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Public Sector Pensions

The Department for Education and the Department of Health have today launched consultations into reforming pensions for their staff. Although if you read the headlines in the media you would be forgiven for thinking that the proposals were final.

The Department for Education and the Department of Health have today launched consultations into reforming pensions for their staff. Although if you read the headlines in the media you would be forgiven for thinking that the proposals were final.

It is proposed that the changes will come into force from April 2012 and, if they go ahead in its current form, will mean that members of the various Public Sector schemes, such as Teachers and Health workers will have to increase their personal contributions at a time when money is tight – no pay rises and high inflation. Although they have said that those earning less than £15,000 a year will see no increase in their contributions.

Even those earning between £15,000 and £21,000 they will see their increase capped at 0.6 per cent of pay before tax. It is the top earners who will pay more but the maximum increase for 2012/13 will be 2.4 per cent of pay before tax.

From an IFA perspective I hope that the negative reporting of this will not deter new employees from joining the scheme nor encourage existing members to quit.  No one likes change especially if it means paying more for your pensions, but if this does go through I would urge all members to remain committed to this form of pension, which is dying out everywhere apart from in the Public Sector.

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