CBI demands overhaul of public sector pensions
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The CBI has demanded public sector pensions be overhauled in a bid to contain a “trillion-pound burden on the taxpayer”.
It says unsustainable final salary models must shift to a more affordable system.
The CBI claims, in a new report, that the “financial black hole” for unfunded public sector pensions is £10bn every year because many public sector pensions include an “unpredictable guarantee from employers and staff contributions are out of kilter with payout levels”.
It says the total overall liability for these schemes has mushroomed to £1tn or £40,400 for every UK household.
The CBI is urging the next government to set up an independent commission within weeks of taking office to fully investigate pensions costs.
The report says pensions should be fully linked to contributions made by staff and employers, with no hidden taxpayer subsidy, although it insists pension rights and pots which have already been accrued must be protected, so staff will not lose whatever they have accumulated.
It says public sector staff should be moved away from final salary schemes going forward.
But for unfunded schemes, including the NHS, teachers and civil service, the CBI thinks staff should migrate to pensions based on the Swedish model of notional defined contribution, which will provide guaranteed pensions without unpredictable taxpayer liability.
It says this scheme would offer a risk-free pension that is more sustainable and secures transparency for employers, staff and taxpayers.
Also, retirement ages for existing and new public sector workers must be raised to match the state pension age, according to the CBI.
Deputy director general John Cridland says: “This is a difficult and emotive area, and not one that should be rushed. Public sector workers deserve a good retirement, but they and their employers should pay their own way. The pensions black hole is over £1tn and rising, and taxpayers cannot be left to make up the difference.
“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 new government needs to acknowledge the problem, establish the true costs and let the taxpaying public decide what they are prepared to pay for.
“Public sector workers cannot lose the pensions pot they have accrued so far, but they will have to adapt in the future. We think that, for many public sector employers, shifting to a notional defined contribution pension could be the best way forward. It would ease the burden on taxpayers and offer public sector workers a secure and sustainable pension.”
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Readers' comments (3)
Anonymous | 6 Apr 2010 11:19 am
I couldn't agree more!
Lets have a strong dose of reality for public sector employees, and a reduced liability for all UK taxpayers.
Since 1997 Labour have substantially increased the public sector (with little economic benefit) and the old argument that average public sector pay is lower than average private sector pay, therefore fully inflation proofed, no risk pensions are appropriate, is no longer valid.
This should have been done years ago!
Yet another example of New Labour incompetence.
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Sean | 7 Apr 2010 8:44 am
No doubt we will have the Unions bleating about the low pay these 'public servants' receive. I agree that maybe just as Labour has attacked the pensions of high earners we should bring in restrictions on the level of pensions received by high earning civil servants.
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dave | 5 Feb 2011 1:49 pm
What an absolute load of waffle. Let me guess a few moany private sector workers, who have suffered a blow to their yearly bonuses, and a pinch to their "harry enfield loads of money" lifestyle. If the moaners above work for that great british protected industry.............the banks, as I bet most of the CBI top brass do, then who put tax payers in such a terrible position.
Despite all your gripping, why don't you look more long term at the problem. How about a law that requires EVERY person over the age of 18 to pay into a private pension scheme NOW. I bet the moaners above are going to take their costly STATE pension. If everyone had to pay, by law, 6% of their income on a pension, I don't think we would have many black holes in public coffers. I bet if you total up the state pension scroungers, I bet you will find quite a few "private sector" workers (the backbone of this great british production industry) claiming both their private yuppy, and state pension. Why, because they are greedy moaning wingers. The Confederation of British Industry.......what a joke, what industry.....Macdonalds, M&S, Costa...blah blah blah. What industry??.
Stop blaming everyone else, and stop getting at public sector workers, we didn't cause the mess. Why didn't the great old CBI spot the mess in the banking industry........I know they were filling their pockets.
I was thinking of getting a 170 billion loan from the government myself, paid back at a lousy 2 billion a year. I'd have a great life.
Oh and I can't wait to see the old "private sector industry" profit announcements. You know British GAS........1.7 Billion, BP and others. Look at the state of that great private sector industry BA. They are always out on strike.
Get real
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