By Claire West

Commenting on government plans announced this week to launch a consultation on the discount rate used to calculate the amount public sector employees pay into unfunded pension schemes, TUC General Secretary Brendan Barber said:

'The government would be ill-advised to alter the discount rate.

'The discount rate is how the government measures future costs and commitments in today's prices. It is used to assess much more than the future cost of public sector pensions - changing it could have unforeseen consequences across government investment plans, and make many worthwhile projects suddenly look too expensive.

'The government has already signalled an intention to sharply raise public sector pension contributions. Some schemes are currently being re-valued which could also result in higher contributions. Increasing the discount rate in order to further increase contributions would be a step too far and would simply lead to many hard pressed public sector staff - particularly the low-paid - walking away from their pensions.

'Lord Hutton said there should be a consultation, but was also clear that the current discount rate is within an acceptable range. Ministers should also heed his warning that increasing contributions for the low-paid would be unfair and lead them to giving up their pension - which in the short term would lead to higher government bills as the Treasury would no longer receive member contributions in pay-as-you-go public sector pensions.'