Select Committee on Defence Appendices to the Minutes of Evidence


Letter to the Second Clerk from the Head of Modernising Pensions, Civil Service Corporate Management (18 March 2002)



  Further to your telephone call to Derek Pain, I enclose a note setting out the history to development of new pension arrangements for the Civil Service.

  Development has taken longer than we envisaged originally as we have modified our thinking to take account of the Modernising Government and Sunningdale (Civil Service Reform) agendas. Both of these envisage changes to the shape of the workforce, and we have had to reflect this in our thinking. At the end of the day we will be offering new entrants from 1 October 2002 a choice of an improved final salary pension scheme (with a contribution rate of 3.5 per cent of pay) or a money purchase pension delivered using the stakeholder model and with a generous employer contribution. Existing staff will be able to remain in the current pension scheme or opt for the new final salary scheme if they are prepared to pay the higher contributions.

  Communications are very important especially in an environment where staff are not used to thinking about their pensions, let alone making decisions about them.





Note on the History of Development

Autumn 1997

Preliminary discussions began on a new pension scheme for the Civil Service to replace the existing scheme which was then 25 years old. Cabinet Office Ministers agreed that we could proceed provided new scheme cost-neutral for employers.

July 1998

Establishment Officers advised of different pension models under consideration, also that we planned to consult staff on what they wanted from their pension, if they were prepared to pay more, etc.

Winter 1998-99

Staff consultation exercise involving questionnaires to around 11,000 staff. Questionnaire responses followed up in discussion in a number of "member panels" drawn from those responding to the questionnaire.

February 1999

Roll-out began of the new pensions administration software, PenServer. The new software brought pensions administration up to date, by using a comprehensive pensions database. Without this, a new scheme would probably not be workable. (Rollout continued until February 2001.)

June 1999

Feedback to establishment officers on the findings of the staff consultation, also recognition that the new pension arrangements had to handle the changing employment patterns envisaged in the Modernising Government White Paper.

December 1999

A "better and more flexible pension scheme" included in the Civil Service Reform Action Plan as part of the "better deal for staff".

April 2000

Civil Service Management Board (CSMB) agreed in principle that new staff should be given a choice between a new final salary pension scheme and money purchase pension arrangements, recognising the Sunningdale Agenda. They also agreed that existing staff should have an option to move to the new final salary scheme (made cost-neutral to employers by increasing the member contribution from 1.5 per cent of pay to 3.5 per cent of pay).

Summer 2000

All staff issued with leaflet "Your future, your decision" including joint statement with unions. Leaflet announced changes and set out key features of new final salary scheme "2002" mentioned as target date for implementation.

November 2000

CSMB confirmed that new staff would choose between final salary and money purchase. They also agreed that the new arrangements should come in from 1 October 2002.

February 2001

Personnel Directors agreed outline design of new final salary scheme.

Summer 2001

All staff issued with "relaunch" letter from Sir Richard Wilson, telling them that the Civil Service would have new pension arrangements from October 2002 and that they would have a choice. Staff also encouraged to participate in "data cleansing" (ie giving feedback on their data on the pensions database) to ensure that reliable pensions option statements could be produced.

Summer 2001

Civil Service Pensions (CSP) issue a "communications toolkit" to all employers. Employers asked to tailor this to suit their own departmental culture and needs

Autumn 2001

All staff issued with four factsheets about Civil Service pension arrangements, to help educate them about pensions and prepare them for making a choice about their pensions.

1 January 2002 to
31 March 2003

Options exercise for existing members of the PCSPS. All members receive personal pension forecast plus choices booklet (describing choices) and workbook (helping them through the decision-making process) and typically have two months to make their decision. Other material available includes video, website and pensions modeller. Default is to stay in current scheme.

1 October 2002

Existing scheme closed to new entrants. New entrants have choice of the new final salary scheme (3.5 per cent contributions) or a money purchase stakeholder pension (with an age-related employer contribution).

March 2002




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