31/01/2012 01:08 GMT | Updated 31/01/2012 04:30 GMT

Public Sector Pensions Reforms Won't Save Money, Says IFS

The government's controversial reforms to public sector pensions may not save money in the long-term, according to a report from respected think tank the Institute for Fiscal Studies (IFS).

IFS deputy director Carl Emmerson said the "long, drawn-out negotiations" over the latest changes to public sector pensions meant there appeared to be "no long-term" savings for the taxpayers.

While the government's switch from the inflation type RPI to CPI will save the taxpayer money, the IFS say other changes mean the plans are unlikely to save the public money in the long term.

The report also noted that the change from final salary to career average payments mean low-paid public sector workers' pensions were more generous, while those with higher salaries lost out.

A Treasury spokesperson said the IFS' analysis was "misleading", saying it only looked at one element of a package of pensions reforms: "Reforms to public service pensions will save the taxpayer tens of billions of pounds over the next few decades and significantly improve the long-term fiscal sustainability of this country."

They added: "Asking people to work to state pension age will, as the IFS acknowledge, deliver savings to the taxpayer. This is because people people working longer will pay more tax and contributions and receive pensions for less time in retirement."

In November an estimated two million public sector workers went on strike in protest at the public sector changes and the leader of civil service union the PCS, Mark Serwotka, has not ruled out further strikes over the deal.

Responding to the report's finding that the pay squeeze in the public sector meant the difference between the salaries of public and private sector workers was back at the level it was in 2008, before the recession, TUC general secretary Brendan Barber said: "The current pay freeze and the one per cent cap on future increases will ensure public sector workers enjoy an equality of misery with employees in parts of the private sector. Wages across the economy are running at less than half the rate of inflation."

Brian Strutton, national officer of the GMB, said: "Only a week ago the Prime Minister said at Davos that public sector pension reform will save 50% of the costs while now the IFS says the savings are zero.

"What is clear is that future costs are pure guesswork, but what is real is the impact on public sector workers - higher contributions, lower benefits and later retirement."

Unite assistant general secretary, Gail Cartmail said:"Overall, the majority of public sector workers will pay more, work longer, and get less. The report reinforces what Unite has repeatedly argued on the pensions issue."