The Impact of the 2007-08 Changes to Public Service Pensions

HC 833, Thirty-eighth Report of Session 2010-12 - Report, Together with Formal Minutes, Oral and Written Evidence

House of Commons - Committee of Public Accounts
TSO (The Stationery Office)

'The Impact of the 2007-08 Changes to Public Service Pensions (HC 833)' reports the Committee of Public Accounts' reservations relating to the new pension schemes introduced in 2007-08 for civil servants, National Health Service (NHS) staff and teachers.

The scheme was designed to make public service pensions affordable and the changes are likely to reduce costs to taxpayers of the pension schemes by 67 billion over 50 years, with costs stabilising at around 1% of Gross Domestic Product (GDP) or 2% of public expenditure.

The Committee is concerned that the Treasury did not test the potential impact of changes in some of the key assumptions underpinning the long-term cost projections. In addition, the Treasury has not tested whether reducing the value of pensions would affect the public sector's ability to recruit and retain high quality staff.

Three-fifths of the savings to the taxpayer were expected to come from the cost sharing and capping mechanism - a transfer, from employers to employees, of extra costs that arise if pensioners live longer than previously expected.

Employees would potentially pay 70% more for their pensions over the next 50 years if life expectancy continues to increase more than expected.

Implementation remains on hold while the Government decides how to respond to the Independent Public Service Pensions Commission (the Hutton Commission).

Public service employees do not have a clear understanding of the value of their pensions because they are not provided with clear and intelligible information to enable them to make rational decisions.

Further changes to public service pensions are expected as Hutton's recommendations are implemented, but this should bring a period of stability and certainty for long-term public service pensions policy.

Extent 37 pages ISBN 9780215559760
Size A4 Price £10.00
Format Paperback Published 26 May 2011
Availability Colour copy: 3 - 5 days Availability help (opens in new window) Delivery Delivery options and charges
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Budget 2011 - HC 836