Pensions are costing British taxpayers even more than first thought, according to a new report.
The Public Sector Pensions Commission has found that the true value of the main unfunded public sector pension schemes is over 40 per cent of salary and that taxpayers are funding the pension shortfall to the cost of £600 a year – each.
At the moment public sector pensions consist of a 20 per cent combined contribution between the employer and employee. But new figures shows that they are in fact costing double that, highlighting a lack of transparency from the Government over the true cost of pensions.
The damning report has called for urgent and long term reform to ease the spiraling cost of Britain’s pension system, which looks likely to keep people in work until they are 70 and cost taxpayers billions.
Peter Tompkins, Fellow of the Institute of Actuaries and Chairman of the Commission, said: "A true assessment of the value of pensions in the public sector today shows that they are worth twice what the Government suggests in its calculation of the contributions that public sector employers pay. It is a matter both of justice and good economics that public sector employees and employers should bear the full cost of their pension provision.”
However the Trade Union Congress has criticised the report for focusing too heavily on individuals to bridge the pensions gap, saying it should be up to employers to increase contributions.
TUC General Secretary Brendan Barber referred to the Institute of Directors as ‘very unconvincing Nelson Mandelas’ claiming they are trying to drag public sector pensions down to the level of private schemes.
She said: "Britain's real pensions scandal is the retreat by employers from providing pensions. Two out of three private sector workers get no employer support towards a pension.
"Yet here we have the representatives of those employers coming after public sector pensions too. Of course all pensions need to change from time to time, but this report is from people who simply want to reduce taxes for business and the super-rich. They have nothing to say about top Directors' pensions, which have continued to go up during the recession and whose most common retirement age is 60.”
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