Pensions: Ministers claim new offer is 'very big move'

The government is urging unions to accept revised proposals it has made for public sector pensions, which it says are a "deal for a generation".

No-one within 10 years of retirement will have to work longer or see their pension income decrease as a result.

David Cameron told MPs the improved offer was "very fair" to workers.

But union leaders said the package was a "long way" from being accepted and preparations for strike action later this month would go ahead.

Unions are continuing to ballot their members on taking industrial action on 30 November.

The BBC's political editor Nick Robinson said that provided serious negotiations continue ministers accept that the strike is likely to go ahead, in part because unions would have to re-ballot their members at an enormous cost if they wanted to delay the action to a later date.

Negotiations between ministers and union chiefs based on pension proposals from the Labour peer Lord Hutton, who chaired an independent review, have been deadlocked.

'Best offer'

But following a 90-minute meeting on Wednesday, Treasury Minister Danny Alexander announced a set of revised proposals which he said could pave the way for a settlement lasting 25 years and which were "more than sufficient" to avert strike action later this month.

Under the proposals, about one million public sector workers - including teachers, civil servants and local government workers - who are due to retire in the 10 years from 1 April 2012 will now not work any longer and they will keep their existing final-salary schemes.

The government is proposing more generous accrual rates - the rate at which pensions build up in value - than previously planned and higher "cost ceilings", the limit on contributions paid by the government.

Liberal Democrat Chief Secretary to the Treasury Mr Alexander, who has been leading the negotiations for the coalition government, said it was "the best offer" on the table.

"If reform along these lines is agreed, I believe that we will have a deal that can endure for at least 25 years and hopefully longer," he said in a statement to MPs.

"So I hope that the trade unions will now grasp the opportunity that this new offer represents."

Ministers argue that change is needed because people are living longer, and say the cost of public sector pensions to the taxpayer has already gone up by a third.

Unions say the changes will mean people working longer, paying more and getting less - and point to forecasts that the cost of pensions will drop as a share of GDP by 2060.

Mr Cameron defended the plans at Prime Minister's questions, saying the cost of public sector pensions could not continue to escalate.

"This, I think, is a very fair offer to hard-working public servants to say this is a strong set of pension reforms which will give you pensions that are still better than anything available in the private sector."

'Long way'

TUC general secretary Brendan Barber said he "welcomed" the new proposals which he said would be the basis for detailed discussions on the shape of individual pension schemes.

While unions were committed to negotiating an agreement, he said there had been no shift on the key issues of higher contributions and the rise in the pension age and he wanted to see "further real progress" on the issues dividing the two sides.

"We are a long way from a position where we have offers on the table which might prove acceptable," he told reporters. "As things stand, the plans for 30 November remain unchanged."

Mark Serwotka, from the PCS union, said the proposals were a "slight improvement" but "nowhere near enough" to address his members' concerns.

"If the government's position is 'this is as good as it gets', then I think we are going to see three million people on strike at the end of this month," he told the BBC.

'Insulated'

Labour welcomed the shift in the government's position but said the details - such as protection for part-time workers - still had to be hammered out in order to avert strike action.

"I think it is a really good step in the right direction and a much better deal for people who work in the public sector," shadow Treasury minister Rachel Reeves told the BBC.

But the Institute of Directors said the government was conceding too much and the deal was unsustainable in the long term.

"It is not reasonable that private sector employees who will never enjoy defined benefit pensions should continue to subsidise public sector workers insulated from economic reality," its director general Simon Walker said.

The result of a strike ballot by Unison, which has a million members working across the public sector, is due to be announced on Thursday.

A number of other public sector unions are also proposing strike action on 30 November, and some of them will continue to ballot until 16 November.