Forestry Commission Trade Unions - www.fctu.org.uk
Civil Service Compensation Scheme (CSCS)
Proposed Changes
The Civil Service Compensation Scheme (CSCS) is a statutory scheme made under the Superannuation Act 1972. It provides details of the discretionary payments which may be made on exits in circumstances which attract compensation either in the form of a severance payment or an early retirement package. The terms of the CSCS – together with the associated provisions in the Civil Service Management Code (the Code1) – have remained broadly unchanged since the last major review which took effect from April 1987. The 1986 review rationalised the early departure arrangements and also introduced a right for members to take pension before pension age on an actuarially-adjusted basis.
In a Written Ministerial Statement of 31 March 2009, the Prime Minister said
“The Government ... intends fundamentally to reform the severance and early retirement terms for all Civil Servants in order to control costs. The current arrangements have been in place since 1987 and are inflexible and expensive. The new terms require departments to reduce costs and will improve accountability and value for money for the taxpayer, saving up to £500m over the next 3 years.”
In addition, the current terms provide different benefits depending on age. Some aspects of the rules have been challenged by members on age discrimination grounds, with varying degrees of success. However, even if the discrimination is judged by the courts to be justifiable, it is not necessarily the case that members perceive the differential approach as fair.
Confidential discussions on new exit terms have taken place with the Council of Civil Service Unions (CCSU) and, internally, with Civil Service management. These formal proposals, which include transitional provisions for current staff, take account of matters raised in those discussions and are intended to strike a fair balance between the interests of all parties.
Current exit terms
Following the 1986 review, a range of terms applied, as summarised below. The circumstances in which the different terms may be used are set out in the Code.
Current exit category |
When used |
Compulsory category |
The most generous terms, intended to be used where the individual’s contract was being terminated compulsorily (for instance on redundancy but also for “structural” departures of senior staff). Employers could also use these terms to invite volunteers for redundancy. |
Flexible category |
Used in circumstances where no compulsion is involved. |
Approved early retirement |
Early access to an unreduced pension with employer consent. |
Medical retirement |
Where an individual is prevented, permanently, by health reasons, from performing their job. |
Inefficiency |
Where a severance payment is considered appropriate following dismissal for poor performance or poor attendance. May also be used in cases which do not meet the stringent criteria for medical retirement. |
Proposed terms
Qualification for these benefits will normally be payable where the individual has a minimum of 12 months service.
Compulsory Redundancy |
Standard compulsory redundancy terms will apply when Cabinet Office agrees that dismissal on the grounds of compulsory redundancy is unavoidable. Cabinet Office agreement will be forthcoming only when Cabinet Office is satisfied that the Department has followed the procedures in the Protocol rigorously and that all redundancy avoidance measures have been exhausted. |
Compulsory redundancy tariff |
The compulsory redundancy tariff applies in all cases of compulsory redundancy (but note that some employees covered by transitional arrangements). The Department does not have discretion to vary the terms paid on compulsory redundancy. * to ensure consistency, a notional pension would be calculated on a standard basis (probably on the basis of classic but reflecting the actual pension age of the individual) |
Years of service |
The period of service will be counted in years and days and expressed as decimal years. It will comprise the individual’s continuous service (as defined for employment rights purposes). Periods of unpaid leave (for instance career breaks) will therefore normally be excluded. Years of part-time service count as full years (ie not reduced to the full-time equivalent as they are in classic, classic plus and premium pension schemes). |
Pay |
Pay will normally be determined as the average of the individual’s actual (not full-time equivalent) pensionable earnings over the last 24 months of service. Where information is held only for full scheme years (ending 31 March) or where the individual has less than 24 months of service, amounts will be calculated pro-rata. The earnings cap will not apply. |
Pension age |
60 for individuals whose current period of continuous service began before 30 July 2007 |
Transitional arrangements |
Transitional terms will be available instead of a payment calculated according to the compulsory redundancy tariff, for those in continuous service since before 30 July 2007 and who leave on compulsory redundancy terms with a last day of service no later than 31 March 2011. In these cases, individuals may opt for the current compulsory terms (Compulsory Early Severance or Compulsory Early Retirement, as appropriate) to apply instead. |
Discretionary exit terms |
Discretionary exit terms will not apply in the case of compulsory redundancy. |
Standard tariff |
1 month’s pay per year of service to a maximum of the compensation ceiling. Benefits will taper in the same way as described for the compulsory redundancy tariff. |
Compensation ceiling |
24 months’ pay for those under pension age. 6 months’ pay for those over pension age. |
Flexible range maximum |
The lesser of:
|
What does this mean?
From 1 January 2010, where members of staff leave as a consequence of compulsory redundancy, the compensation will be mandated in the Compensation Scheme rules – that is, all Departments will be required to follow the same rules, set out below. In cases other than genuine compulsory redundancy, employers will have flexibility to determine the compensation payable but subject to overall limits.
