March 07
Unions nuke the Government’s plans to cut NDA pension benefits

The GMB, ASLEF, Unite and Prospect Unions secured a significant victory for their members in reaching a deal with the Energy Minister last week, which will see Nuclear Decommissioning Authority (“NDA”) employees ‘pay more and get more’ rather than ‘pay more for their pensions and get less when they retire’.

Under the deal, which is subject to a ballot of each Union’s members, contributions will increase by an average of 3% rather than an average of 3.2% initially proposed and will be now phased in (over a period of up to 4 years).  In return, employees will receive an improved pension accrual rate of 1/58th of salary for each year of service, compared to 1/60th originally offered by the Government.  Currently employees receive 1/80th plus a cash lump sum of 3/80ths, which is equivalent to 1/64th based on the current terms for converting pension into cash at retirement.  So the deal will see the pension earned by employees each year increase by around 10%.

The supposed quid-pro-quo is that benefits will no longer be linked to final salary, but instead based on average earnings over the employee’s career, mirroring the pension reforms introduced by the Government across the public sector.  However it is only those whose salaries increase rapidly in the future who stand to lose out as a result of this change.  In particular, the change will only negatively impact upon those whose salaries increase by less than the rate of revaluation applied to active members’ benefits.  I could not determine details of the revaluation rate proposed by the Government or agreed as part of this compromise deal.  I note that the revaluation rate applied in the various public sector schemes are as follows:

Pension Scheme
Revaluation rate
Inflation (CPI) + 1.5%
Inflation (CPI) + 1.6%
Principal Civil Service
Inflation (CPI)
National average earnings
Local Government
Inflation (CPI)
Armed Forces
National average earnings
Inflation (CPI) + 1.25%

So depending on the revaluation basis applied, NDA employees expecting below national average pay increases or increases that are below or not much more than the increase in inflation each year, could actually find themselves better off as a result of the switch from final salary to career average.
As part of the deal, the Government also dropped plans to increase the age from which the pension can be drawn (without reduction).  So all in all, NDA staff should be extremely pleased with the deal the unions have struck.

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