Public sector employees to face reduced pay

Over six million UK workers could be subject to pay cuts from April after the new flat-rate state pension comes into effect.

The move, announced in the 2013 Budget, will boost the Treasury’s coffers by £5.5 billion per year and will be raised from public sector employers and employees by higher National Insurance (NI) payments.

Data suggests around five million workers in public sector and 1.5 million in the private sector will be affected. Those eligible will have to pay an extra 1.4 per cent points of NI on their earnings, equivalent to a deduction of up to £37 per month.

In an interview with The Times, former pensions minister Steve Webb, now director of policy at Royal London, said: ”I think the Chancellor had hoped that no one would notice this rather large tax increase smuggled out in advance as it was some years ago."

Employers will now pay higher NI, amounting to 3.4 per cent of their employees relevant earnings. The move means public sector employers will pay £3.33 billion and employees £1.37 billion more to the treasury in 2016-17 as a result of bringing in the pension earlier.