Public Service Pension Reform

29th November 2012

Finance Secretary John Swinney has today outlined to Parliament the Scottish Government’s continuing commitment to public service pensions that are affordable, sustainable and fair, as he responded to UK reform of public sector pensions.

Mr Swinney confirmed Ministers’ objections to the UK Government’s decision to use pension reform as a cover for deficit reduction and to place constraints on Scotland’s ability to negotiate long term reform with public sector workers. He announced the Scottish Government’s refusal to give consent to proposals in the Public Service Pensions Bill to place some public body schemes in Scotland under UK legislative control.

Mr Swinney also confirmed that the UK Government intends to further increase pension contributions by public sector workers in the coming year as part of its programme to increase contributions by an average of 3.2 per cent of pensionable pay by 2014-15; and would impose financial penalties on the Scottish Government if the same increase is not applied in Scotland.

Mr Swinney said:"The UK Government’s approach to pension reform has more to do with its failed austerity programme than delivering sustainable long term public sector pensions.

"The Scottish Government has repeatedly made clear our opposition to the timing of the UK Government’s increases in pension contributions and we have sought maximum flexibility in our negotiations with trade unions over long term reform.

"It has taken several months to get clarity from the UK Government over their intentions and I know that has led to uncertainty for public sector workers. Without full responsibility for all aspects of pensions policy in Scotland we are tied to the decisions of the Treasury.

"Our ability to negotiate has been eroded by Treasury decisions to legislate on key issues such as matching normal retirement age with state pension age.

"The UK has also confirmed that it expects increased employee contributions in Scotland from April 2013, for a second year.

"For the Scottish Government to refuse to implement this increase would result in our funding being reduced by £100 million for each and every year the increase was not applied. That financial burden is too large to further impose on Scotland’s communities who are already dealing with difficult economic times.

"We believe the pension reform should be taken forward in partnership with public sector workers, not imposed by the Treasury.

"Where flexibility remains we will continue to negotiate with our partners. "

Mr Swinney also addressed Parliament on the issue of legislative competence.

The UK Government has sought Holyrood’s permission to require the closure of a small number of schemes which are the legislative responsibility of the Scottish Parliament through a legislative consent motion to the Public Service Pensions Bill. Refusing to offer support for the move the Finance Secretary said:

"Given this government’s opposition to the way in which the UK Government is conducting long term pension reform, the lack of flexibility and the lack of certainty being offered we can not willingly agree to the suggested approach.

"Where we can act differently we will take the opportunity to do so. There are six small schemes that are affected. We will assess their financial health and if change is necessary then it will be done by this Parliament in line with our values and alongside employees.

"I have today written to Chief Secretary to the Treasury Danny Alexander to confirm that we will not support the transfer of any public sector pensions to UK control."