Cost of public service pensions set to rise again

Cost of public service pensions set to rise again

KPMG predicts a rise in costs of £3bn a year in public sector pensions bringing their value to members under even closer scrutiny.

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As an all-encompassing cost review begins today, KPMG predicts a rise in costs of £3bn a year, bringing public service pension schemes, and their value to members, under even closer scrutiny.

Public service pension schemes only start their cost review all on the same day once every 12 years, and so the actuarial evaluation which was effective on the 31 March 2016 will provide a rare complete picture of the cost of public sector pensions. Whilst the full findings won’t emerge for two years, KPMG predicts the review will find a cost increase across all schemes of around £3bn a year.

Steve Simkins, Partner, Public Sector Pensions, KPMG comments:

“Whilst public sector employers will be required to inject an extra £3bn of cash each year, the benefits members receive and the contributions they pay are not expected to change. This presses home the need to ensure that these schemes are offering excellent value to members. Since the new public service pension schemes were introduced, private sector pensions have seen a step change towards maximum flexibility and choice, but over five million public servants are locked into more rigid arrangements which might not fit their individual needs. 

“The new single state pension and the resulting increase in national insurance costs for employers from next Wednesday means that there will soon be very few active members of defined benefit schemes outside of the public service pension schemes. The UK pension system will move to one which could be billed as “flexible defined contribution versus inflexible public service” and we expect the pressure will increase for this gulf to be reduced over the coming years.

“Whilst cost will always be a key priority, I hope this review won’t just focus on cost but will also look at design and how combining the two could lead to a better outcome for everyone.  Put simply, a more modern, flexible system could offer more value at less cost.”


For further information please contact:

Christina Bridge, KPMG Corporate Communications

M: 07789504905


About KPMG

KPMG LLP, a UK limited liability partnership, operates from 22 offices across the UK with approximately 12,000 partners and staff.  The UK firm recorded a revenue of £1.96 billion in the year ended September 2015. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 155 countries and has 174,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity.  Each KPMG firm is a legally distinct and separate entity and describes itself as such. 



This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK.

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