Pension reforms won’t make much difference to costs – IFS

Thursday February 2nd, 2012

The Institute of Fiscal Studies (IFS) has released new analysis which suggests that the Government’s public sector pension reforms are unlikely to make long-term savings.

The report states that the pension reforms negotiated ‘will make little or no difference to the long-term costs of public service pensions’.

It adds that savings from higher pension ages are, on average, ‘offset by other elements of the pensions becoming more generous’ and that the ‘current pay freeze and additional two years of one per cent increases will leave public pay at roughly the same level relative to private pay as it was in 2008’.

The reforms include a switch from final salary schemes to pensions based on career average earnings, an increase in contributions by members, and a retirement age pegged to the state pension age.

Carl Emmerson, deputy director of the IFS and co-author of the paper, said: “The reforms to public service pensions implemented by the last Labour government, and this Government’s decision to switch from RPI to CPI indexation of pension benefits, will in the long run reduce the generosity and therefore the cost of these schemes to the taxpayer. But the consequence of the long drawn-out negotiations over the latest [structural] reform appears to be little or no long-term saving to the taxpayer or reduction in generosity, on average, of pensions for public service workers.”

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