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Pressure grows to cut £7bn civil service pensions

The civil service pension scheme makes up 95 per cent of the Cabinet Office’s planned total spending, the department’s annual report has revealed.

Total expenditure for 2009-10 amounts to £7.5bn, with £7.1bn accounted for by the civil service superannuation scheme.

Conservative MP for Wokingham John Redwood says the Government should consider more radical options such as a higher retirement age and cutting back on early retirement for public sector workers.

He says the UK cannot afford to continue running these schemes and calls for public sector pension schemes to be closed to new members and for new employees to be encour- aged to save in a defined-contribution scheme.

Local Government Pension Scheme senior official Bob Holloway recently told delegates at a conference in Manchester that higher and lower membership bands should be introduced so that people earning over a certain threshold would pay a higher level of contributions while a new lower band could be brought in for less-well-paid staff who had previously opted out of the scheme.

The Policy Exchange recently proposed replacing gold-plated public sector pensions with a defined-contribution scheme and the Conservatives have indicated they would introduce reforms to public sector pensions.

Redwood says: “We need to ask if we should go further. One option is to stop existing members accruing extra pension from future service on these terms and whether they too need to go over to defined-contribution saving for the remaining years.

“One way to cut future costs would be to agree a higher retirement age. Another would be to be more careful about granting early retirement, which has become common in parts of the public sector.”

Comment, p17

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  1. Another way of cutting costs would be to put a stop to the system whereby some civil servants- in departments like HMRC particularly-are temporarily promoted for their last year (or less) of service thus giving them a lifelong much higher pension(based on their final salary) than would have been the case had they remained in their existing grade.

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