Allowing workers in the public sector to pay lower national insurance contributions despite benefiting from the full pension is costing £6 billion a year according to experts.
Workers in the private sector are able to avoid paying the full national insurance because they don’t receive the second state pension at a later date. However, some public sector workers are having their cake and eating it by paying a lower rate of national insurance and benefiting from the second state pension. Pension’s expert Ros Altmann says it is wrong that workers are allowed to get away with not paying the full amount and that their pension schemes are paid for by the taxpayer which is a huge boost to private sector workers. She also claimed that the Treasury could save £6.6 billion a year by forcing these workers to pay the full rate of national insurance.
Altmann’s comments were included in a response to John Hutton regarding the government consultation that looked at pension schemes for the public sector. Altmann said that this was an oversight in public sector pension schemes that was costing taxpayers billions per annum and it needed to be addressed.
Private sector workers usually pay 11% of their income in national contributions which is divided up into the regular and second state pensions. The second state pension receives 1.6% while the main pension takes 9.4% of their wages. The problem is that public sector workers do not pay the 1.6% second pension money. Though the second state pension is only a top-up to the basic pension it is nonetheless important.
Popular newspaper The Daily Telegraph recently uncovered some startling truths about the pension industry with miscellaneous and generally unknown levies and other fees wiping an average of £100,000 off the value of private pensions enjoyed by middle class workers. A spokesperson for the government said that paying lower rates of national insurance now decreases the amount you can expect to receive in your retirement fees which will lower government spending when it comes to pensions. They continued by stating that all workers in the public and private sectors are allowed to pay less in terms of national insurance. The spokesperson concluded by saying that the government doesn’t recognise the numbers quoted and have not seen any calculations that proves they are correct.