Public sector pensions 'will still be very good after reforms'

27 Oct 11
Retired public servants will still get 'a very good pension' even after the government's proposed reforms take effect, Treasury permanent secretary Sir Nicholas Macpherson has said.

By Mark Smulian | 27 October 2011

Retired public servants will still get ‘a very good pension’ even after the government’s proposed reforms take effect, Treasury permanent secretary Sir Nicholas Macpherson has said.

Giving evidence to a Public Accounts Committee hearing yesterday, he described negotiations between the government and trade unions as being ‘at a delicate stage’.

But he said: ‘What informed [the] Hutton [report] was that public sector pensions are very generous relative to private pensions, but that does not mean a race to the bottom.

‘Even after the reforms, we will still have very good public sector pensions.’

The hearing was the first of PAC’s new follow-up reviews of recommendations to government departments that have not been carried out.

Among those yesterday was the Treasury’s failure to calculate the impact on social security costs of people opting out of public sector pension schemes were contribution rates to rise sharply.

Macpherson said his working assumption was that ‘only 1% by pay bill will opt out’.

He denied a claim by Labour MP Fiona Mactaggart that social security costs would rise because people who opted out would receive pensions so low that they would need means-tested benefits.

‘We’ve looked at it, but if you opt out you go back into the second state pension and I would not see people falling into means-tested benefits,’ Macpherson said.

‘I am pretty confident there would not be a cost to social security from opt-outs.’

PAC members also questioned Ursula Brennan, the Ministry of Defence permanent secretary, on whether she had acted on recommendations to sell surplus MoD estate.

Brennan told the committee the MoD remained committed to raising £500,000 from sales during the Comprehensive Spending Review period to 2014, and £1bn in the following four years.

PAC chair Margaret Hodge said the MoD should reduce the size of its estate more rapidly in line with reductions in the number of military personnel.

But Brennan said it was impossible to synchronise the two. ‘Assets are not disposed of at the same speed that personnel are reduced,’ she said.

‘For example, if we have troops coming back from Germany they have to be accommodated here, so personnel reductions take time to knock through to asset sales.’

The MoD has valued 100,000 out of 166,000 identified assets, but might not carry out full appraisals of the rest as some are ‘remote fields and roadside verges’, Brennan said.

But she told the committee that a change of policy meant decisions on property sales were now taken centrally.

‘We do not any longer allow the individual services to say, “we want to hang on to this”,’ she said.


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