TPA calls for public sector pension freedom

Embargoed: 00:01 Saturday 11th May 2019

  • New TPA report calls for public sector workers to have more control over their remuneration.
  • Report suggests that those in the public sector should be able to opt-out of their employer pension and take the contribution as salary. This would be on a voluntary basis.
  • The most recent government figures suggest that public sector pension liabilities currently stands at around £2 trillion. Many public sector pension schemes saw a substantial increase in employer contributions last month.
  • With a huge national debt and the tax burden is at a 50-year-high, action needs to be taken to address the increasingly unsustainable perks which those in the public sector enjoy so that future generations aren't paying for things we want today.

 

Click here to read our report

 

The TaxPayers’ Alliance proposes the following:

  • Public sector workers should be given the option to fully or partially opt-out of their pension at the beginning of each financial year.
  • In return for sacrificing pension entitlement, employees would not be required to make contributions proportional to the size of their opt-out.
  • They would then receive the corresponding share of the employer contributions as part of their salary.

Illustrative example of proposals:

  • An NHS employee earning £25,000 in 2018-19, such as a staff nurse, had take home pay of £18,960.88 after paying £2,275 income tax, £1,989.12 national insurance and £1,775 in pension contributions (7.1 per cent contribution rate).
  • The employer currently pays £2,287.49 in national insurance and £3,575 in pension contributions, a total of £5,862.49 (14.3 per cent employer contribution rate.
  • Under these proposals, the employee could choose to opt out of their pension for the year. In return for giving up 1 year of pension accrual, the employee would receive a pre-tax salary of £28,575 (£25,000 + £3,575), taking home £22,811.68 after paying £3,345 income tax and £2,418.12 national insurance.
  • The employer would pay £2,780.84 national insurance.

Duncan Simpson, research director of the TaxPayers' Alliance, said:

Those in the public sector have pensions which private sector workers could only dream of. The current system is completely unsustainable, with public sector pensions liabilities in the UK now approaching £2 trillion. By giving public sector employees the freedom to claim a bigger salary and opt out of pension contributions, the government could save taxpayers' money in the long term and ease the cost of living today for public sector employees on the lowest incomes.”

 

Click here to read our report

 

TPA spokesmen are available for live and pre-recorded broadcast interviews via 07795 084 113 (no texts)

Media contact:

Chloe Westley
Campaign Manager, TaxPayers' Alliance
chloe.westley@taxpayersalliance.com
24-hour media hotline: 07795 084 113 (no texts)

Notes to editors:

  1. Founded in 2004 by Matthew Elliott and Andrew Allum, and now with 80,000 supporters, the TaxPayers’ Alliance (TPA) fights to reform taxes, reduce spending and protect taxpayers. Find out more about the TaxPayers' Alliance at www.taxpayersalliance.com.
  2. TaxPayers' Alliance's advisory council.
  3. Last year the TPA revealed that public sector workers in Britain will retire on pensions three times larger than their private sector counterparts: https://www.taxpayersalliance.com/pensions_inequality_press_release