Civil Service pensions: how on Earth did we come to this?

Hector the Inspector

If it isn't my old friend, Hector!

Before I continue, for those of you below a certain age, Hector was, in his day, a bit of a trailblazer. He was the first attempt by the then Inland Revenue to reach out to the public as if to say, "look, we can laugh at ourselves too". And, believe it or not, his voice was provided by Alec Guinness, the only voiceover the great man ever did. But I digress.

When I started as a civil servant, at a time when tax assessments were produced by typists using carbon paper, we still had wax to seal documents and I occasionally worked by the light of a candle, the standard retirement age was sixty-five, just as it was for virtually everyone else. However, things were beginning to go badly for the then Conservative government, and it was decided that getting rid of a bunch of civil servants was necessary (and doubtless popular, plus ca change, plus c'est la meme chose).

However, firing people was bad for morale and, more importantly, expensive. And so the Conservatives thinkers came up with a brilliant plan. "I know, we'll reduce the retirement age to sixty and pension them all off!". "Brilliant idea George, let's do it!". And so, a number of my more aged colleagues were dragged away from jobs they rather enjoyed (and were quite good at), and force fed pensions. And the logic was obvious - it cost less to give them a pension than to keep them on the payroll. Well yes, in the short term, at least. Of course, you had to make them eligible for their pension, and that meant allowing civil servants to receive their pension at sixty.

At that time, you accrued your maximum pension entitlement after forty years which, if you had joined the Civil Service from school, you would manage that by the age of sixty. It wasn't so great if you had studied at university, but the pension was pretty good anyway, and the promised leisure time was kind of appealing.

The catch was obvious, giving every Civil Servant an extra five years of pension was likely to prove expensive eventually and, in truth, look rather generous from the perspective of everyone with real jobs (naturally, I am paid to drink tea and shuffle paper all day - you have no idea how difficult it is to do both at the same time...). But, as long as the economy was going well, it would be alright. Of course, it also assumed that the Civil Service wouldn't grow much either. So much for that theory...

The system was already beginning to creak and groan by the time Labour came into power in 1997, and before long, proposals to make the scheme less generous were forthcoming. However, to avoid the ignominy of civil servants doing even less than usual (note to the humourless - that's sarcasm, by the way), it was agreed that those of us already in the scheme would have the right to opt in to the new scheme, or remain in the old one. If you had served more than fifteen years, you were almost certainly better off staying put. If you had served less than twelve, you were better off moving over. Yes, you had to pay a bit more, but the benefits were enhanced a bit, and if you were a newcomer, you weren't given a choice anyway.

It still wasn't enough though, and it was soon time to restore the retirement age to sixty-five. That wasn't as helpful as it sounded though, as the reserved right to retire at sixty was retained. What that meant was that you could go on until sixty-five if you wished, but why do so if you could take a comfortable pension at sixty, live off of the lump sum for five years and then collect a state pension at sixty-five? However, it would begin to pay off somewhere around 2050...

Since then, the final salary scheme has been closed to all new entrants (2007), the mandatory retirement age has been abolished (2008), both of which potentially help the 'pension timebomb' at some point in the future. On the other hand, the maximum number of years for which you could contribute towards your pension was increased to forty-five - which did at least mean that you had to work the extra five years if you wanted to benefit.

So, that's the background to the current dilemma. Tomorrow, I'll look at some of the reasons why civil servants are so outraged...