Government Increase State Pension Contribution by up to 10.9%

Over two million public sector employees will have to have an extra £1.5 billion added to their pension contributions as of April 2012.

The extra money being taken from NHS workers, teachers and civil servants has come as the government attempts to cut £1.2bn off its pension bill next year.

There will be protection for the lowest paid civil servants and those earning between £15,000 and £21,000 will have their increase capped at 0.6% before tax in 2012/13 tax year.

The government proposes that those on lower incomes will not pay any extra contributions at all.

The new reforms will affect 2.5 million people across England and Wales. Civil servants in Scotland will also be affected by the changes.

For teachers, the Department of Education has set its own responses suggesting that the 0.6% cap should rise to salaries up to £26,000.

The maximum increase will be at 2.4 percentage points from April. This is the first of three annual increases planned by the government. 

This will affect highly paid NHS staff such as doctors who now face a maximum contribution rate of 1.9% should they be earning over £110,000 annually.

Currently civil service employees contribute between 1.5 and 3.5% towards their state pension, whereas the employer contributes 14%.

The proposal follows a report by Lord Hutton which suggested a ëcomprehensive reformí was needed of the state pension.

Lord Hutton also said “there is clear rationale for increasing member contributions to ensure a fairer distribution of costs between taxpayers and members”.

Chief Secretary to the Treasury, Danny Alexander said:

ìThe Government will take the latest step towards setting public service pensions on a sustainable path. Departments will start consultations on the extra contributions nurses, teachers and civil servants will make to their pensions next year.î

It is advisable to look into savings accounts to control your pension pot.

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