Latest Public Sector News

05.02.13

Pensions ‘black hole’ by 2020 – Centre for Policy Studies

The Government has underestimated the expense of public sector pension reforms, the think tank Centre for Policy Studies has warned.

This could lead to a “pensions black hole” of £9bn a year by the beginning of 2020, costing taxpayers. A new CPS study has suggested the burden on taxpayers could be around £1,600 each year, rather than the Government’s estimate of £1,230.

Public sector pensions reforms are aimed to bring these into line with private sector pensions, but could lead to “unintended consequences”, the Centre for Policy Studies has warned.

Tim Knox, a director of the think-tank, said: “It’s effectively a pensions black-hole mostly because of the strange interaction between the new single tier pension and public sector pension reforms.

“Lord Hutton claimed that his proposals for public sector pension reform would be fair, sustainable and balanced, and that taxpayers can have confidence that the costs are controlled. Sadly, none of this is true. Taken together, the Coalition’s pension proposals are unfair and the costs – at £1,600 a year for every household – are clearly not controlled. This is clearly unsustainable.”

A spokesman for the Department for Work and Pensions said officials “simply do not recognise the figures as presented”.

“The new single tier state pension will be more sustainable and cost the taxpayer no more than the current system. To make the state pension simpler and easier to understand, contracting out must end, meaning both employees and employers across the public and private sectors will pay National Insurance at the standard rate.”

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