each valuation, the actuary makes certain assumptions – for instance, in
relation to how long people are likely to live, pay rises and so on. At the next
valuation, the actuary then looks as what has actually happened and reassesses
the assumptions for the future. “Unexpected costs” will include first, the
difference between reality and the assumptions used for the previous period
and, second, the changes in assumptions looking to the future. So, for instance,
if pay rises have been lower than the actuary had assumed, this would feed
through as a cost reduction. But if people are living longer than assumed at the
last valuation, this would feed through as a cost increase.
6c Who pays the costs of early retirements?
The full cost of early retirements are met by the employer who is authorising
the early retirement. These costs are not picked up by the scheme and so won’t
feed through as “unexpected cost increases”. The only exception to this is ill-
health retirements; these costs are met by the scheme.
7 What happens if costs go down?
If there are unexpected decreases in scheme costs in the future the effect will
be shared between employers and employees, subject to the cap on average
Civil Service employer contributions of 20% of pay.
8 I thought my contribution rate was fixed?
Your contribution rate will only change in the future if circumstances change
and the Government decides, in consultation with the unions, to increase
member contributions rather than changing the way benefits build up in the
future. You will be given plenty of notice of any change (either to future
benefits or your contribution rate) and we do not expect anything to happen
before April 2012.
8a This is like a “red letter” from my endowment company!
It is important to realise that no change is planned before 2012 at the earliest,
and then only if necessary to deal with future unexpected cost increases.
Furthermore, any changes will not affect the benefits that you have already
built up before the date of change.
9 We don’t have a pension fund, so what do you mean by “if costs
Although we don’t have a fund this does not mean that our pensions are free.
Employers pay contributions each year based on how much the pension you
11c I’m over 60. Why can’t I buy added years?
Added years contracts are designed and costed around pension age (60) so
they don’t work when people are over 60. We plan to introduce a different
way of buying extra pension, which will work at all ages. In the meantime you
can top up your pension through the stakeholder pension or the AVC scheme
even if you’re over 60.
12 I’m planning to work to 65 anyway, so the scheme for new entrants
might be better for me. Can I transfer across?
The consultation on Building a Sustainable Future made clear that existing
staff wanted, overwhelmingly, to carry on in their current scheme. The
Government has no current plans to open the new scheme to existing staff.
13 What happens if I leave the scheme and then wish to rejoin in the future?
Will I go back into my current pension scheme or into the new scheme?
This is one of the matters of detail that Cabinet Office will discuss with the
Civil Service Unions shortly
13a If I am re-employed in the future, will my pension be abated?
There are no proposals to scrap abatement, although it may be simplified.
What this means is that you cannot earn more, as a re-employed pensioner, by
way of your scheme pension plus re-employed salary than you were earning
before you retired. This is not usually a problem if you are going to be re-
employed part-time or in a lower paid job.
14 Can I retire before pension age?
You can retire and draw your pension before pension age if you want to, but
your pension will usually be reduced to reflect the fact that it is being paid for
more years. For instance, if you chose to retire 5 years before pension age
(ie at 55) your pension would be reduced, permanently, by about 25%.
14a Is the Compensation Scheme changing?
Probably, but not just yet. Cabinet Office will consult with employers and
unions before publicising any proposals for change.
15 How do you justify having a two-tier workforce in the future with
different pension schemes and different pension ages?
Many employers, both in the private and public sectors, operate different
pension arrangements for new entrants. This allows employers to take steps
to control costs, or implement more appropriate pension arrangements, whilst
recognising existing employees’ reasonable expectations.
16 How have the Unions been involved in coming up with the plans?
Special sessions of the Public Services Forum (PSF), chaired by the then Minister for Work and Pensions, Alan Johnson had constructive discussions on pension age reforms for all major public sector pension schemes in 2005. The purpose of the Public Services Forum is to improve the dialogue between Government, public service employers and trade unions on public service and workforce reform to improve the delivery and citizen’s experience of public
These discussions set out agreed principles within which individual public sector schemes would make proposals for pension reform.
Since the PSF agreement Cabinet Office has had constructive discussions with the Civil Service Unions on the high level design of the pension scheme for new entrants and will now work with the Civil Service unions to develop the fine detail.
17 What do the Civil Service unions think of the plans?
The Civil Service unions’ response has been broadly positive. They have
said that they think the proposals for the new scheme for new entrants are radical but will deliver good quality pensions while being more equitable and better suited to likely future employment patterns. On the cost-sharing proposals, the unions agree that the scheme needs to be sustainable, but think that the time to come up with approaches to handling cost increases is when the problem arises, rather than now.
18 How do I find out more?
See the News section on the JSS website www.jsspensions.org.uk
19 How do I have my say?
You can email your comments to email@example.com. These will be
forwarded to the Cabinet Office. They cannot answer individually but will publish a summary of comments received on their website and will update these Q & As as appropriate.