THE Coalition's controversial reform of public sector pensions is unlikely to save any money in the long run, the country's leading think-tank said today.

The Institute for Fiscal Studies also claimed the four-year squeeze on public sector pay would return the public-private wage differential to the level it was before 2008 because pay in the private sector reacted quickly to the slump while the public sector did not.

On pensions, the IFS argued that the savings made from higher state pension ages were offset by other elements of pensions becoming more generous with lower earners generally becoming better off.

Higher earners, in contrast, were likely to lose out, with the move from final salary to career average schemes penalising workers who had big pay increases over time.

The IFS's report also said the UK Government's decision to shift indexation of public sector pensions from RPI to the generally lower CPI measure of inflation "substantially" reduced costs and generosity.

"The reforms to public service pensions implemented by the last Labour government and this Government's decision to switch from RPI to CPI indexation of pension benefits will in the long run reduce the generosity and therefore the cost of these schemes to the taxpayer," explained IFS deputy director Carl Emmerson.

"But the consequence of the long negotiations over the latest reform appears to be little or no long-term saving to the taxpayer or reduction in generosity, on average, of pensions for public service workers."

Research economist Wenchao Jin pointed out how there was "considerable variation" in what public sector employees are paid above their private sector counterparts.