Public sector pensions

Public Accounts Committee Closed Inquiry
Opened: 8 Feb 2021 Closed: 5 Aug 2021 Parliament page
As at 31 March 2020 the UK’s major public service pension schemes had over 8 million members, including active and deferred members and current pensioners – a significant part of the national pensions “landscape”. Most of the main public service pension schemes are unfunded, with pension payments paid for out … Read more
25 Conclusions
1 Report
1 Oral session
1 Letter
1 Event
Activity timeline 5 events
2 Sep
2021
Report published
11 Jun
2021
Report published
19 May
2021
Correspondence
22 Apr
2021
Oral evidence
22 Apr
2021
Formal meeting (oral evidence session) · The Wilson Room, Portcullis House
Oral evidence sessions 1 session
22 Apr 2021
View on parliament.uk
Affordability of public sector pensions; Supply chain financing and the operation of Covid finance facilities; Equitable Life
Cat Little · Cabinet Office Charles Roxburgh · HM Treasury Martin Clarke · Government Actuary’s Department (GAD) Mike Williams · HM Treasury Sir Tom Scholar · HM Treasury
Title HC No. Published Items Response
Sixth Report - Public Sector Pensions HC 289 11 Jun 2021 25 Responded
Recommendations & Conclusions
25 results
2 Conclusion
Sixth Report - Public Sector Pensi…
It is becoming clear that public service pension policy is affecting the delivery of frontline...
It is becoming clear that public service pension policy is affecting the delivery of frontline services in some areas, such as education and health. In 2019–20, a substantial increase in employers’ pension contributions—which was not fully funded by HM Treasury—has … Read more
Government Response
2.1 The government agrees with the Committee’s recommendation. Recommendation implemented 2.2 Employer contribution rates for public service pension schemes are determined at valuations which are held every four years. Valuations … Read more
HM Treasury
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3 Conclusion
Sixth Report - Public Sector Pensi…
HM Treasury has not done enough to ensure people understand the value of their pensions.
HM Treasury has not done enough to ensure people understand the value of their pensions. This Committee previously recommended, in 2011, that HM Treasury should work with employers and pension schemes to ensure that clear and relevant information is provided … Read more
Government Response
3.1 The government agrees with the Committee’s recommendation. Target implementation date: March 2022 3.2 Participation in the main public service pension schemes are very high. For example, less than 1% … Read more
HM Treasury
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4 Conclusion
Sixth Report - Public Sector Pensi…
HM Treasury has done little to identify and manage the stark differences in average pensions...
HM Treasury has done little to identify and manage the stark differences in average pensions between genders and other groups. HM Treasury does not collect and analyse data on how pension outcomes differ across groups of scheme members or across … Read more
Government Response
4.1 The government disagrees with the Committee’s recommendation. 4.2 Differences in public service pensions between different groups are a function of past differences in earnings over members’ careers rather than … Read more
HM Treasury
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5 Conclusion
Sixth Report - Public Sector Pensi…
HM Treasury has had to revisit key elements of the reforms, and these issues may...
HM Treasury has had to revisit key elements of the reforms, and these issues may take decades to resolve fully. HM Treasury should have foreseen the age discrimination issue that gave rise to the 2018 McCloud judgment, and putting things … Read more
Government Response
5.1 The government agrees with the Committee’s recommendation. Target implementation date: February 2022 5.2 The government committed to legislate as soon as practicable to remedy the discrimination identified by the … Read more
HM Treasury
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6 Conclusion
Sixth Report - Public Sector Pensi…
HM Treasury has not yet performed an evaluation of its reforms and we are not...
HM Treasury has not yet performed an evaluation of its reforms and we are not convinced it is on track to meet its objectives. As a part of its 2011–2015 reforms, HM Treasury made a commitment that there would be … Read more
Government Response
6.1 The government agrees with the Committee’s recommendation. Target implementation date: End 2021 6.2 HM Treasury will write to the Committee with an assessment of how it is meeting its … Read more
HM Treasury
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1 Conclusion
Sixth Report - Public Sector Pensi…
On the basis of a report by the Comptroller and Auditor General, we took evidence...
On the basis of a report by the Comptroller and Auditor General, we took evidence from HM Treasury and the Government Actuary’s Department about public service pensions.1
Government Response
Based on a report by the National Audit Office, the Committee took evidence on 22 April from HM Treasury and the Government Actuary’s Department. The Committee published its report on … Read more
HM Treasury
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7 Conclusion
Sixth Report - Public Sector Pensi…
As a part of the 2011–2015 reforms, HM Treasury offered ‘transitional protection’ to those closest...
