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The Minister for Policing and Criminal Justice (Damian Green)
I thank the right hon. Member for Leicester East (Keith Vaz) for initiating the debate and for the kind remarks he made about me at the start of his speech. I can confirm that I am already nostalgic for the UK Border Agency. I entirely echo his remarks about the tremendous service that police officers give to their communities and the whole country. As he said, he and I attended the police bravery awards a few weeks ago. It was the first time I had attended, and I was struck dumb by the courage and heroism shown by all the winners. Even more importantly, I know from my own experience as a constituency MP, as well as from other experiences I have had as police Minister, how that kind of service is provided on a daily basis across the country.
This afternoon, I would like to clarify the Government’s approach to public service pension reform as a whole, as well as what it means for police officers. As the right hon. Gentleman acknowledged, these are difficult economic times and we have to take difficult decisions, but we have equally made it clear that we are committed to reaching a fair outcome for police officers, and I hope to explain why I believe that that has been achieved. In the course of his speech, the right hon. Gentleman enjoined me to listen to the comments made by a number of organisations.
I should start by reminding the House of the context for pension reform. From the outset, we have been candid about the need for a fundamental review of public service pensions and of how they are funded and maintained. That is why my right hon. Friend the Chancellor invited Lord Hutton to chair the independent public service pensions commission. As a member of the previous Government and a former Secretary of State for Work and Pensions, Lord Hutton was well placed to undertake an independent and comprehensive review. He did a thorough job and made a compelling case for change. As he set out in his findings, the costs of public service pensions have increased over recent years, mainly because people are living longer, and the increasing costs have fallen largely to the taxpayer.
The Government are committed to providing good occupational pensions for public servants, but we must do so in a way that is affordable, sustainable and fair both to those workers and other taxpayers. That means, across the public services, moving to the career-average pension model in place of final-salary schemes. That also involves increasing the contributions that workers pay for their own pensions and raising the retirement age. The Public Service Pensions Bill, which is currently before the House, sets out the high-level framework for those reforms, with work force and scheme-specific details to be implemented through regulations in due course.
To put all that in context, the latest figures from police forces show that, in the 2011-12 financial year, across England and Wales more than £2.8 billion was paid out in police pensions. Such pensions are paid to retired officers who have a legal entitlement to receive them. I hope that gives Members a sense of the scale of the issues and finances involved.
The right hon. Gentleman raised a specific point about police pension contributions. It is true that police officers pay among the highest contributions in the public services. That is because the pension is significantly more valuable than most others, as it should be.
As part of his report, Lord Hutton commissioned a comparative analysis of the benefits that workers get out of pension schemes based on what they contribute themselves. He found that, aside from those in the armed forces, who do not contribute to their pensions, police pensions are more valuable than most, as they are generally drawn from an early age and paid for longer in retirement. That is even taking into account the relatively high contributions paid by police officers.
I was struck by the verdict of Police Mutual, an independent financial adviser that specialises in services for the police. Its assessment, in response to the increased contribution rate, states that
“the Police Pension Scheme remains one of the best financial investments you are ever likely to make.”
People should listen to Police Mutual, because it knows whereof it speaks.
While I am on that subject, I am happy to reassure my hon. Friend the Member for St Albans (Mrs Main) that the new scheme does not have a service requirement, so female officers will not be disadvantaged for taking career breaks.
Keith Vaz
I thank the Minister for bringing that information to the House’s attention. Police Mutual may have a vested interest, because it deals with such financial affairs and might benefit in some way. I do not know the organisation’s position, but the organisations that have spoken to us are clear that their members will be affected. The Minister is new to his position, and he is not responsible for this. He did not write the Winsor review. He has just become the Police Minister, and he has to work with the police for the two-and-a-half years at least that he has this job. Will he agree to meet the representatives—the Police Federation, the Police Superintendents Association, the Association of Chief Police Officers and others—again to discuss one more time the effects that the changes will have on their members? If he agrees to do that, he will get a better impression of what is going on.
Damian Green
I constantly meet not only police officers in my constituency who wish to discuss this but, as the right hon. Gentleman would expect, the fed and the supers. This item is clearly on that agenda, and I am happy to reassure him that I will continue to discuss it. I will come on to what the federation said in a second.
We have maintained throughout the process that police officers deserve to be treated with respect and even-handedness. We have worked hard with partners in policing to reach a fair outcome that recognises the particular nature of a police officer’s work. That is why we asked Tom Winsor to reflect on Lord Hutton’s findings and consider some of the issues in the context of his independent review.
Mr MacNeil
The Minister speaks about fairness and even-handedness, but does he agree that, to give fairness and even-handedness, full flexibility on pensions should be given to the Scottish Government, as the Scottish Police Federation wants?
Damian Green
I am not sure whether the hon. Gentleman is aware that the Scottish Government’s Cabinet Secretary for Finance, Employment and Sustainable Growth has this afternoon made a statement on his intention to take forward such issues in Scotland. I hope the hon. Gentleman will go away and reflect on what the Scottish Cabinet Secretary said.
