Lobby group to govt: Save £900m a year with our pension plan

The government can save £900m a year from public sector pensions without raising workers' contributions for two years, a lobbying group has argued.

The Local Government Employers has written to Communities Secretary Eric Pickles with its plan, seen by the BBC.

It says employees could either pay more in - starting in two years' time - to keep their benefits, or pay what they do now and get less when they retire.

The latest plan, which could affect two million workers, claims to deliver the required savings without employees opting out of the pension scheme.

In the letter to Mr Pickles, the group states its proposal "delivers the required level of savings, other than wholly through an increase in employee contributions, minimises the impact on the lower paid and offers choice to individuals".

The proposals include an increase in the normal pension age from 65 to 66 from April 2014, which the group claims would save £300m a year. The remaining £600m comes from an increase in contribution rates with protection for the lower paid, it says.

But for employers who are not willing or able to contribute more, there would be the option of accepting a reduction in their pension benefits. No employee would face a rise in contributions for at least two years.

The Department for Communities and Local Government now has to decide whether to adopt the latest proposal or launch its own proposals for pension changes at the end of the month, according to the BBC.

However, the largest public sector union Unison said it did not back the plans.

The unions have already said they will go ahead with ballots for mass strike action in the autumn over pensions, after talks with ministers failed to reach a breakthrough.