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Has Alistair Darling finally reacted to the public sector pension situation?

Underneath the hustle and bustle of the big headline grabbing stories of today's pre-budget report there is confirmation that UK public sector workers will be required to increase their own pension contributions in the short, medium and longer term. While the 1% cap on public sector pay rises has obviously grabbed more attention than the pension situation, we must not underestimate this particular move.

The last few years has seen a massive divergence in the cost of pensions and contributions from employees in the public sector and the private sector. While the vast majority of public sector workers still enjoy final salary pension schemes, these are becoming something of a rare beast in the private sector were massive deficits at companies such as BT are actually starting to impact upon trading and balance sheets. Today's announcement has been well received by the pensions industry and will see some pressure taken off the UK taxpayer in the future.

However, there is still a need to fundamentally change the UK pensions sector which has for many years been very biased towards public sector workers. Quite how any future Chancellor of the Exchequer would be able to balance out these anomalies remains to be seen but more action needs to be taken sooner rather than later, even though today's move has been well received.

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