Public sector pension reforms ineffective

Public sector pension reforms ineffective

An independent pensions consultant claims that the government’s proposed reforms to public sector pensions will result in no cost savings whatsoever.

John Ralfe says that the savings which will be made by increasing the public sector pension age to 67 will be cancelled out by the faster build up of pensions in the new schemes.

The Government has defended the effectiveness of the reforms, claiming that Mr Ralfe’s calculations are based on a partial analysis and do not take either higher pension contributions or reduced levels of inflation proofing into account.

As well as increasing the pension age, the Government plans to introduce career average schemes for most public sector employees, as these will be cheaper to fund.

It also plans to increase the amount that workers’ must contribute to their pension scheme.

The Government has already cut pension costs by changing the way public sector pensions are inflation-proofed.

They are now linked to the consumer prices index (CPI) rather than the retail prices index (RPI) because the CPI is designed to rise more slowly.

However, Mr Ralfe points out that improved accrual rates, introduced after recent negotiations with trade unions, will mean that the proposed pension deal will generate no savings compared with the existing arrangements.

Meanwhile, Unison has criticised the Government for focusing on public sector pensions instead of the crisis facing private sector pensions.

Dave Prentis, general secretary of Unison, said: ‘The real pensions timebomb is in the private sector.

‘Already two thirds of these workers get nothing from their employers towards their pensions - this could cost the taxpayer billions in the future.

‘The situation will spiral even further out of control, if more schemes are shut down and the taxpayer has to step in to cover the cost of supporting even more workers in their retirement.’

Tags: , , private sector pensions, , UNISON

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