- The Royal Mail Pension Scheme has added abut £1.5bn to the forecast shortfall;
- The public sector wage freeze has meant lower contributions while pensions have continued to increase by CPI;
- An increase in forecast pension and lump sums, partly explained by the anticipation of more redundancy-induced, and very costly, early retirements over the next few years, along with further improvements in longevity.
A major new research paper produced by Michael Johnson for the Centre for Policy Studies has highlighted that, despite reassurances from the Government to the contrary, the current round of public sector pension reform (even though still not completed) may not see time called on the issue for very long. As has been suspected by many, myself included, the major concessions won by the trade unions from the government will mean that the changes will do little to improve the public finances, will merely further divide our public and private sector and will commit us to a cashflow deficit of over £15bn by 2016/17. That’s a 77-fold increase in only 11 years and will mean that the annual burden on tax payers will rise to £32bn – the equivalent of £1,230 for every household in the country. It also means that £4 out of every £5 paid in pensions to former public sector workers is paid by the tax payer. So how could the government have got its calculations so wrong? It’s difficult to be too specific as they haven’t released their figures for us to check, however, there’s probably three key issues, namely:-