As a part of the 2011–2015 reforms, HM Treasury offered ‘transitional protection’ to those closest to retirement. This meant that scheme members within 10 years of their normal retirement age would see no change to their pension age or their … Read more
Government Response
Introduction from the Committee Around 25% of pensioners and 16% of the working-age population are members of one of the four largest public service pension schemes (the armed forces, civil … Read more
HM Treasury
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8 Conclusion
Sixth Report - Public Sector Pensi…
HM Treasury has since been developing a remedy for those affected.14 In February 2021, HM...
HM Treasury has since been developing a remedy for those affected.14 In February 2021, HM Treasury announced that it plans to give the 3 million members affected by the McCloud judgment a choice of which scheme they would like their … Read more
Government Response
The government committed to legislate as soon as practicable to remedy the discrimination identified by the Court of Appeal in the McCloud judgment in its consultation Public service pensions: Changes … Read more
HM Treasury
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9 Conclusion
Sixth Report - Public Sector Pensi…
Separately, HM Treasury has some concerns about the measures it has in place to control...
Separately, HM Treasury has some concerns about the measures it has in place to control rising costs. As a part of its 2011–2015 reforms, government put in place a ‘cost control mechanism’ designed to share costs fairly between employees and … Read more
Government Response
HM Treasury is setting out in amending Directions the detail of how the cost control element of the 2016 valuations will be completed. These will be published following engagement with … Read more
HM Treasury
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10 Conclusion
Sixth Report - Public Sector Pensi…
While the cost control mechanism was only used for the first time in 2016, HM...
While the cost control mechanism was only used for the first time in 2016, HM Treasury is concerned that it is not sufficiently protecting the taxpayer and members. The provisional results of the 2016 valuations show that costs had fallen … Read more
Government Response
5.4 HM Treasury is setting out in amending Directions the detail of how the cost control element of the 2016 valuations will be completed. These will be published following engagement … Read more
HM Treasury
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11 Conclusion
Sixth Report - Public Sector Pensi…
In both of these cases, the government knew these issues had the potential to arise...
In both of these cases, the government knew these issues had the potential to arise and could have avoided them. In the case of the McCloud judgement, government was advised that special transitional protection could potentially be in breach of … Read more
Government Response
The government believes that the public service pension reforms introduced in 2015 meet the objectives for public service pensions set out in the 2011 white paper Public service pensions: Good … Read more
HM Treasury
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12 Conclusion
Sixth Report - Public Sector Pensi…
As a part of its 2011–2015 reforms, HM Treasury made a commitment that there would...
As a part of its 2011–2015 reforms, HM Treasury made a commitment that there would be no more reforms for 25 years. HM Treasury told us there are no intentions for further cross-government reform, but that it is something it … Read more
Government Response
The government believes that the public service pension reforms introduced in 2015 meet the objectives for public service pensions set out in the 2011 white paper Public service pensions: Good … Read more
HM Treasury
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13 Conclusion
Sixth Report - Public Sector Pensi…
HM Treasury told us it has not yet performed an evaluation of its reforms.
HM Treasury told us it has not yet performed an evaluation of its reforms. In its 2011 report on public service pensions, the Committee noted that increasing the amount that employees have to contribute to pension schemes could result in … Read more
Government Response
6.1 The government agrees with the Committee’s recommendation. Target implementation date: End 2021 6.2 HM Treasury will write to the Committee with an assessment of how it is meeting its … Read more
HM Treasury
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14 Conclusion
Sixth Report - Public Sector Pensi…
HM Treasury said that its focus remains on implementing the 2011–2015 reforms in full and...
HM Treasury said that its focus remains on implementing the 2011–2015 reforms in full and that its reforms will have an impact over the very long-term. HM Treasury acknowledged there will come a point where it will need to undertake … Read more
Government Response
The government believes that the public service pension reforms introduced in 2015 meet the objectives for public service pensions set out in the 2011 white paper Public service pensions: Good … Read more
HM Treasury
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15 Conclusion
Sixth Report - Public Sector Pensi…
Pensions play an important role in the overall remuneration package employers offer to recruit and...
Pensions play an important role in the overall remuneration package employers offer to recruit and retain staff. There is evidence that pensions affect how people chose to work which may impact frontline services. For example, the interaction between the NHS … Read more
Government Response
Departments are responsible for assessing where the reformed public service schemes introduced in 2015 require further changes to meet specific workforce needs. When any changes are proposed to HM Treasury, … Read more
HM Treasury
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16 Conclusion
Sixth Report - Public Sector Pensi…
Pensions are also a significant cost to public service employers.
Pensions are also a significant cost to public service employers. In 2019–20, employer contributions across the four main public service schemes rose in real terms by £6.4 billion, to £23.3 billion (around 24.3% of total payroll).34 This substantial increase has … Read more
Government Response
Employer contribution rates for public service pension schemes are determined at valuations which are held every four years. Valuations are a complex process which take several years to complete and … Read more
HM Treasury
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17 Conclusion
Sixth Report - Public Sector Pensi…
As a direct result of concerns about these increasing contributions, around 200 independent schools are...
