Fire Brigades Union

Fire Brigades Union

June 24, 2011 03:00 ET

Firefighter Pension Changes Could Cost Taxpayer GBP 210 Million as One in Four Say They Will Consider Leaving the Scheme

LONDON, ENGLAND--(Marketwire - June 24, 2011) - Firefighters already pay highest pension contributions in public sector, Government proposes contribution hike from 11% to between 14% and 17%.

Proposed changes to the main firefighter pension scheme could cost the taxpayer £210 million instead of saving money, the Fire Brigades Union has warned. One in four firefighters say they will consider leaving the scheme if the changes are pushed through, producing a sharp drop in contributions.

The FBU says the Treasury needs to think again and not to take a massive gamble with firefighter pensions and taxpayer money. The Government has explicitly said the contribution hikes are to address the wider budget deficit and not about affordability, an issue dealt with by changes to firefighter pensions in the last few years.

Central to the changes is raising contribution rates from 11% to 14% and up to 17% for those who get promotion to officer grades. A sharp hike in already very high contribution rates would be one of the triggers for an exodus from the scheme. At 11% of salary, firefighters – along with the police - already pay the highest contribution rates of any scheme in the public sector.

The Government's proposed changes to the Firefighters Pensions Scheme (FPS) aim to save £73 million by 2014. But this is based on assuming only 1% would opt out of the FPS, by far the largest pension scheme for fire crews.

Every 1% of current members who opt out of the scheme will cost £3.5 million in lost contributions each year. A YouGov survey of nearly 8,000 firefighters found that the burden of the changes were so great that as many as one in four (27%) are considering opting out of the pension scheme.

If that happens, the changes would cost the Government £283.5 million in lost contributions by 2014 (£94.5 million a year) and undermine the viability of the pension scheme. Including the savings of £73 million by 2014, the lost contributions would mean a net loss to the scheme of £210 million.

This would have a devastating impact as the scheme is unfunded. It relies heavily on the contributions coming in to pay the pensions going out, meaning the impact of the loss of contributions would be immediate.

FBU General Secretary Matt Wrack said: "The savings the Government is hoping for are very likely to turn into much higher costs. A sharp hike in already high contributions and the other changes could be the tipping point which will see an exodus from the main pension scheme.

"The perverse outcome of the dash for savings to help pay for the budget deficit will be large losses. The viability of the scheme will be badly undermined, costing even more in the long-term.

"Firefighters already pay a huge contribution for their pension. The proposals to increase this alongside the other changes are causing huge concerns and anger.

"It makes no sense for the taxpayer to be paying more, for firefighters to be paying more and the scheme producing less. The Treasury needs to think again and not take a massive gamble with firefighter pensions and taxpayer money."

Key changes

At 11% of gross pay, firefighters currently make the highest contribution (along with the police) into their pension scheme of any public sector worker. The Govt wants to increase this to 14% of gross pay for firefighters and up to 17% for officers.

With national insurance rates rising to 12% in the immediate future it would mean firefighters seeing 26% of their gross pay being taken in pension and national insurance costs, before taxation kicks in.

Officers would see national insurance rates rising to 14% and pension rates rising to 17%, a rate of 31% of their gross pay before taxation.

A proposed move from final salary to career average earnings would mean officers would also be hit hardest, with the value of their pension greatly reduced. They would pay considerably more and get considerably less.

The total sample size was 7,981 current FBU members currently working in the Fire Service. The survey ran from Wednesday 18th May to Friday 17th June 2011. It was carried out online and the figures have not been weighted. YouGov is registered with the Information Commissioner and is a member of the British Polling Council.

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