After all the acrimony and strikes, the deal that the government and public sector workers came to over pensions will not save the public purse any money says a leading think-tank.

However, one of the changes that has and will save the government money says the Institute for Fiscal Studies (IFS), is the earlier move in October 2010 to link pension increases from the RPI inflation measure to the lower CPI.

But now on a long term basis, says the IFS, the latest changes will make ‘little or no difference’ to costs (ifs.org.uk/pr/ps_pensions_pay_gb2012.pdf).

So what was all the hassle about these recent reforms then?

Well, what has happened says the report is that the public sector pension system has been improved and some of the benefits have been shifted from higher earning public sector workers to the lower earners.

The report claims that public sector workers on lower incomes will be able to retire at 65 with higher pensions than under the current system. But that those on higher incomes will be worse off.

This though says the IFS will increase the disparity between the public and private sectors. Not sure that that was a desired outcome.

The IFS has three main conclusions:

• Because the private sector pay packets reacted so quickly to the recession, it will take all the two year pay freeze as well as two years of 1% pay increases to bring the public/private sectors back into the 2008 alignment.
• There are large differentials in relative pay between public sector workers across the country. No surprise when you consider that you pay them the same and the cost of living alters vastly as you move about the country.
• There is no evidence that lower paid public sector workers are hard done by or that they have done badly in recent years.

In fact compared to the private sector they have been well protected against the recent economic problems.
Carl Emmerson, Deputy Director of the IFS and co-author of the paper said “The reforms to public service pensions implemented by the last Labour Government, and this Government’s decision to switch from RPI to CPI indexation of pension benefits, will in the long run reduce the generosity and therefore the cost of these schemes to the taxpayer. But the consequence of the long-drawn-out negotiations over the latest reform appears to be little or no long-term saving to the taxpayer or reduction in generosity, on average, of pensions for public service workers.”

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