Public sector workers have reacted angrily to having to pay more in pension contributions from April 2012. But a pensions expert tells Channel 4 News they still have a generous deal.
The Government has outlined how much more public sector workers, including teachers, NHS staff and civil servants, will have to pay towards their pensions.
The planned contribution increases are part of a wider package of pension reforms for the public sector. The Government wants to make public sector pensions more affordable and fairer in relation to the private sector.
The proposed increases, which will now go out to consultation, will deliver over £1bn of savings in 2012/2013.
The lowest paid public sector workers, earning less than £15,000, will see no increase in their contributions. Workers earning between £15,000 and £21,000 will have their increase capped to 0.6 per cent (before tax) in 2012/2013. The maximum increase will be 2.4 per cent.
Even after the reforms, it actually just brings the public sector in line with everyone else. Pension analyst Laith Khalaf
The changes will affect around 2.5m public sector workers, including those working in the Civil Service in England, Scotland and Wales, the NHS in England and Wales, and teachers in England and Wales. Pensions for MPs are currently also under review.
Different people will be affected differently depending on how much they already pay towards their own pensions, as well as how much they earn.
Health Secretary Andrew Lansley said a nurse earning £25,000 a year will pay an extra £10 a month towards their pension in 2012/2013, while a consultant on £130,000 will pay an extra £152.
Further changes still have to be made on specific schemes to save more money in the years after 2013. The Government wants to save £2.3bn in 2013/2014 and £2.8bn in 2014/2015.
Public sector workers have already staged one of the biggest strikes in decades over the reforms, which also include putting an end to final salary pension schemes and increasing the retirement age as part of a package of reforms recommended by Lord Hutton. Unions are still in negotiations with the Government over the plans.
The British Medical Association called the contribution hike a “tax on public sector workers” and other unions also reacted furiously. They say that the changes have nothing to do with sustainable pensions and instead claim they are designed to “pay for the bankers’ mess”.
Read more from FactCheck: why Cameron's right on public sector pensions
Mark Serwotka, General Secretary of the Public and Commercial Services union, said: “This announcement shows the need for trade unions to stay united and build for more industrial action.
“The Government figures confirm what we have said all along. People are going to have to pay more and work for longer, in return for smaller pensions.”
But Laith Khalaf, pensions analyst at financial services company Hargreaves Lansdown, told Channel 4 News that public sector pensions were still very generous. He said the move towards higher contributions just fitted in with a wider trend for individuals, not companies or the state, to be more responsible for their own retirement income.
“Even after the reforms, it actually just brings the public sector in line with everyone else,” he said.
“Not many people can expect to retire at 60 and be provided for over 30 or 40 years without making their own provision. I’m not saying you can’t aim for that, but then it’s up to you to make contributions.”