The alpha effect: why the civil service will soon need more part-time roles
9 Oct 2017
Dr Kath Atkinson, Researcher, University of Leicester
Since the abolition of the default retirement age in 2011, there has been little change in the proportion of civil servants aged over 60. This is perhaps not surprising as the majority currently reaching 60 can still take a final salary pension which, for many, will be sufficient to finance their retirement.
However, civil service pensions have changed and as the state pension age continues to rise, more civil servants will choose, or need, to extend their working life. An expected consequence of this is an increase in partial retirement requests and a heightened demand for part-time roles. However, a less obvious corollary will be the ‘alpha effect’: a wave of requests for smaller roles of between 16 to 30 hours, but more typically 20 to 25 hours per week, which will occur between 2023 and 2033. This is not just caused by demographics or economic necessity but changes in civil service pensions.
Background: civil service pension changes in 2015
Most civil servants have a workplace pension. In 2015, the majority migrated from final salary schemes to ‘alpha’, a career average defined benefit scheme. The age this pension can be drawn, without reducing benefits, mirrors the state pension age.
Employees within 10 years of receiving their civil service pension remained in their legacy scheme. The majority of these have a retirement age of 60 and, for long tenure employees, this may provide sufficient income for full retirement, if desired.
For younger staff, their legacy pension was ‘crystallised’ so no more years of service (a critical component in calculating benefits) could be added. This means they will not achieve the level of benefits enjoyed by many older colleagues and their pensions are unlikely to provide adequate income to retire fully at 60. To maintain income levels, civil servants can request ‘partial retirement’ whereby they take their pension and continue in paid employment. This option is expected to prove popular for this group and it is a key part of what creates the alpha effect.
Partial retirement and the need for smaller jobs
Partial retirement allows individuals to draw their pension and continue working, as long as pensionable earnings are reduced by a specified amount. This is achieved by reducing hours worked in the current job or by keeping hours the same but moving to a lower-paid job. By seeking to ‘re-shape’ their current job an employee can retain their grade, which for some is an important part of their identity and status. In addition, they gain more time outside work to relax, or support family members, all without a significant drop in income. Drawing a pension and working a smaller number of hours, whilst maintaining income levels, is an attractive combination and many are likely to seek this option.
The desired size of job would depend on the amount of pension taken. For example, 16 reckonable years in Classic (eg joined before 1999 and working full-time) would provide 20 per cent (16 x 1/80) of final salary. Taking this pension and working just under 30 hours a week, instead of 37, would meet partial retirement rules and provide a similar income. The bulk of requests which form the alpha effect are likely to be seeking re-shaped jobs of between 20 to 25 hours, due to the size of legacy pension available.
The impact on the civil service
Reducing work gradually, rather than stopping suddenly, allows workers to adjust to their forthcoming full retirement and is a valuable step for older civil servants. However, the alpha effect creates several challenges for the employer, not least the significant increase in part-time jobs in grades and specialisms which previously had few part-time workers.
If no new part-time jobs were created there would be strong competition for those already in existence. Employees seeking to combine work with family or caring responsibilities (who are mostly women) would be competing against those wanting to enjoy their pension (who are potentially higher ranking, ex-full-time workers, where men predominate). Feelings of discrimination and unfairness would surely arise. On the other hand, accepting requests keeps experience but it impacts resourcing and accommodation needs, raising questions about job structure, re-allocation of ‘abandoned’ tasks and how to achieve good performance management and staff wellbeing in the changed workplace.
A rise in partial retirement requests is expected as civil servants with legacy pensions seek to extend their working lives. A foreseeable consequence of this is an increased demand for part-time roles. The volume of requests for smaller roles depends on departmental age profiles, staff pension choices and years of reckonable service held. Without examining the relevant data, the potential impact for individual departments cannot be predicted.
What can be predicted, however, is that in several years’ time, the alpha effect will hit and leave behind a civil service with a different working pattern and demographic to the one we know today. So, how will a rise in older, part-time workers change the civil service? What are the major implications for a department facing the alpha effect? What should HR managers be doing to prepare? These issues will be considered in a subsequent blog.
Any views expressed are those of the author and not necessarily those of the Institute as a whole.