Public sector employers told to increase pension contributions

13 Mar 14
Public sector employers will need to increase the amount they pay into occupational pension schemes, as current levels are insufficient to meet the future costs, the Treasury has announced.

By Vivienne Russell | 13 March 2013

Public sector employers will need to increase the amount they pay into occupational pension schemes, as current levels are insufficient to meet the future costs, the Treasury has announced.

The government said today that near-final valuations by the Government Actuary’s Department are expected to show that, if current contribution rates continue unchanged, there would a nearly £1bn a year shortfall across the teachers’, civil service and NHS pension schemes.

Final results from the valuation exercise will be published in the coming months and changes to employer contribution rates will come into force in 2015, the Treasury said.

‘Where the new valuations show that they have not been paying enough into the schemes, employers (eg in government departments, education and health sectors) will need to increase their contributions in line with the results of the new valuations,’ the department said.

Chief Secretary to the Treasury Danny Alexander also published details of a new cost cap mechanism for reformed public service pension schemes.

This has been designed to ensure long-term costs are controlled, providing protection for the taxpayer and ensuring that the risks of changes in costs are shared equitably with scheme members and employers.

‘Ongoing analysis of what is a fair contribution is the final stage of the reforms, which will ensure that long-term costs of public service pensions remain under control and are fairly distributed between employees, employers and taxpayer,’ Alexander said.

But head teachers warned that the pension contribution hike would create a hole in school budgets.

The Association of School and College Leaders said the £350m increase in the education budget, also announced today, would not be enough to offset a 2.3% pension contribution increase and a likely 1% rise in teachers’ pay.

‘This will have a catastrophic effect and lead to larger class sizes and reduced curriculum choice,’ said ASCL deputy general secretary Malcolm Trobe.

‘We want the government to ensure that this increase in contributions is fully funded so that children’s education is not compromised.’  

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