As a direct result of concerns about these increasing contributions, around 200 independent schools are set to withdraw from the Teachers’ Pension Scheme. HM Treasury told us that the Department for Education has worked very closely with the Teachers’ Pension … Read more
Government Response
Employer contribution rates for public service pension schemes are determined at valuations which are held every four years. Valuations are a complex process which take several years to complete and … Read more
HM Treasury
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18 Conclusion
Sixth Report - Public Sector Pensi…
The employer contribution rate is next due to be implemented in 2024, where it may...
The employer contribution rate is next due to be implemented in 2024, where it may change again. Both the SCAPE discount rate—which is a key assumption used to help set the employer contribution rate and drove the 2019–20 increase in … Read more
Government Response
Employer contribution rates for public service pension schemes are determined at valuations which are held every four years. Valuations are a complex process which take several years to complete and … Read more
HM Treasury
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19 Conclusion
Sixth Report - Public Sector Pensi…
This Committee previously recommended, in 2011, that HM Treasury should work with employers and pension...
This Committee previously recommended, in 2011, that HM Treasury should work with employers and pension schemes to ensure that clear and relevant information is provided to employees on the value of their pensions, and that this information is regularly updated … Read more
Government Response
3.1 The government agrees with the Committee’s recommendation. Target implementation date: March 2022 3.2 Participation in the main public service pension schemes are very high. For example, less than 1% … Read more
HM Treasury
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20 Conclusion
Sixth Report - Public Sector Pensi…
Furthermore, government’s response to the McCloud judgment has potential to exacerbate the problem.
Furthermore, government’s response to the McCloud judgment has potential to exacerbate the problem. Members affected by the McCloud remedy will be asked to make a complex decision about their pensions, which may include balancing between the level of pension they … Read more
Government Response
For active and deferred members, the Bill introduces the ‘deferred choice underpin’ as set out in the government’s consultation response. Under this approach, members can make their choice over which … Read more
HM Treasury
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21 Conclusion
Sixth Report - Public Sector Pensi…
When asked about what information was available on employees that opt out of public service...
When asked about what information was available on employees that opt out of public service pension schemes, HM Treasury told us it did not collect this information.45 HM Treasury told us that individual pension schemes often provided assessments of opt-out … Read more
Government Response
The government agrees with the Committee’s recommendation. Target implementation date: March 2022 Participation in the main public service pension schemes are very high. For example, less than 1% of the … Read more
HM Treasury
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22 Conclusion
Sixth Report - Public Sector Pensi…
Individual schemes hold information on participation rates for some groups, for example participation in the...
Individual schemes hold information on participation rates for some groups, for example participation in the NHS Pension Scheme is lower among younger employees.48 However, HM Treasury told us that there are lots of imperfections in the quality of participation data, … Read more
Government Response
The government agrees with the Committee’s recommendation. Target implementation date: March 2022 Participation in the main public service pension schemes are very high. For example, less than 1% of the … Read more
HM Treasury
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23 Conclusion
Sixth Report - Public Sector Pensi…
The National Audit Office found there were stark differences in the average pension received by...
The National Audit Office found there were stark differences in the average pension received by scheme members, when analysed by gender. Their report identified that the average pensioner is paid £10,000 annually, but there is a 45% gap in the … Read more
Government Response
4.2 Differences in public service pensions between different groups are a function of past differences in earnings over members’ careers rather than differences in pension provision itself. 4.3 The government … Read more
HM Treasury
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24 Conclusion
Sixth Report - Public Sector Pensi…
HM Treasury told us it does not collect and analyse data on how pension outcomes...
HM Treasury told us it does not collect and analyse data on how pension outcomes differ across groups of scheme members or across generations.57 GAD told us that insufficient data means government is unable to analyse similar gaps that are … Read more
Government Response
4.2 Differences in public service pensions between different groups are a function of past differences in earnings over members’ careers rather than differences in pension provision itself. 4.3 The government … Read more
HM Treasury
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25 Conclusion
Sixth Report - Public Sector Pensi…
We are also concerned that HM Treasury does not specifically consider whether armed forces pension...
We are also concerned that HM Treasury does not specifically consider whether armed forces pension scheme arrangements are sufficient to support personnel when it becomes time for them to move into civilian life, which can be well before reaching “retirement … Read more
Government Response
Departments are responsible for assessing where the reformed public service schemes introduced in 2015 require further changes to meet specific workforce needs. When any changes are proposed to HM Treasury, … Read more
HM Treasury
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Correspondence 1 letter
19 May 2021 Correspondence from Catherine Little, Director General Public Spending Head of Government Finance Function, HM Treasury, re Public Accounts Committee – Session of 22 April 2021, dated 12 May 2021
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