Public sector pensions could cost billions

Pensions for public sector workers could cost taxpayers up to £41 billion a year, according to research by the Centre for Policy Studies.

Its report, A toxic tangle, found that this figure would be comprised of at least £17 billion in employer contributions and at least £15 billion to cover cashflow shortfall between pensions in payment and pension contribution as currently identified by the Office of Budget Responsibility.

The report also identified at least £9 billion in additional costs that will arise from the interaction between the Public Service Pensions Bill, which was published in September 2012, and the Department for Work and Pensions’ white paper on the single-tier pension.

The Centre for Policy Studies suggested that these two proposed pension reforms will trigger additional costs of about £3.4 billion a year from the loss of public sector employers’ national insurance contributions rebate if contracting out is abolished, and approximately £4 billion a year as a result of public sector employees still receiving an enhanced occupational pension, if still contracted in, and being entitled to the single-tier pension.

Tim Knox, director at the Centre for Policy Studies (pictured), said: “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.”