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Concerns raised over pension plans

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26 May 2011

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MPs have raised question marks over whether the government has adequately planned ahead to prepare for changes made to public sector pensions.

Workers in the public sector do not properly understand how much their pensions are worth because they do not have access to “clear and intelligible” information, the Public Accounts Committee said.

Committee Chairman Margaret Hodge said that, based on government projections of the future cost of public sector pensions, the taxpayer would benefit from “substantial” savings as a result of changes agreed with unions in 2007/08.

But concerns were raised that the Treasury had not properly assessed the consequences of the changes on some of the assumptions that are pivotal to future cost projections.

She said: “We are also concerned that the Treasury has not set out clearly what level of spending it considers sustainable in the long term. Instead, officials appeared to define affordability on the basis of public perception. The Treasury expects the majority of savings to come from cost sharing and capping, a reform designed to ensure that employees bear a greater share of future costs.

“However, implementation has been deferred because of the Treasury’s discount rate review, and remains on hold while the government consults on the recommendations put forward by the Hutton Commission.”

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