Gold-plated public sector pensions 'set to cost every family 1,500'Last year the net cost of paying the pensions of retired State workers was 8billionThat figure is set to more than double in 2017/18 according to a Treasury watchdog
, the net cost of paying the pensions of retired State workers was 8billion.
But this figure is set to rocket to 16.2billion in 2017/18, according to the forecast by the Office for Budget Responsibility, the Treasury’s independent watchdog.
The cost of paying gold-plated pensions to Britains public sector workers will double over the next six years to the equivalent of 1,500 per family
Experts said it makes a mockery of the Government’s claim to have tackled the problem of the ballooning cost of paying such generous pensions to the State workforce.
It comes as unions are plotting strike action over changes to their pensions as well as other grievances.
Members of the militant Public and Commercial Services union walked out on Budget Day and teachers are planning industrial action later this year.
But the report by the think-tank the Centre for Policy Studies said the figures revealed ‘the true scale of the public sector victory in pension negotiations.’
Under the deal, hammered out between ministers and unions barons, public sector workers will have to work longer and pay more for their pensions and many will get less when they retire.
But the figures show how the cost of public sector pensions continues to rise at a time when the majority of private sector workers do not have a single penny in a retirement pot.
To make matters worse, it does not even represent the full cost to the taxpayer of paying the pensions of retired public sector workers.
This is because it deducts the amount contributed by the employer into their workers’ pensions – but the ‘employer’ is the State, paid for by taxpayers.
Figures show how the cost of public sector pensions, for health professionals and teachers for example, continues to rise at a time when the majority of private sector workers do not have a single penny in a retirement pot
In 2017/18, the employer contribution will be around 17.5billion, making a total of 33.7billion.
Michael Johnson, a pensions analyst and author of the CPS research, predicts the total figure will be closer to 39billion.
He said: ‘The annual cost of providing public service pensions will be over 1,500 per household by 2016 and rising rapidly.’
Mr Johnson raised his concerns about the potentially disastrous pledge by ministers not to make any further changes to public sector pensions for a quarter of a century.
Tim Knox, director of the CPS, warned they are rising to such an extent that ‘they will soon represent a significant driver of the deficit.’
Lord Oakeshott said that public sector pensions are rising to an 'eye-watering' amount
Lord Oakeshott, a leading LibDem lord and a former pensions spokesman, said: ‘Public sector pensions costs are due to rise by an eye-watering amount every year.
‘Meanwhile private sector pensions are being squeezed and the Bank of England’s quantitative easing programme is hammering annuity rates for private savers.
‘Our coalition Government has only half defused the ticking public sector pensions time bomb Labour left us.’
It comes as gold-plated pensions in the private sector are being shut down at the fastest rate on record, according to the National Association of Pension Funds.
In 2005, 43 per cent of defined benefit schemes allowed new recruits to a company to join. Today the figure has collapsed to just 13 per cent following the biggest-ever drop last year.
A defined benefit pension promises to pay a worker a certain pension when they retire, typically linked to their final salary or their average salary over their career.
Matthew Sinclair, chief executive of the Taxpayers’ Alliance, the campaign group, said: ‘The growing burden of public sector pensions shows little sign of slowing despite government promises of reform.
‘Unions have vociferously resisted even moderate reforms and it is taxpayers who are paying the price for that.
‘We’re all living longer, and this bill isn’t getting any smaller.’
A Treasury spokesman said: ‘The Government’s package of reform will deliver 430billion of savings over the next fifty years, ensuring public service pensions are affordable and sustainable in the long-term.
‘The reformed pension schemes will rebalance the costs more fairly between employees, employers and the taxpayer, while protecting those nearest retirement and accrued rights.’