Pension deficit costs everyone

AS many as half a million public sector jobs will go in coming years as the Government takes the axe to spending to curb the soaring deficit. Each post that disappears will reduce spending – but at the same time it also has a knock-on cost in terms of lost tax revenue and potentially increased spending on benefits.

Today the Yorkshire Post reveals another burden that will be borne by hard-pressed taxpayers who face filling the growing black holes in public sector pension funds which, it is estimated, already total 1 trillion.

Poor returns on investments and a political failure to reform the schemes means that the deficits are a significant problem in any case. With fewer people paying into pensions schemes due to unprecedented job losses, however, the pension shortfall will become even more unmanageable.

Taxpayers, who have already been asked to come to the rescue for failures in both the private and public sectors in the last few years, will be forced to dip into their pockets once again.

A minority of highly-paid public sector staff receive generous pensions by any standards, but it remains a fact that the average pay-out is less than 6,000 a year which is hardly a fortune as all those trying to get by this winter on meagre pensions will testify.

Major reforms of public sector schemes being drawn up in a review by Lord Hutton, the former Labour minister, are due to be announced in the spring amid expectations the final salary scheme will be abolished.

Staff will have to work longer, pay more into their pensions and get less in return, sparking the likelihood of widespread unrest among workers already facing a pay freeze and heavier workloads and what amount to pay cuts in their retirement.

The scale of the black holes mean all taxpayers will pay through higher council tax bills or income tax.

Deficit hawks may applaud the austerity measures carried out by the Government, but nothing is without cost.

Next year's reforms cannot be fudged and must deliver long-term sustainability to pension funding.

A failure to do so will see both taxpayers and public sector staff continue to pay the price for a failure of political will.