The Independent Public Service Pensions Commission, chaired by Lord Hutton, identified the need to reform public service pension schemes to provide a fairer deal for employees and taxpayers and to ensure that they are affordable and sustainable in the long term. The reforms to pension schemes are essential. People are living longer, with the average 60-year-old living 10 years longer now than they did in the 1970s. As a result, the cost of public service pensions has increased in real terms by around a third over the last 10 years and is now £32 billion a year.
Lord Hutton also found that the firefighters’ pension scheme 1992 is the most expensive public service pension scheme. Currently, for every pound a firefighter pays into the scheme, taxpayers are paying in an extra £5. In 2012-13, the scheme cost taxpayers £557 million. As such, on 28 October 2014, the Firefighters’ Pension Scheme (England) Regulations 2014 were laid, setting out the main elements of the new career average pension scheme to be introduced from 1 April 2015.
The firefighters’ pension scheme 2015 will provide one of the very best pensions available, with guaranteed benefits that are inflation proofed. The coalition Government recognise that firefighters regularly undertake duties under tough conditions and that they deserve a good and generous pension. This is why, since the start of the reform process, we have agreed to a number of enhancements, including improvements for those who choose to retire early. In the 2015 scheme, a firefighter retiring at 55 would see a 21.8% reduction to their pension—and no reduction to benefits earned in the 1992 scheme if the firefighter was a member of that scheme. This compares very favourably with the 40.5% reduction applied in the 2006 scheme which was introduced by the previous Administration. In addition, the normal pension age of firefighters is 60, and has been since 2006. It is lower than the pension age for other public sector workers, reflecting the physical nature of the occupation. A normal pension age of 60 is being retained for firefighters in the 2015 scheme.
Last month consequential regulations were made and last week we laid regulations setting out strengthened governance arrangements for the 1992, 2006, and 2015 firefighter pension schemes. Today, we are laying the final set of regulations required to ensure that the 2015 scheme can come fully into effect on 1 April, as required by the Public Service Pensions Act 2013. These include the Firefighters’ Pension Scheme (England) (Transitional and Consequential Provisions) Regulations 2015, which describe how the benefits of firefighters who are moving from the 1992 and 2006 pension schemes into the 2015 scheme, will be protected. Benefits already accrued by scheme members under the existing schemes will be preserved and continue to be linked to final salary. In addition, because of the strong protections already built into the 2015 scheme, no firefighter will have to work beyond their current expected normal pension age until 2022.
We are also laying two further orders. The first of these updates the provisions relating to compensation for injury so that they also apply to members of the 2015 scheme. This instrument also gives authorities an additional six months to complete the exercise of enrolling eligible firefighters into the modified scheme for retained staff who were unable to access a pension scheme between 2000 and 2006. The order also increases the pay bands that determine contribution rates under the 2006 scheme by 1% each year to 1 April 2018, in line with the 2015 scheme. This should avoid a scheme member being drawn into a higher contribution band because of a pay rise designed to reflect inflation. The final instrument makes this latter change, but in respect of the 1992 scheme.
The introduction of these regulations completes the new regulatory framework for firefighters’ pensions, fulfilling our commitment to completing the reform process within the lifetime of this Government, and ensuring that firefighters continue to receive one of the best pensions available in the public sector.