10 October 2008
The government should use the economic crisis to review public sector pension schemes, Public Finance has been told.
David Davison, a director at the independent actuaries Spence and Partners, said: 'If there's going to be pressure on public finances, then [public sector pensions are] one of the things that's going to have to come back to the top of the political agenda.'
While the private sector has responded to a more hostile economic climate by moving away from final salary pension schemes towards money purchase ones, this shift had not occurred in the public sector.
Davison said the level of benefits within public sector final salary schemes as they are at the moment was unsustainable. Employer contributions to some local authority schemes are expected to have to increase by more than 20%, which for small voluntary sector bodies would be particularly hard to maintain.
Changes to the civil service's pension scheme, where final salary arrangements were replaced with ones based on career-average earnings, were 'very positive and progressive', Davison said. 'It's more affordable. There's much greater certainty for the public purse.'
But the largest public sector trade union, Unison, called for reassurances for public sector workers. General secretary Dave Prentis said: 'Millions of public service workers save into their pension funds to help provide some dignity and security for their retirement. That security is now under threat because the viability of pension schemes is being threatened by the destruction of their asset base.'
In Scotland, the Scottish government and council leaders agreed a £40m deal to plug a hole in police and fire service pensions. Holyrood and local government will each provide £20m, in addition to the £33m of government money being injected into the scheme this year and the £22m next year.
Scottish Justice Secretary Kenny MacAskill said: 'As well as dealing with the exceptional pensions pressure we are facing next year, we have also agreed with the Convention of Scottish Local Authorities how to address the longer-term pensions issue.'
PFoct2008
