The Times reports (£) on The Treasury being lobbied by the trade unions and the Local Government Association over increasing the pension contribution for public sector workers.
George Osborne announced last year an increase, on average, of 3% in pension contributions across the public sector from next April to raise £2.8 billion by 2014-15. But the change will be progressive – those earning less than £24,000 won't have to pay more.
The Times reports a letter to Mr Osborne which "includes figures compiled by the Department for Communities which show that those earning more than £40,000 would have to nearly double their contributions, from 7.2 per cent to 13 per cent (£2,900 to £5,200), by 2014-15."
Staff on more than £75,000 would face a jump from 7.5 per cent to 14 per cent (£5,600 to £10,500), while those on more than £100,000 would see their contributions rise from 7.5 per cent to 14.5 per cent, or to 15 per cent if they earned more than £150,000 (from £11,250 to £22,200). From next April, when the pay freeze starts, staff on more than £150,000 would face a pay cut of about £4,500 and roughly £9,000 in 2013-14. Those earning more than £40,000 face smaller cuts but these still run into thousands of pounds.
The letter from Baroness Eaton says:
“The local government group is very concerned that the implications for local authorities, their workforce and the wider economy may not have been fully considered by HM Treasury…
“A significant increase in employee contributions at a time of pay restraint/pay cuts and increasing inflation is likely to lead to a significant worsening in industrial relations."
The letter "also warns that hundreds of thousands of social workers, teaching assistants and middle managers are likely to leave the scheme if the contributions rise too much." I doubt it. Their pensions will remain heavily subsidised by the taxpayer even with the increase in contributions. If they did decide to leave the scheme I doubt the Chancellor would be quaking in his boots as the saving to The Treasury would be much greater.