Chancellor George Osborne has announced spending plans that will force public sector staff to pay £1.8bn a year more towards their pensions and lead to 490,000 job losses.
He said the headcount reduction was “unavoidable when the country has run out of money” and would be partly achieved through unfilled posts.
He added: “We should remember that unless we deal with this record budget deficit decisively many more jobs will be in danger – in both the private and the public sector.”
Announcing changes to pensions, he said the rise in the age at which women can draw their state pensions will rise from 64 to 66.
In addition, annual savings to the public sector pension scheme of £1.8bn over and above planned cuts would be made by 2014-15.
The spending review states this will be made through “progressive changes to the level of employee contributions” equivalent to a 3 per cent rise, being phased in from April 2012.
The government also wants to reduce the discount rate used to calculate the future value of pensions.
Hargreaves Lansdown head of pensions research Tom McPhail told HSJ: “People are going to be paying more and getting a bit less back, which is never an attractive proposition.”
He added: “This is a very rapid pace of change. Compared to the normal speed at which these things are done this is positively breakneck.”
The 3 per cent increase would amount to a pre-tax increase in contributions of £750 a year to someone on a £25,000 salary, he said.
In the NHS, higher earners already pay a greater proportion of their salary in pension contributions – up to 8.5 per cent compared with the 5 per cent paid by the lowest earners.
PWC public sector partner Steven Beet said the firm had been lobbying against a universal increase in contributions.
He said: “Our strong view has been not to apply [the increase] across the board.” The total reward packages received by different groups of public sector staff needed to be considered, he said.
But he said even if higher NHS earners were forced to pay an extra 3 per cent, taking them to 11.5 per cent of their salaries, this would not necessarily be out of line with private sector averages.
However, comparisons between sectors were problematic, he added.
The government will wait for the full report of the review into public sector pensions being led by Lord John Hutton to be published before making any decisions over the precise nature of the pensions changes.