Social care workers in the public sector should pay higher pension contributions in order to save taxpayers money in the short term, an independent commission led by Lord Hutton has found.
A 1% increase in employee contributions could save the Treasury around £1bn per year, according to the Independent Public Services Pensions Commission’s interim report, published today.
“Given the implementation time for any longer term reforms there is a case for short term changes, especially given that the Commission found that current government assumptions may well underestimate the cost to the taxpayer,” said Hutton.
The majority of social workers are on the local government pension scheme, in which they currently contribute between 5.5% and 7.5% of their salary into pensions, with employers covering around 14% of the overall pay bill.
If contributions were raised by 1%, social workers earning £30,000 would have to pay an extra £300 per year into their pensions.
However, Hutton’s main focus was on longer-term reform. He made it clear that the final salary pension scheme should be scrapped, although he shied away from backing an alternative.
“The final salary link in public services pensions is inherently unfair and can lead to high flyers getting almost twice as much back in pensions than those on more modest earnings for the same amount of pension contributions,” he said.
“In my final report [to be published before the next Budget in 2011] I will consider a range of alternative structures.
“This will include a career average alternative to the current final salary defined benefit schemes.”
Unions GMB, Unison and Unite played down the significance of the interim report but re-stated their opposition to any attacks on public sector pensions.
Brian Strutton, national secretary of GMB, said it was impossible to determine at this stage how reforms to public sector pensions might affect social workers.
“This is very much a work in progress,” he explained.
He admitted that switching to a career average pension scheme could benefit social care workers on low or average salaries.
The median midpoint salary for a social worker is £29,647 a year, according to a report commissioned by Unison last year.
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