Labour targets pensions to save £300m per year

High-earning council chiefs will be told that if they want to keep their generous pensions they will have to contribute more from their own pockets.

The Local Government Secretary, John Denham, made the announcement yesterday in an attempt by Labour to take the sting out of the argument over public sector pensions.

Public employees are among the few remaining workers who are paid pensions based on their final salaries. Private companies are scrapping such schemes, saying they cannot afford them. The Tory leader, David Cameron, and the Liberal Democrat leader, Nick Clegg, have questioned whether Britain can still afford public sector pensions.

Addressing an audience packed with public employees at the Labour conference, Mr Denham promised: "I'm not joining the clamour of Clegg and Cameron to slash your pensions. The average local government pension is less than £4,500 a year. But I do want to limit the pension entitlements of the very highest earners."

Mr Denham's staff have calculated that they can save £300m a year from the pension pots of 0.01 per cent of the highest paid public employees, such as the nine council chief executives who are paid an average of £212,000.