(2) how his Department treats (a) increases and (b) decreases in employee contributions to public sector pension schemes for accounting purposes; and what effects would such changes have on Government (i) spending and (ii) receipts; and if he will make a statement.
Total Managed Expenditure (TME), the Government’s preferred measure of expenditure drawn from the National Accounts, nets employee pension contributions off gross expenditure on pensions paid. This means that an increase in employee contribution rates without any commensurate increase in salaries or pension benefits would reduce TME. Government receipts, which finance TME, are unaffected by pension contributions, as these net off within TME.
Contributions that employees make to funded public service pension schemes, such as the Local Government Pension Scheme and funded pension schemes in the wider public sector, are treated as income to the individual funds and are not netted off in TME as described above.