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Govt attacked over U-turn on public-sector pensions

The Government’s U-turn on public-sector pensions will make the job of selling reform in the private sector much harder, warns Aegon head of corporate affairs Francis McGee.

McGee says last week’s agreement between the Government and public-sector unions – which allows existing workers to continue to retire at 60 while the pension age for new entrants is increased to 65 – means the difficult decisions ahead will be tougher for private-sector employers and employees to stomach.

McGee says the timing of the announcement ahead of the Turner report is not helpful, especially as Adair Turner has already indicated that increases in the retirement age are high on the agenda.

He says this view has also been acknowledged by Work and Pension Secretary David Blunkett, which sits uneasily with last week’s deal.

McGee also argues that future reforms will only be successful if the pension industry benefits as there is a strong alignment between the interests of the industry and the public. He believes that introducing a version of the Swedish pension model – where life offices have a reduced role because contributions are collected by central government – would fail for this reason.

McGee says: “It is going to be hard for the Government to sell a package including later retirement and more obligations on the private sector after this announcement.”

Hargreaves Lansdown head of pensions research Tom McPhail says: “This move from the Government is completely spineless and indefensible. It is a huge step in the wrong direction and has made the forthcoming negotiations on private-sector pensions post-Turner that much harder as these employees watch the public sector’s Rolls-Royce pensions go by.”

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