Police pension liabilities rise by £10bn in a year

31 Jan 02
Government officials are considering a fundamental reorganisation of police pensions after it was revealed that the total liability for English and Welsh forces may have leapt to £36bn.

01 February 2002

The Treasury is 'extremely concerned' that the liability has risen by about £10bn since a calculation made in February 2001. A senior source involved in an ongoing government review, launched in 1998 by the then Home Secretary Jack Straw, told Public Finance that total liabilities 'were astonishing – around £34bn-£36bn'.

The dramatic increase has resulted from the use of more accurate and transparent accounting practices, due to be fully implemented in 2003.

Police forces have called for changes to pension practices because they are expected to fund payments from their central budget. Rising costs have prevented money from being spent on key services at a time when chief constables are under pressure to improve performance in line with national standards.

Some forces spend more on pensions than forensics, for example, and total expenditure on all schemes rose to 13.3% of the total police budget last year.

Currently, police schemes operate on a 'pay-as-you go' basis with no invested assets. The Treasury meets around 80% of costs, while the remainder is raised through council tax. All public schemes face an increased burden due to rising life expectancy, but the problem is exacerbated by beneficial retirement practices for the police.

Officers can retire after just 30 years, while the number of early retirements through ill health remains a sensitive issue. Home Secretary David Blunkett this week announced that officers capable of doing 'sufficient duties' for their rank would be retained until their natural retirement.

Melanie Leech, executive director of the Association of Police Authorities, said she would oppose fundamental changes to the 30-year pension entitlement, but that the APA would push for 'core changes' to Treasury funding.

'We are interested in anything that halts the year-on-year rises that have become a burden on our forces,' she said.

The Home Office revealed it was 'entertaining all possible alternatives to the current structure', including a funded system. CIPFA, however, said funded schemes would be almost impossible to introduce because the cost would be enormous.

The Treasury could also consider an alternative accounting system, whereby pension and services budgets are split – and possibly ring-fenced. But that would not address rising costs.

PFfeb2002

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