Public sector workers face pay cut under new state pension rules

Some five million public sector workers across the UK face a cut in take-home pay from next month under new state pension rules.

Under the new flat-rate state pension, workers could have to pay an extra 1.4 per cent of national insurance on their earnings – equivalent to £34 a month.

Some 1.5 million private sector workers are also likely to be affected, as will many public and some private sector employers.

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First announced in Chancellor George Osborne's budget back in 2013, the pension change is expected to make £5.5bn for the exchequer each year.

Former Liberal Democrat pensions minister Steve Webb, who is now director of policy at Royal London pensions company, said: "I think the Chancellor had hoped that no one would notice this rather large tax increase smuggled out in advance as it was some years ago."

The change will merge the state second pension with the basic state pension and abolish a 3.4 per cent national insurance reduction for employees who opt for final salary schemes.