All Departments have introduced (or are committed to introducing) no age retirement polices for civil servants below the senior civil service. Compensation payments will therefore be paid regardless of age. Subject to transitional terms for current staff made redundant during an interim period, the current model of early retirement for those aged over 50 and severance for those under 50 will no longer apply. For the future, compensation on termination of contract will be provided as a cash payment in all cases.
From 1 January 2010, employees made compulsorily redundant will get cash compensation based on length of service and subject to a maximum of 2 years' pay (the maximum will apply to those with more than 14½ years’ service). Staff may choose to use some or all of the payment to top-up their pension, but – other than during the transitional period to 31 March 2011 - enhanced early retirement packages will no longer be available on redundancy.
For those who are able to take an unreduced Civil Service pension (that is, typically someone who is over 60), the cash payment will be less to take account of the fact that their pension is largely funded by the taxpayer. In these cases, payments will typically be 6 months' pay. Payments for those close to pension age will be tapered to avoid a “cliff edge”.
In other circumstances, for instance when an employer is reducing numbers and asking for volunteers, there will be some flexibility for employers to devise their own terms around a standard tariff of 1 month's pay per year of service, but subject to an absolute maximum of 2 years' pay. Departments will be required to take account of affordability in devising their terms and may choose to pay less or more than the standard or to offer early retirement (but without any enhancement to service) to those over 55.
Voluntary terms form the bulk of exits from the Civil Service. In the three years from 2005-8 there were fewer than 100 compulsory redundancies of those people who wished to continue their civil service career even though the Civil Service as a whole reduced by over 70,000 during that period.
Should the Forestry Commission want to invite volunteers to leave, they will have a degree of flexibility to set their own compensation terms to meet their business needs and budgets subject to an overriding maximum of 2 years’ pay. Departments will also be able to offer
The FC will have flexibility to set their own terms when they are seeking reductions in headcount on a voluntary basis. However, they will be required to take account of affordability in devising their terms. While they may choose to offer early retirement to those over 55, this will in future be without any enhancement of service.
The standard tariff will be 1 month's pay per year of service, subject to an absolute maximum of 2 years' pay. The variation that the FC may offer is subject to a maximum of twice the standard tariff (or, if less, 2 years' pay) and a minimum of statutory redundancy. For senior staff, any proposal to go over the standard tariff will have to be approved by the Permanent Secretary personally and, in some cases, by the Cabinet Office as well.
Some other Questions answered: -
Q My Department has already made me a formal severance offer. Does this still stand?
A If you are due to leave before 31 December 2009 – Yes
If you are due to leave between 1 January 2010 and 31 March 2011, and:
• the FC has already provided you with an estimate; and
• you have said that you are happy to go on these terms; and
• the FC has confirmed that you will go and agreed the date of your departure then the terms you have agreed will probably be paid unless you and your employer agree something different.
If matters are at an earlier stage than outlined above, for instance if you have received an estimate but taken no further action, then the FC will tell you how the proposals will affect you.
Q I'm over 50 and interested in the possibility of early retirement. How do the new arrangements affect me?
A The rules of the Civil Service Pension Scheme give you the right to draw a pension early on actuarially-adjusted terms – that is, your pension and lump sum will be permanently reduced to reflect the fact that your pension will be paid for longer than if you had drawn it at pension age. (Please note that pension cannot be drawn before age 55 if you joined the pension scheme on or after 6 April 2006.) The pension scheme rules will be amended to allow you to buy out, at full cost, all or part of the actuarial reduction.
The new compulsory redundancy terms will provide for a cash payment only. If you want to, however, you will be able to put some or all of that payment towards the cost of bringing your pension into payment early on an unreduced basis.
Where employers are asking for volunteers to leave, they may decide to offer early retirement terms (but not to people under 55). In that case you would receive the pension (and lump sum) you have built up, without any reduction for early payment, but without any enhancement of service.
Q What about ill-health retirement?
A Ill-health retirements are made under the pension scheme rules and are unaffected by these changes.
Q What are you doing about compensation payments currently paid to staff who leave on grounds of inefficiency?
A In the light of these proposals, we are considering what changes to make to the current rules covering payments to staff dismissed on grounds of inefficiency.
Q What consultation has there been on these changes?
A Cabinet Office has been in discussions with the Civil Service Trades Unions for some months but, regrettably, it has not proved possible to reach agreement with all of the unions involved.
As a result Permanent Secretaries have now agreed formal proposals and these have been sent to the Unions. We expect that the unions will consult their members before responding formally to Cabinet Office which they are asked to do by 5 October. Staff can send any comments to their union or direct to Cabinet Office – see the proposal document Fairness for All at http://www.civilservice.gov.uk/pensions/index.aspx for further information.
The FCTU view
This is an outright attack on our terms and conditions and is not the best deal that was being offered. These proposals will leave many of our members thousands of pounds worse off in the event of voluntary or compulsory redundancy.
These changes are also likely to lead to more compulsory redundancies as voluntary will be open to fewer people and on detrimental conditions. The Government can not be allowed to impose changes that have not been agreed and which represent a detriment to many union members in the Civil Service, to do so would give a green light to attacks on other terms and conditions, most notably pensions.