Long-term cost savings unlikely

The Institute for Fiscal Studies (IFS) also said savings from higher pension ages were offset by other elements of pensions becoming more generous, with lower earners generally becoming better off.

An IFS study also revealed that higher earners were likely to lose, with the move from final salary to career average schemes penalising workers who have big pay increases over time.

The Government’s decision to move indexation of public sector pensions from RPI to the generally lower CPI measure of inflation “substantially” reduces costs and generosity, said the report.

An IFS spokesman 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.”