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‘Pension costs are untested’

The Treasury has not adequately tested some of the assumptions it has based public sector pensions cost projections on, says the Commons’ spending watchdog.

A report from the public accounts committee last week says Government projections suggest changes made in 2007/ 08 could reduce the cost by £67bn once they are all implemented. But it says only one aspect of data used to make the projections – longevity – has been subject to testing and others should have been looked at.

It says: “Important areas of uncertainty are – the validity of assumptions that the public sector workforce will remain static over time and that long-term GDP growth will average 2.2 per cent a year to 2050, the rate of opt-out from the scheme if employee contributions rise, and the impact of declines in the value of public sector pensions on public service employment and means tested benefits.”

The 2007/08 changes include raising the age at which the pensions begin paying out to 65, raising employee contributions and a mechanism which increases employee contributions or reduces the value of future pensions if longevity increases beyond projections.


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