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To: Secretaries of Constituent Organisations 23^rd June 2010

EMERGENCY BUDGET 2010

Dear Colleague

The Emergency Budget took place yesterday. Some of the major provisions are laid out below.

Indexation of Public Service Pensions

From April 2011, the indexation of public service pensions will be switched from the retail prices index (RPI) to the Consumer Prices Index (CPI). Under normal circumstances, the increase in the CPI is lower than that for the RPI. For example the RPI is currently 5.1 per cent, compared to 3.4 per cent for the CPI. The PSPC estimates that a public service pensioner retiring at 60 with a £10,000 a year pension, will lose out by almost £49,000 over a 26-year retirement if there is a 1 per cent a year difference between CPI and RPI.

The PSPC views this change of indexation as unacceptable. The Coalition Government had stated that accrued rights would be protected. The PSPC expected that this would include continued indexation, via the 1971 Pensions (Increase) Act, to RPI throughout retirement. Phillip Hammond MP’s letter to the CSPA on 27^th April stated that the Conservative party ‘has no plans to change the current index-linking of pensions in payment’. This assurance has not lasted two months and paints the new Government in a very unfortunate light.

CPI indexation will also be applied to all benefits other than the basic state pension, or the minimum income guarantee element of pension credit.

Basic state pension

As expected, the Chancellor announced the restoration of the earnings link for the basic state pension from April 2011, with a ‘triple guarantee’ that the basic state pension is raised by the higher of earnings, prices or 2.5 per cent. The ‘prices’ element will be RPI in April 2011, but CPI thereafter. The PSPC is pleased with this change overall as it restores the earnings link, but we obviously oppose the switch from RPI to CPI.

Age-related personal allowances

While there was an announcement that the basic personal allowance would be raised from £6,475 to £7,475 in the 2011-12 tax year, there was no announced increase in the age-related personal allowances.

Concessions linked to state pension age

The Government has confirmed that the age at which these benefits can be claimed (such as Winter Fuel Payments, free off-peak local bus travel, eye tests and prescriptions) will rise in line with the female state pension age, which is set to increase from 60 to 65 over the next decade.

Increase in state pension age

The Government has announced a review of the implementation date for when the state pension age will rise to 66. Under current arrangements, the state pension age is set to rise to 66 between 2024 and 2026. The PSPC of course opposes an increase in the state pension age.

Annuitisation of Savings

The Government has confirmed that it will end the existing rules that create an effective obligation to purchase an annuity by age 75 from April 2011.

Yours sincerely

ANDREW MORRIS

General Secretary