June 29, 2011 / 11:34 PM / 9 years ago

Factbox - The public sector pension dispute

LONDON (Reuters) - Hundreds of thousands of teachers and civil servants will go on strike on Thursday over the Conservative-Liberal Democrat coalition government’s plans to reform public sector pensions.

General secretary of the ATL, (Association of Teachers and Lecturers) Mary Bousted, speaks to members of the media as she stands on a picket line at Richmond upon Thames College in southwest London June 30, 2011. REUTERS/Luke MacGregor

The strike could be the first in a wave of industrial action by unions angry at the plans and the government’s austerity drive.

The following is background to the row.

WHY ARE PENSIONS BEING REFORMED?

* The government says that the current pension system is no longer affordable with people living longer and drawing pensions for much longer. Official statistics show that in 2009, 12.7 million workers and pensioners were members of public pension schemes.

* It says payments to public service pensioners and their dependents rose by a third in real terms over the last decade to almost 32 billion in 2008-9 while employee contributions have fallen, leaving taxpayers to picked up the shortfall.

* Ministers argue that public sector pensions are far more generous that those in the private sector, where employees generally retire later and receive lower benefits.

WHAT ARE THE REFORM PROPOSALS?

* A report in March commissioned by the government and led by a former Labour government minister recommended that the final salary pension scheme, where payments are based on the annual pay a worker receives at the end of their career, should be replaced with a system based on average career earnings. Industry experts have said this could save the Treasury some 2 billion pounds a year.

* The report said the normal pension age should be linked to the state pension age, meaning many public sector staff would have to work longer, with the government planning to raise the statutory retirement age to 68 from 2020.

* Employees will have to increase their contributions with average payments rising by 3.2 percent. The lowest paid workers, those earning under 15,000 pounds, will be exempt from any rise and those earning less than 18,000 will face a capped increase of 1.5 percent. However unions argue some people will have to double or triple the amount they pay into their pensions.

* The government has switched inflation adjustments for public sector schemes and state pensions to the lower consumer prices index (CPI) from the retail prices index (RPI).

* Prime Minister David Cameron has said even after the reforms, public sector workers would still get a defined benefit which would keep them among the best pensions available.

WHY ARE UNIONS SO ANGRY?

* Unions say the reforms will mean workers will pay more to get less, and come at a time when millions of public sector workers are facing a two-year pay freeze and hundreds of thousands are expected to lose their jobs.

* Unions also say some public sector workers do physically demanding jobs, those such as paramedics, nurses or road cleaners, and it is wrong and dangerous to expect them to work up to the age of 66 by 2020.

* They argue a report by Britain’s independent financial watchdog the National Audit Office found that public sector pensions were affordable — projected to be about 1.7 percent of GDP by 2059/60, and that changes under the last Labour government to increase the pension age for new staff and to raise contributions also reduced the burden on the taxpayer.

* Unions say that the proposed changes therefore are not about the cost of public sector pensions to the Treasury. Instead they argue that the changes will allow the government to cut the budget deficit, currently running at about 10 percent of GDP, with the result that public sector workers foot the bill for a financial crisis they did not cause.

GOVERNMENT REACTION

* The government says negotiations are still ongoing with unions and those holding strikes are jumping the gun. However, they insist that no reform was not an option.

* In a recent speech, Treasury minister Danny Alexander warned that a failure to accept the proposals could lead to a worse deal in the future. “Our offer is by far the best that is likely to be on the table for years to come,” he said.

* The government has hinted that widespread industrial action could lead to tougher new union laws, which were strengthened during Margaret Thatcher’s premiership in the 1980s. Some Conservative politicians want a law that would ban industrial action not supported by 50 percent of union members.

* Ministers also say that contingency plans are in place to ensure that vital public services continue in the event of any strike action.

STRIKE PLANS

* The first 24-hour strike is set for June 30 when about 250,000 civil servants in the Public and Commercial Services union walk out along with members of three teaching unions, the National Union of Teachers, the Association of Teachers and Lecturers (ATL) and the University and College Union.

* Other unions have indicated they could also hold ballots for strike action including Britain’s biggest union, Unite, and Unison, the biggest public sector union, which represents some 1.4 million public sector workers.

* Even moderate unions have threatened to take industrial action over the issue. The ATL, for example, has never staged a national strike in its 127-year history.

* Union chiefs have warned that as many as 4 million of Britain’s 6.2 million public sector workers could take coordinated strike action later this year. They say it would lead to the largest workforce stoppages since a general strike nearly a century ago.

Reporting by Michael Holden; Editing by Louise Ireland

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