Pre-Budget Report: State-funded contributions to be capped for public service pensions

Chancellor Alistair Darling has announced that public service pension contributions will be capped to bring them more in line with those offered in the private sector.

In the pre-Budget report, the Chancellor said contributions by the state into pensions for teachers, local government, National Health Service and civil service workers would be capped, saving £1bn a year.

In addition, he said public sector workers will make a greater contribution to pensions, with those earning more than £100,000 paying more.

Charles Cotton, reward adviser at the Chartered Institute of Personnel and Development (CIPD), said: “We welcome attempts to reduce public sector pension costs. However, capping the contribution level and making higher earners contribute more will not significantly reduce the cost burden and risk that taxpayers have to shoulder.  What is needed is a more fundamental review of what is sustainable in public sector pensions, to ensure the cost and risk is more equitably shared between taxpayers and tax-funded workers.”