The future cost of public service pensions could amount to more than £9bn a year above current expectations due to the “toxic tangle” of the Public Service Pensions Bill and the DWP White Paper on the single-tier pension according to a report published by the Centre for Policy Studies.

A total of £3.4bn a year in additional costs is due to the public sector employers’ NICs rebate following the end of contracting-out. In addition, about £4bn a year in costs will come as a result of public sector employees continuing to have an enhanced occupational pension.

The report’s author Michael Johnson said that Lord Hutton may also have misjudged the cost of the public service pensions bill as he has used life expectancy rates “six years out of date,” and this could in turn lead to additional costs of £2bn a year. The burden of the future costs of public service pensions is likely to fall on taxpayers and the report underlines that this will be around £1,600 a year for every household in the UK, despite the government predicting that it will cost around £1,230.

Johnson said: “Given that the full cost implications of future public service pension provision appear not to have been understood, it is essential that the Public Service Pensions Bill is reconsidered before it can complete its passage through Parliament.

“The unacknowledged additional costs, predominantly those introduced via the DWP White Paper, will manifest themselves as a much larger cashflow shortfall, between contributions and pensions in payment, than is currently envisaged. If the Bill were to become law as it stands, we would be embarked upon an almost unparalleled perpetration of inter-generational injustice: the young will have to pay for the older generation’s pensions at the expense of their own provision,” he added.

Share Story: