The cost of new defined benefit (DB) pension benefits for public sector workers is set to soar by £25 billion this year.
The Public expenditure statistical analyses 2008 from HM Treasury shows that the contributions paid by UK government departments and employees to public sector pension schemes are less than the cost of the new benefits being earned
Philip Hammond, shadow chief secretary to the Treasury, said:”Public sector workers do important jobs, often under difficult circumstances, and they are entitled to security in retirement. But it’s high time [prime minister] Gordon Brown cam clean about the true cost of public sector pensions. This lack of transparency is just building up yet more problems for the future.”
Costs look set to increase further over the next two years, by £26bn in 2009 and £27bn in 2010.
John Ball, head of UK defined benefit consulting at Watson Wyatt, said: “The government might find it easier to hold down wages for public sector employees if it shouted from the rooftops how valuable the other parts of their pay package are. One of the attractions of public sector pensions to employees is that they are guarantees, but this comes at a price.
“Like any other employer, the public sector can use a decent pension scheme to attract members of staff and stop the good ones from leaving. But it’s hard to see how the tax payer can get value for money if public sector employees are told their benefits cost less than the figure shown in the government accounts.”