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Report laments Treasury’s ‘lack of curiosity’ over £34 billion public sector pensions says AJ Bell @Investcentre

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  • The Treasury has been criticised for showing a ‘lack of curiosity’ about the impact generous public sector pensions have on staff retention (Public sector pensions (parliament.uk))
  • The Public Accounts Committee report also accuses officials of failing to adequately consider the effect of rising pension costs on employers and potential knock-on impacts on public services
  • In 2019/20, the four largest public sector pension schemes paid out pensions worth almost £34 billion – with more than £24 billion of this coming from the taxpayer

Tom Selby, senior analyst at AJ Bell, comments:

“While a ‘lack of curiosity’ might sound like a relatively mild accusation to land at the Treasury’s door, it is pretty staggering in the context of public sector pensions.

“Reforms first proposed a decade ago were designed to make these pensions more sustainable, yet they remain among the most generous available in the UK. In fact, guaranteed ‘defined benefit’ pensions like this have all but died out in the private sector because of the associated costs.

“Given the value of pensions paid out in 2019/20 from the four largest public sector schemes totalled nearly £34 billion – with almost £24 billion of this coming from the taxpayer – you would expect the Chancellor to take at least a passing interest in whether this huge outlay represents value for money.

“Those cost-saving reforms have also faced serious issues, with the Government losing an age discrimination court fight – the McCloud case – which will add an extra £17 billion to public sector pension costs.

“As these costs will need to be met by public sector schemes – rather than from taxpayers directly – they will inevitably act as a further drain on frontline services.

“And the kicker is that the Government was told in 2011 that offering transitional protections to older workers as part of the reforms which eventually led to the McCloud case risked breaching age discrimination rules – but went ahead and offered them anyway. As such, this mistake was both hugely costly and entirely avoidable.”

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