Pension overhaul will fail to lower cost to public, says IFS

Julian Harris
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COALITION reforms to government sector pensions will fail to reduce the burden on taxpayers and will actually become more generous to some public sector employees, the Institute for Fiscal Studies (IFS) has calculated.

Planned changes to pension schemes will “increase the difference between the public and the private sectors,” the IFS stated this morning, with low earners in the state sector set to do even better than their commercial sector counterparts.

Cabinet office minister Francis Maude recently allowed two trade unions back to the negotiating table after an earlier fall-out over the plans.

Yet state employees still have an advantage over general remuneration, the IFS said. “It will take the whole of the two-year public pay freeze and two years of one per cent pay increases to return public pay to where it was relative to private sector pay in 2008.

“This is because private sector pay reacted quickly to the recession. Pay in the public sector did not,” it stated.

However, the government’s shift to tying pensions to the CPI (consumer price index) measure of inflation, instead of the usually-higher RPI (retail price index), has reduced costs and generosity, the IFS added.