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Getting the balance right?

20 October 2010

The Chancellor today announced that public sector pensions are to be sustainable and affordable ‘gold standard’ final salary pensions. Employee contributions are to be increased staggered in line with employee earnings.

But has he got the balance right? There might be some unintended consequences for future tax payers – employees may withdraw from their public sector schemes, opting out from paying higher contributions, particularly during difficult times, leaving themselves with either little or no private pension income in retirement.

This is a trend currently being seen in the private sector, this combined with the closure of many final salary pension schemes could mean that future tax payers have to pick up the tab for more pensioners without sufficient retirement income.

It will be interesting to see how this progresses.

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