CBI Demands Probe of Public Sector Pensions

By Peter Ranscombe, business.scotsman.com

April 6, 2010

United Kingdom

Business leaders will today demand the next UK government sets up an independent commission within weeks of taking office to probe public pension costs.

The CBI warned that a more affordable system is needed if the "trillion-pound burden" on the taxpayer is to be contained.

A newly published report claims there is an annual unfunded public sector black hole of £10 billion, partly because staff contributions are "out of kilter" with payout levels.

The demand comes just a week after the Scottish Chambers of Commerce (SCC) called for a minimum retirement age of 70 for workers standing to gain "non-revised" – or non-contributory – public sector pensions.

The CBI will today claim the picture is complicated because public-sector pensions vary greatly in size and structure depending on the employer.

Some, such as the local government scheme, have more transparent arrangements and are funded, unlike the civil service, which is unfunded, said the business group's report.

Public sector pension benefits are on average worth 26 per cent of salary every year, far higher than private sector norms, and the total cost will increase as people live longer, it was claimed.

The report, Getting A Grip: The Route To Reform Of Public Sector Pensions, argued that the public sector needs to "pay its way" for pensions.

All public sector staff should be moved off guaranteed defined benefit schemes, which include final salary and career average pensions, said the report.

CBI deputy director-general John Cridland said: "Guaranteed final salary pensions have entered the history books in the private sector, but the state has not squared up to the issue for its own workers. 

"Countries like Sweden and Holland reformed their systems some 15 years ago."

A Treasury spokesman said: "The UK government has set out substantive reforms to ensure the sustainability of public sector pensions."

Shadow chief secretary to the Treasury Philip Hammond said: "We agree with the CBI that an important first step in public sector pension reform is transparency, so taxpayers understand the true costs and public sector workers understand just what the value of their retirement benefits is."

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