Government announces pension reform

Public sector pension contributions are set to increase and the retirement age will rise, the government has announced.

Chief Secretary to the Treasury Danny Alexander has announced an average rise to public sector pension contributions of 3.2% and a rise in the public sector retirement age.

Mr Alexander said the Normal Pension Age would now be linked to the State Pension Age of 66.

Following the advice of Lord Hutton, public sector pensions will now follow the Consumer Prices Index instead of the Retail Prices Index to track inflation, Mr Alexander said.

Finally salary pensions will no longer exist, to prevent low earners from losing out.

‘For future pension accruals, the defined benefit will be linked to the average salary over your career and not your final salary,’ Mr Alexander said.

However any pensions accrued under the current final salary scheme will be protected, Mr Alexander said.

In April this year, GP reported that GP pension contributions would rise from 7.5% to 13% by 2015.

Figures obtained by the BMA from government actuaries showed that high-earning doctors paying 8.5% contributions could be forced to pay 15.5% by 2015.

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