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Written question asked by Lord Hammond of Runnymede (Conservative) on Wednesday, 14 January 2009, in the House of Commons. It was due for an answer on Monday, 19 January 2009. It was answered by Yvette Cooper (Labour) on Thursday, 2 April 2009 on behalf of the Treasury.

Public Sector: Pensions

Question
(7) what account his estimate of a £13 billion saving from reforms to the Civil Service, NHS and teachers' pension schemes takes of (a) the net present value of cashflow savings on benefits paid out net of employee contributions paid in during the 50-year period and (b) the net present value of the reduction in the value of benefits accrued relative to employee contributions paid during the 50-year period; what other factors his estimate takes into account; and if he will make a statement.
Answer

To assist discussions of modernisation reforms to the pension schemes for the NHS, teachers and civil service in 2005, an indicative estimate of £13 billion was calculated as the potential net saving in employer costs for these three schemes over a 50-year period from 2006. The estimates were based on approximate methodologies to indicate the savings that might result from the proposals then under discussion and were heavily rounded to allow for factors such as the possibility of a few years variation in start dates.The estimate was calculated as at 2005, using 2005-06 prices, to show the amount of employer contribution savings over a 50-year period, converted to a capitalised value. This reflected savings in the value of benefits built up over the 50-year period, not cashflow savings on benefits paid out over that period. The estimate took into account expected membership of the pension schemes and a net discount rate of 3.5 per cent. per annum in excess of prices.The subsequent packages that were actually introduced included further reforms, such as cost sharing and cost capping mechanisms, to limit employer costs. The £13 billion calculations are now obsolete and revised estimates of the capitalised savings and extensions of the estimates to other schemes on the assumptions used in 2005 could be provided only at disproportionate cost. Instead, the significant level of savings that are already being delivered by the scheme reforms were described in my answer to the hon. Member of 26 November 2008, Official Report, column 1909W.

Secondary information

Type
Written question
Reference
490 c1390-1W;490 c1386-7W; 248975
Session
2008-09
Subjects
Pensions Public sector
Link
View this Written question on www.publications.parliament.uk