The Government could face a fresh battle with trade unions if they propose lowering pensions in return for higher salaries for millions of public sector workers. Teachers, nurses, and civil servants could see wage increases now in exchange for reduced public-sector pensions, a move described by Unite, which represents workers in councils, schools, and the NHS, as “rearranging the deckchairs on the Titanic.
Unions have vociferously opposed the idea. The National Education Union (NEU) warned that the model would force public sector staff into choosing “poverty now or poverty in retirement,” while the British Medical Association (BMA) expressed “serious concerns” if doctors’ pensions were included in the negotiations.
After winning the July election, Labour settled strikes with pay rises for various public sectors, but the Government faces the threat of new industrial action in 2025 unless an initial offer of a 2.8 percent pay increase is improved. Negotiations on any “pay for pension” deal are at a very early stage, and fully formed proposals have not yet been presented to ministers. Speaking at the Institute for Government in December, the civil service’s chief operating officer floated the idea of adjusting compensation packages, potentially increasing salaries in exchange for less generous pensions.
Cat Little said: “The questions that we need to look at are, you know, what’s the balance between pay and pensions? How do we really focus and segment our pay on the skills that we most need to recruit and retain within the Civil Service?”
However, multiple Government sources insist that the suggestion is not actively being worked on.
Public sector unions address pension cuts
A significant obstacle to this proposal is that it would require upfront cash from the Treasury to pay larger salaries now, with savings from reduced pensions only materializing in the long term. Union leaders have expressed significant concerns. Richard Munn, Unite’s national officer for health, stated: “Lower pensions would force workers to work even longer, when too many are already being forced out of the health service before reaching pension age due to illness and ill health.” Munn emphasized that retiring at 68 was already too late for staff facing “huge physical and mental toil” from their work.
Daniel Kebede, General Secretary of the NEU, echoed these sentiments: “Public sector workers want fair pay and they want to defer some of their earnings so they can live a dignified retirement with a fair pension. The choice should not be poverty now or poverty in retirement.”
Mike Clancy, General Secretary of Prospect, pointed to serious recruitment and retention issues in the civil service, particularly in specialist roles, with pay being a central concern. He added: “We are ready to engage with the Government on the issue of pay reform in the civil service and will consider whether any proposals put forward work for our members and for the civil service as a whole.
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Vishal Sharma, chair of the BMA pensions committee, noted that doctors’ pay and pension values had been significantly reduced over the past decade. “We don’t know if doctors’ pensions are being considered as part of this plan, but we will have serious concerns if they are,” he said. “It would be neither fair nor reasonable to suggest that our loss in pay can be addressed by further raiding our pensions.”
A Government spokesperson stated: “We are focused on supporting the civil service with the necessary tools it needs to deliver change for working people.
