Pensions (Hansard, 23 July 1986)

§ Mr. Brooke

[pursuant to his reply, 21 July 1986, c. 68]: The corresponding information relating to the main public service schemes, based on the most recent information available for the year 1985–86, is shown in the tables. The information on nationalised industries and other public sector employers required to update the final table of the original answer is not readily available. I shall write to the hon. Member in due course.

317W

Financing arrangements for the main schemes
	Employee contributions (see note a)	Employer contributions	Source of benefit
Scheme	Per cent. of pay	Estimated revenue in 1985–86 £ million	Per cent. of pay	Estimated revenue in 1985–86 £ million	Basic pensions	Pensions increase
	1½
Civil Service	(see note b)	73.5	(see note c)	(see note c)	Exchequer	Exchequer
			England and Wales 5
	non-manuals 6		Scotland 8.5		Local authority	General rate
Local Government	manuals 5	508.5	(see note d)	473.0	pension funds	funds
			England and Wales 9–45
Teachers	6	399.8	Scotland 8	601.3	Notional fund	Exchequer
	non-manuals 6
National Health Service	manuals 5	419.4	7.5	524.0	Notional fund	Exchequer
					Police authorities	Police authorities
Police	11	161.0	(see note c)	(see note c)
Fire	10.75	42.5	(see note c)	(see note c)	Fire authorities	Fire authorities
Armed Forces	(see note b)	—	(see note c)	(see note c)	Exchequer	Exchequer

Notes:

a. Most of the schemes covered by this table provide for pension to accrue at a rate of 1/80 final salary, plus a lump sum of 3/80 final salary, per year of service, up to a maximum of 40 years at age 60 or 65. However, the arrangements for the police and fire services, the armed forces, prison officers (within the Civil Service scheme) and mental health officers (within the NHS scheme) provide for pensions to be paid from earlier ages, with faster accrual rates. The value of such arrangements as a percentage of salary is considerably greater, and is reflected in higher effective employee contributions for the armed forces, the police and the fire service.

b. Civil Service and armed forces pensions are largely non-contributory (the 11/2 per cent. contribution paid by male civil servants is for widows' benefits). In the case of the armed forces, a reduction of 11 per cent. was incorporated in pay rates recommended for 1985–86 by the Re-view Body on Armed Forces Pay, to take account of pension benefits. For the Civil Service no formal reduction has been made to pay rates since the abolition of pay research, but, as with other public services, the value of the pension scheme is a relevant factor in determining an overall remuneration package appropriate to recruit, retain and motivate the necessary staff.

c. The employer contributions listed are those payable to actual or notional pension funds for the wholly unfunded schemes, no employer contributions as such are paid. However, the NHS and teachers' notional funds and the local authority pension funds (and, therefore, the contributions shown for these schemes) cover basic pensions only, without index-linked increases under the Pensions (Increase) Act 1971: these increases are financed separately by the bodies listed in the final column of the table. The Government Actuary estimates that if these increases were taken into account in the funds the employers' contributions might be higher by some 6 per cent. of pay.

d. Pensions under the local government superannuation scheme are paid from pension funds maintained by county councils, the Common Council of the City of London, London boroughs, certain residuary bodies and district councils in the metropolitan areas and Scottish regional authorities. The employers' contributions vary from fund to fund, and in 1985–86 averaged 5 per cent. in England and Wales (following reductions resulting from recent actuarial valuations) and about 8.5 per cent. in Scotland, where similar reductions are likely to follow later valuations, with effect from April 1986.

Numbers covered by the schemes
thousands
			Number of Pensioners
Service	Number of employees in service	Members of pension scheme in service	Retired Employees	Dependants	Total	Ex-employees with preserved pensions
Civil service	^*594.0	592.0	360.0	109.0	469.0	120.0
Local government	^*1,112.0	†138.4	459.5	109.6	569.1	131.2
Teachers	669.0	635.4	230.7	14.9	245.6	120.0
NHS	1,216.4	929.0	252.9	39.7	292.6	80.5
Police	132.0	132.0	65.5	29.0	94.5	5.0
Fire	38.0	38.0	23.0	8.0	31.0	8.0
Armed Forces	323.0	317.0	229.0	64.0	293.0	92.0
Overseas	—	—	34.0	13.0	47.0	—
Total	4,084.4	3,781.8	1,654.6	387.2	2,041.8	556.7
^* Full time equivalent.
† Includes admitted bodies.

Expenditure on pension benefits
Scheme	Lump sums	Basic pensions	Pensions increase	Total	Average pension of retired employees £ a week	Average pension of retired employees £ a week
	£ million	£ million	£ million	£ million	pre-November 1985	post-November 1985
Civil Service	214.0	549.0	469.0	1,232.0	47.80	51.70
Local Government	227.9	541.4	395.5	1,164.8	31.70	33.70

318W 319W

Scheme	Lump sums	Basic pensions	Pensions increase	Total	Average pension of retired employees £ a week	Average pension of retired employees £ a week
	£ million	£ million	£ million	£ million	pre-November 1985	post-November 1985
Teachers	239.0	522.0	432.3	1,193.3	77.30	82.90
NHS	168.2	390.5	262.2	820.9	42.90	46.40
Police	70.0	120.0	153.0	343.0	64.00	69.00
Fire	20.0	32.0	35.8	87.8	55.00	56.00
Armed Forces	190.0	308.0	367.0	865.0	n/a	53.80
Overseas	0.2	17.6	106.5	124.3	49.0	53.00
Total	1,129.3	2,480.5	2,221.3	5,831.1	47.40	51.30

n/a = not available.

Distribution of monthly paid pensioners, by amount of pension after November 1985 uprating
	Percentage of pensioners
Pension £ per year	Civil Service	Teachers	NHS	Armed Forces
0–999	28.9	2.7	39.5	13.8
1,000–1,999	23.6	10.2	23.7	37.9
2,000–2,999	13.2	15.3	11.7	19.3
3,000–3,999	8.7	16.6	7.5	8.6
4,000–4,999	7.7	19.5	4.9	5.8
5,000–5,999	5.6	16.2	2.8	4.4
6,000–6,999	4.1	10.5	1.7	2.9
7,000–7,999	2.5	5.0	1.2	2.2
8,000–8,999	1.5	2.2	1.0	1.6
9,000–9,999	1.2	1.0	0.9	1.0
10,000 or more	3.0	0.8	5.1	2.5
TOTAL	100	100	100	100