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Pensions

Volume 453: debated on Monday 27 November 2006

To ask the Secretary of State for the Home Department (1) what the (a) present and (b) future retirement age arrangements are for each public sector pension scheme for which his Department has responsibility; and if he will make a statement; (102088)

(2) what the current (a) accrual rate and (b) normal retirement age is for each public sector pension scheme for which his Department is responsible; and if he will make a statement.

Under the Police Pension Scheme 1987, to which most officers belong, there is no fixed retirement age for the police. Officers with at least 25 years' service may retire with an immediate pension from age 50. Officers may also retire with an immediate pension, irrespective of age, after 30 years' service, when they will have accrued maximum benefits. This means that an officer who joined at age 18½—the earliest age at which it is possible to start as a police officer—is entitled to retire at age 48½ with a full pension. Otherwise officers become eligible to retire with an immediate pension from the age of 55, 57 or 60 depending on what their compulsory retirement age would have been for their rank and force before such ages were revised with effect from 1 October this year. Officers with less than 25 years' service who leave the police with deferred benefits will receive their pension at age 60.

The accrual rate under the Police Pension Scheme 1987 is one sixtieth of final salary for each year during the first 20 years and two sixtieths for each of the next 10 years, providing a target pension of two thirds of final salary, if no lump sum is taken, after 30 years.

Members of the Police Pension Scheme 2006, which applies to those who have joined the police service on or after 6 April this year, have a set pension age of 55 at or after which a serving officer can leave with an immediate pension irrespective of his or her length of service. Officers who leave the police service below the age of 55 with deferred benefits will receive their pension at age 65.

The accrual rate under the Police Pension Scheme 2006 is one seventieth of final salary for each year providing a target pension of one half of final salary, plus a fixed lump sum of twice final salary, after 35 years.

To ask the Secretary of State for the Home Department what recent estimate he has made of the (a) rate and (b) annual cost of employer contributions to each public sector pension scheme for which his Department has responsibility; and if he will make a statement. (102089)

The system for funding police pensions changed as of 1 April 2006. Under the new system, the cost of pensions in payment has been removed from police authorities' operating accounts. Police authorities now operate a separate pensions account for this purpose, into which are paid officers' contributions and a new employer's contribution. Any deficit is topped up with a grant from central Government; any surplus is recouped.

The new employer's contribution, which is common to both old and new police pension schemes, is set at 24.6 per cent. of an officer's pensionable pay. In addition to this the police authority will pay into the pensions account a charge of twice the officer's average pensionable pay for any officer who retires early on ill-health grounds. We estimate the annual cost of employer contributions (not including ill-health retirement charges) at £1,095 million.

To ask the Secretary of State for the Home Department what his most recent estimate is of the unfunded liability, in present value terms, of each public sector pension scheme for which his Department is responsible; and on what assumptions of (a) discount rate and (b) longevity the estimate is based. (102091)

The latest available information is in the note on unfunded liabilities placed in Library by my right hon. Friend the Chief Secretary to the Treasury on 2 March 2006, which gives a combined figure for the police and fire service pension schemes of £85 billion.

To ask the Secretary of State for the Home Department what estimate he has made of the potential for savings to his Department of the reforms to public sector pensions agreed with trades unions in 2005 for each year between 2006-07 and 2050-51; and if he will make a statement. (102093)

It is not possible to provide an exact estimate at this point as the full savings will only be realised once all police officers are in the New Police Pension Scheme introduced in 2006, which will take in the region of 30 years. The estimated savings from the new scheme after 30 years on the basis of today’s costs will be approximately £300 million per annum in England and Wales.