Putting up firefighter pension contributions could cost the taxpayer £250 million over the next three years warns a new independent actuaries report commissioned by the Fire Brigades Union. One in four firefighters say they will consider leaving the scheme if their already high contribution rates go up further.
As an unfunded scheme the Firefighters Pensions Scheme relies heavily on money coming in from contributions to pay for pensions and other benefits going out. A drop in contributions coming in would result in immediate financial losses to the scheme.
An independent actuaries report says a one in four drop out rate could mean the taxpayers having to stump up the shortfall of £84 million a year for the next three years. Taxpayer losses could be a lot higher if more than this number drop out.
The FPS contribution increases aim to save money by 2014. But this figure only works by assuming only 1% would drop out, an increasingly highly unlikely figure.
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 main pension scheme. Government savings estimates are based on assuming only a 1% drop out rate from the pension scheme.
The Fire Brigades Union is the first to produce a detailed independent actuarial assessment of the Government’s plans. A report has been provided to the Department for Communities and Local Government as part of the union’s evidence in the consultation process.
The Government proposes increasing pension contributions in the main Firefighters Pensions Scheme (FPS) by between 3.2% and 6% of gross pay. This would push rates up from 11% currently to between 14.2% for firefighters and from 11% up to 17% of gross pay for those promoted to officers.
The impact is to push up contribution rates by more than a quarter for firefighters from 11% to 14.2%. For officers hit by the top rate their contributions go up by more than half their current contribution.
The higher tier contributions start kicking in for thousands of junior officers based at fire stations from station managers upwards. The move will cost fire crews between £2,000 and £7,500 by 2014.
FBU General Secretary Matt Wrack said: “The plans for a big contribution hike are self-defeating and could result in huge costs to the taxpayer. A sharp hike in already high contributions could be the tipping point which will see an exodus from the main pension scheme.
“The perverse outcome of Osborne’s dash for savings will be large losses. The viability of the scheme will be badly undermined, costing even more in the long-term.
“Incomes have been hammered by pay freezes and big rises in household budgets so people are looking at where to make savings. The Treasury needs to think again and not take a massive gamble with firefighter pensions and taxpayer money.”
FBU members oppose the Government proposals and seek fair pensions, ie :
1 Changes to ensure that all personnel covered by the nationally negotiated pay and conditions are entitled to be members of the relevant firefighters pension scheme.
2 Changes to ensure that the normal retirement age for firefighter members is that applicable in the relevant Firefighters Pensions Scheme.
3 Amendments to secure RPI as the basis for increasing pensions in the fire service.
YouGov survey
The total sample size was 7,981 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.
