Public servants will work six more years before retirement

The move was announced as part of a shake-up of pension schemes on offer to state-paid workers, which also includes moving from a final salary system to benefits based on career-average earnings and raising contributions by 3.2 per cent on average.

Danny Alexander, chief secretary to the Treasury, conveyed a message to public sector workers that it would be a "colossal mistake" to reject the deal, which he insisted was the best they could hope for.

He used a speech to left-leaning think-tank the IPPR to put out a message to workers that he believed it was "unjustifiable to ask the taxpayer to work longer and pay more so that public sector workers can retire earlier and receive more themselves".

The current retirement age for public sector workers is 60. The new plans will not apply to the uniformed services like firefighters, police and the military.

Mr Alexander added: "The history of reform is littered with examples where people simply deny the facts, deploy their myths and dig their trenches. This may hold out for a little while but eventually reality bites and when it does change is often urgent and uncompromising.

"Our offer is by far the best that is likely to be on the table for years to come."

His speech sparked fury from union leaders and opposition politicians, who warned that the delicate balance of talks between the government and public sector workers could be upset.

Some unions threatened to pull out of the talks currently under way with government.

During a by-election visit to Inverclyde yesterday, Labour leader Ed Miliband claimed the coalition was "hopelessly mismanaging" the issue.

"What people want the government to do is to sort this out on the basis of negotiation not on the basis of megaphone diplomacy," he said.

"Both sides have a responsibility to engage in negotiation to prevent the public being inconvenienced."

An SNP spokeswoman said: "Coupled with a wage freeze across the public sector, those working in our public services may feel a particular burden from these proposed changes.

"The UK government must set out very clearly what they propose as anything which suggests public sector pensions are being targeted to cut the deficit rather than to be protected for public sector workers will prove deeply unpopular."

The Scottish Government is expected to release a statement on its views on the proposals in the coming days.

Mr Alexander promised that low and middle earners would receive as generous pensions at retirement as they do now - albeit at a later age - and that those on the lowest incomes would be spared higher contributions. It is thought that staff on less than 15,000 a year pro rata - roughly 750,000 people in the UK - will not face any increase in contributions. Another 500,000 workers earning between 15,000 and 18,000 will see their contributions rise by no more than 1.5 per cent.

The GMB union's national secretary for public services, Brian Strutton, said the government appeared to have "already made its mind up" on some of the matters currently under negotiation.

"If that's right, if that's the government's position - that they have decided what they want the answer to be - then it is going to make it impossible for us to stay in these negotiations," he said.

Mike Kirby, Scottish secretary for Unison, said: "It's a real shame that Danny Alexander has seen fit to make these inflammatory announcements through the media, while we are still in the middle of detailed negotiations with both the UK and Scottish governments.

"Many public sector workers do very physically demanding jobs - expecting paramedics to carry patients into an ambulance at 66, 67 or even 68 is a danger to themselves and patients. And the same is true for nurses, midwives, binmen, road cleaners and many more."

He added: "We want public sector pension schemes to be fair, affordable and sustainable which is why they were renegotiated only a few years ago.

"This ill-informed attack on public sector pensions has nothing to do with a pensions deficit and everything to do with making public sector workers pay to clean up the financial mess left by the city bankers."

The government is to phase in the contribution increase, with only 40 per cent of the rise due to take effect in April next year, 80 per cent in April 2013 and in full from 2014.

But business body the CBI warned that the government should not cave in to union pressure, pointing to the 10 billion-a-year-gap between contributions paid in to public sector schemes and the value of the benefits currently being promised.

Director general John Cridland said: "Public sector pensions must be fair for employees and fair for taxpayers. That means they must be affordable.

"We understand that increasing contributions at a time of wage constraint may be difficult for public sector workers. That's why the government is right to say it will protect lower earners from the full increase.

He added: "Workers in the private sector have accepted significant changes to their pensions to maintain good schemes. Once proposals are implemented, public sector workers will still have among the best pensions in the UK."

Downing Street said the government was trying to have a "constructive dialogue" with the unions and pointed out that almost half - 44 per cent - of public sector workers were non-members.

"Clearly, we have a duty to speak to those people as well," Prime Minister David Cameron's spokesman said.

FDA, the union for senior civil servants and managers, accused the Treasury of "doing their best to provoke strike action".

General secretary Jonathan Baume said: "I am coming to the view that these negotiations are doomed to failure while the Treasury is in the driving seat, and it is inevitable that there will be industrial action across the public sector, which would be likely to include the FDA."

Those ready to retire will have to wait longer before they can get their chance

For public sector workers approaching retirement age, yesterday's news will have been unwelcome.

Instead of being able to retire at 60, as they previously would have expected to do, they are now likely to have to wait another six years.

But, as with most private sector pension schemes, the new public sector retirement age - which matches that of many commercial companies, as well as the state pension - is not set in stone.

In the past, many state sector pensions providers have offered early retirement to employees in a bid to cut jobs without having to implement redundancies.

While, in the private sector, taking early retirement would usually mean a reduction in benefits - usually around 5 per cent for every year the worker takes before their "official" retirement age - the offers made by some parts of the public sector have come without a cost.

Derek Smith, an independent financial adviser at Melville Hutchison in Edinburgh, said the public sector schemes remains "the Rolls-Royce" of pensions for their members.

"It is definitely a dilution of their benefits, but it's not the end of the world," said Mr Smith. "They are still extremely attractive schemes. People in the public sector really do have the Rolls-Royce of pensions schemes."

He added: "In either public or private sector, although there is a retirement age for people in most jobs, it is usual that there is some kind of early retirement deal on offer, so if people really do want to leave work before they are due to, they can."

The government's plans to move to a career-average earnings benefit scheme, rather than the final salary scheme now enjoyed by public sector workers, will bring public sector workers in line with most schemes offered by private firms.