Ministers have been accused by business leaders of caving in "at the first sign of trouble" to union demands over public sector pensions.

The government and TUC hailed Tuesday's deal as a "sensible compromise" after they agreed not to force current public service staff to work until 65.

Instead new entrants to civil service pension schemes will face a raised retirement age.

Unions had repeatedly threatened strike action over the plans to save £13bn in spending over 50 years. Industry secretary Alan Johnson insisted that all the originally planned savings would still be made.

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