Mrs Main
The Minister was helpfully explaining why female police officers will not be disadvantaged, but female police officers have told me that the career-average scheme will disadvantage them, and I am concerned about that. Will the Minister explain that point a little more fully?
Damian Green
There is no service requirement, but we could discuss that for the rest of the time available. I would more than happily have that conversation with my hon. Friend offline.
Tom Winsor agreed with Lord Hutton that a normal pension age of 60 is appropriate for police officers. Given the findings of the two independent reviews, the Government believe there is a strong and coherent case for the framework, which will be in place from April 2015.
The Police Federation has been mentioned a lot, and having engaged in the process that followed those reviews, it confirmed that it accepts the outcome as the “best deal possible” for police officers in the context of the reform across public service pensions. Paul McKeever, chair of the Police Federation and the staff side of the Police Negotiating Board said, and I will quote him in full for balance:
“Despite being disappointed with aspects of this announcement, Staff Side accepts it within the context of the Government’s wider public service pensions reform agenda. It is clear from our discussions with the Home Office that, compared to the reference scheme offered by the Home Secretary of 27 March, this was the best deal possible to protect the unique position of police officers.”
The right hon. Member for Leicester East asked me to listen to the Police Federation, and I do in that regard.
The right hon. Gentleman also asked me to listen to ACPO. The ACPO lead for reward and recognition, Chief Constable Simon Ash, said:
“The changes to the Police Pension Regulations by the Home Office are broadly supported by ACPO, who have worked constructively with other stakeholders since March to ensure that the best possible balance is achieved for longer term reform whilst providing sufficient transitional arrangements.”
The degree of consensus is often under-recognised. The right hon. Gentleman set out the general picture, but nevertheless both ACPO and the Police Federation have accepted the proposal. There is much of the detail still to arrange for new pension arrangements to be in place for 2015. Obviously, we will maintain the dialogue to make those arrangements work.
The deal means that the normal pension age for police officers will be 60. Aside from the armed forces and firefighters, other public service workers will have a higher normal pension age linked to the state pension age, which is 65 rising over time to 68. That means that police officers will continue to retire earlier than most others, reflecting the nature of the work they do.
We have heard today that some officers are concerned about the prospect of working to 60, but the evidence shows that the average age of those joining the police in recent years is 26. The current open pension scheme—the 2006 scheme—has a 35-year accrual period, so many officers will already be working beyond 60 to accrue a full pension. I recognise that that is a genuine concern for some officers. The framework, therefore, includes flexibility for officers to retire from 55 with an immediate pension and an actuarial reduction linked to the normal pension age of 60.
The increased flexibility of the career-average model also means that there is no cap on the amount of benefits that can be accrued. Under current arrangements for police officers, benefits are capped after 30 or 35 years, depending on the pension scheme. Under the reform framework, there is no cap, so years worked beyond age 60 would provide an enhanced pension.
We are protecting accrued rights for police officers for pension built up by 2015, as we are for all public servants. Most police officers are members of the 1987 scheme, which is a complex scheme that includes uneven periods of pension accrual, so we have developed tailored arrangements to reflect that, thus honouring the Government’s commitment to protect accrued rights and to give police officers a fair outcome.
The Government also made a commitment to give transitional protection to those who were within 10 years of their current normal pension age on 1 April 2012. That applies across the public services, recognising that those nearest to retirement are likely to have least time to plan for that retirement. Again, the complex design of the 1987 scheme has led us to create specific arrangements. As there is no set pension age under that scheme, we have decided to give protection based on age and length of service. All officers aged 45 at 1 April 2012 will be able to remain in their current scheme rather than moving to the new pension arrangements in 2015. We are also giving protection to those who, at 1 April 2012, were within 10 years of retiring on a full police pension. That will give full protection to a further group of officers, including some who were as young as 38 or 39 at 1 April this year. On top of all that, there is also further tapered protection for those who were within four years of qualifying for full protection, in order to smooth the cliff-edge effect that often happens with pension reforms. That tapering again demonstrates, I hope, that the Government have entered into the process in good faith with a view to finding a fair outcome.
I am conscious that going through the details of pension reform does not make for great parliamentary rhetoric, but it is such a serious issue that detailing it is important. I appreciate as well as anyone the degree of understandable emotion caused by the issue, but the underlying point is that, under the new arrangements, the police pension deal is still one of the best deals on offer. I do not underestimate the level of concern among police officers about pension reform, and it is right that they should have clarity at the earliest opportunity about what it means. Many details of how the reforms will be implemented have still to be decided. I repeat the commitment that the right hon. Gentleman wished me to make: the Government will continue to work with our partners in policing on the issue, including specifically those who represent rank-and-file officers.
Throughout the discussions, we have been committed to reaching a fair outcome for police officers. We have done all that we can to achieve a fair pensions package for police officers that reflects the front-line nature of policing work and protects those closest to retirement. Police officers will continue to retire earlier than most public servants, and will continue to benefit from significant employer contributions on top of their own.
I am grateful to the Police Federation for making it clear that they encourage their members to remain in the scheme and will continue to do so after the proposed reforms. I hope that police officers will be reassured by that eminently sensible advice. It is difficult to envisage another investment that would provide the same guaranteed level of income—