These are the contribution increases under Option One (before tax) to save £450 Million annually by 2014/15;
These are the changes to the accrual rate under Option One;
The balance of £450m in this case would be achieved a by a stepped change in the scheme’s accrual rate from the current rate of 1/60ths to 1/64ths with effect from April 2013 and to 1/65ths with effect from April 2014.
This means that for future service from 2014 onwards each year of service would be worth 1.54% of final salary on retirement as opposed to 1.67% as at present.
This reduces the value of future service for pensions purposes by 7.8% (that means that for a given amount of service and a given final salary, your pension – in respect of future service – will be 7.8% lower than it would otherwise have been.)
An employee at the top of Scale 6 in Inner London would, by 2014, be paying 27.7% more to earn 7.8% less pension than at present in respect of future service (representing about one third (33%) less “value for money”).In the next post, I will look at Option Two in the same way.