Can you afford to put £1,600 into your pension this year?

Pensioner Did you contribute £1,600 to your pension last year? Thought not. But that's what public sector pensions could cost each household in the UK if the government fails to rein in spending.

Future costs of public sector pensions throw up some frightening numbers. The most recent is £41 billion a year, as calculated by pension expert Michael Johnson for the Centre for Policy Studies. That £41 billion is the equivalent to £1,600 a year for every household.

%VIRTUAL-SkimlinksPromo%The amount is extraordinary and what's most worrying is that in November last year, Johnson estimated the cost at £32 billion a year but has in just a few short months identified another £9 billion of annual costs thanks to the end of contracting out.

Even more worryingly is these costs could rise further because the life expectancy projections being used as now six years out of date – Johnson estimates that costs could rise by another £2 billion a year.

The costs of public sector pensions are not sustainable, and when people can ill-afford to save £1,600 into their own pension it is unsurprising that those working in the private sector cannot accept these costs happily.

It is especially galling to hear of private sector costs increasing when details about judges' pensions have been revealed. And frankly the deal they currently receive is ridiculous.

A High Court judge receives £86,500 a year and a lump sum of £173,000 on retirement after they have served for 20 years. A circuit judge receives £64,000 a year and a lump sum of £144,000 on retiring after 20 years.

Unbelievable isn't it, and worse is that until April 2012 judges didn't have to actually contribute to their pension in order to receive that!

The good news is that the government is reforming these pensions, scrapping the lump sums completely and reducing High Court judges to a pension of £75,000 a year and circuit judges to £55,000 a year.

The judges aren't happy and, of course, there are rumours of a legal battle to retain these absurd pensions. When you hear details like that it is unsurprising that the public sector receives little sympathy from the private sector over pensions.

Of course, not all public sector workers receive these obscene amounts, but they have to recognise that their pensions have to be paid for somehow and to keep burdening the private sector is completely unfair and unsustainable.
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