View more on these topics

Treasury sets out terms for public sector pensions cost cap

The Treasury has revealed the framework it will use to cap the costs of public service pension schemes.

The cap, which was recommended by Lord John Hutton’s independent public service pensions review and only relates to member costs, is designed to limit the cost to the taxpayer of providing pensions to public sector workers.

The level of the cap will be set as a percentage of pensionable payroll. In the Local Government Pension Scheme, which is funded, the cap will be triggered if the cost of pensions exceeds 19.5 per cent of pensionable payroll.

For the rest of the public sector, where pensions are not funded, the level of the cap has not yet been confirmed but will be set on a scheme-by-scheme basis.

If a future valuation shows the costs have risen more than 2 percentage points above the cap, or fallen 2 percentage points below the cap, action will be taken to return costs to the level of the cap. This could include changes to contributions or accrual rates.

If agreement cannot be reached within a defined period on actions to take to reduce public sector pension costs, a default adjustment will be made.

The Treasury estimates the shortfall between contributions and pensions in payment is currently £1bn a year across the teachers’, civil service and NHS schemes.

Treasury chief secretary Danny Alexander says: “An excellent pension has long been part of the reward for a career serving the public. It is only possible to ensure that public service workers continue to have among the best pensions available if we also control the costs in the long term.

“Our reforms overall will save nearly £500bn. Ongoing analysis of what is a fair contribution is the final stage of the reforms, which will ensure that long term costs of public service pensions remain under control and are fairly distributed between employees, employers and taxpayer.”



UK faces ‘crippling’ tax rises to fund pension and care costs

The UK faces “crippling” tax rises to fund future pension and social care contributions, the Institute of Economic Affairs warns. A new report by the think-tank, published ahead of next week’s Budget, claims total spending would need to be cut by a quarter, or health and social care expenditure by 50 per cent, to avoid […]


Ex-Which? Money editor launches financial consumer group

A consumer group has launched today which will rate banks and insurers as part of a campaign for a fairer financial services market. Fairer Finance will publish bank and insurer ratings on its website based on customer perception, complaints handling and transparency, as measured by independent consumer polling and complaints data obtained from the Financial Ombudsman […]


Ageas enters relevant life cover market

Ageas Protect has entered the relevant life cover market, offering maximum sum assureds of between 15 and 25 times salary. Relevant life cover allows firms who are too small to qualify for group protection to provide a life policy for employees. Ageas’ policy can be written into trust for insured beneficiaries from the start of […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm