Responding to the Chancellor’s comments on public sector pensions in today’s Comprehensive Spending Review announcement, Nigel Keogh, CIPFA’s Technical Manager, Pensions and Central Government said:
'It was always going to be difficult for the Chancellor to square the circle of increasing the total employee contributions yield in public sector pension schemes whilst at the same time protecting the lower paid. The announcement today to achieve these through “staggered and progressive” changes to contributions ahead of Lord Hutton's final report due next year brings this challenge into even sharper focus.’
‘Increasing employee contributions by a further £1.8 billion by 2014-15, on top of the increases already factored into the Treasury calculations that will be generated by the cost share mechanism due to come into force next year, are unlikely to be achieved unless contribution increases are factored in some way down the pay-scale. This raises the spectre, highlighted by Lord Hutton in his interim report, that lower paid workers will be more likely to opt out of a pension scheme and “could end up with an inadequate retirement income and could fall onto means tested benefits later in life”. If this happens, we also run the risk of aggregate contributions to schemes falling rather than increasing and the proposed savings to the public purse not materialising.’
Contact: Guy Roberts/ Lindsay Machin / Chloe Forbes
CIPFA Press Office
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