Treasury estimates forecast that tens of thousands of public sector workers are likely to opt out of their gold plated pension schemes when the government brings in their planned 3 per cent increase in contributions.
Experts believe that the figure could even be an underestimate, and pension analysts and the public sector unions have warned that the move could counter the governments campaign to increase pension saving, a campaign that is being led by plans to auto enrol all workers into a pension scheme next year.
Chancellor George Osbourne announced a three per cent increase in contributions which will be phased in from April next year for all public sector pensions. The plans are intended to help plug the £4billion gap between the amount being paid out by public sector pensions and the amount being paid in by employees and employers. By 2024 that figure is expected to reach £10billion if no changes are made.
Reports prepared ahead of last Octobers announcement have been released under the freedom of information act and show the treasury acknowledges a large number of opt-outs in light of the changes.
Despite claims it will remain “economically rational” to stay in the schemes, analysis believe that 8% of those earning under £21,000 will opt out, and 6% of those earning under £25,000 will do the same.
John Wright, a partner at Hymans Robertson believes the figures are likely to be under estimated.
“The Treasury is right to say it will be economically rational to stay in, but people … do not act rationally,” he said.