Early retirement for civil servants is cost effective, says Cabinet Office

The Cabinet Office has insisted that offering civil servants early retirement on full final-salary pensions in exchange for giving up a lump-sum redundancy payout will prove a cost effective way of cutting staff numbers.

Under planned changes to the Civil Service Compensation Scheme, an estimated 80,000 Whitehall staff, as well as thousands more in police forces, the NHS and councils, will be given the opportunity to retire at the age of 50 on full pensions.

The move was described as “outrageous” by pensions expert Ros Altmann, who suggested it would have worked out cheaper to keep these staff on the payroll, while John Philpott, chief economist at the Chartered Institute of Personnel and Development said it was “the last hurrah for the public sector”.

Reports suggested that some highly paid civil servants will end up taking home more if they get their pension straight away rather than leaving with a lump-sum redundancy payout.

But a spokeswoman for the Cabinet Office said that the cost of providing a pension will only exceed the value of the compensation payment in a limited number of cases.

“Only in those cases where a person has not only reached their minimum pension age but also has very significant periods of service will it attract costs in excess of their compensation payments,” she told Personnel Today. “We would not expect staff in this limited group to form a large proportion of those who will leave.”

The spokeswoman added that the current scheme “is no longer fit for purpose” and is unaffordable.

“For instance, at present those being made redundant would also receive an increased pension which can add more than two years’ salary to the cost of the redundancy,” she said. “Under the proposed new scheme this will no longer be the case and a person will receive their pension accrued to the point they leave.”

Earlier this month, Cabinet Office minister Francis Maude announced that the 18-month long negotiations over redundancy terms in the Civil Service Compensation Scheme had concluded after five of the six civil service unions agreed a deal, which specified that the maximum payout should be 21 months’ salary. The Government had previously offered a cap of 15 months’ pay.

However, two of the unions said that Maude had jumped the gun, while the Public and Commercial Services union – which won a High Court challenge to the previous Labour Government’s attempts to change the scheme – insisted that the new offer was still unacceptable.

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