Government plan is a cash grab on pensions, warns UNISON

UNISON, the UK’s largest union, said today that the government’s plan to bring forward the introduction of the single state pension scheme was a cash grab that could have serious implications for pension schemes in the public and private sectors.

The union called on the Chancellor to make a firm commitment to helping the public sector cope with the additional cost of the plans.

Currently, workers pay less national insurance if they save into a public or private sector pension, because they ‘contract out’ of the second state pension.

Scrapping the second state pension will bring this tax relief to an end and see employees facing a 1.4% increase to their national insurance contributions, and employers facing an extra 3.4% to their bill. Coming on top of a three year pay freeze followed by a two year 1% squeeze on pay, the increase will leave public service workers and their families struggling financially.

Although the government seems to have called on employers to pay this additional cost, there are no recommendations about how they can do this. If the cash strapped public sector does not get additional funds to cope with this increased cost, it will ultimately mean even deeper cuts to public services and jobs.

In the private sector, the additional cost could force employers to close their schemes. It could also fuel opt outs amongst low paid workers, if additional costs have to be picked up by employees. Increased employer contributions could also have serious implications for public sector pensions, renegotiated only last year.

Glyn Jenkins, UNISON head of pensions, said:

“Pushing forward plans for a single state pension is an audacious cash grab by the Treasury that could have damaging implications for schemes in the public and private sectors. Yet again the government has failed to think though the implications of its policies properly.

“There is a real danger that the move could fuel deeper cuts to public services and jobs, as well be the final nail in the coffin for the few decent pension schemes surviving in the private sector. We are calling on the government to help employers and employees deal with the consequences.”