Scrap public sector pensions, says think-tank

27 Feb 14
Public sector pensions are uncertain, unfunded and unsustainable and should be replaced with an individual contributory pension on a defined contribution basis, according to proposals from a Scottish think-tank

By Vivienne Russell | 27 February 2014

Public sector pensions are uncertain, unfunded and unsustainable and should be replaced with an individual contributory pension on a defined contribution basis, according to proposals from a Scottish think-tank.

Reform Scotland’s paper, published today, called for a radical overhaul of pensions across the UK. As well as the end of public sector defined benefit scheme, it said the state pension should be phased out over the next 45 years.

In its place would be Universal Contributory Pension, to apply to all workers in the public and private sectors and help reduce some of the current disparities between them. 

These UCPs would be mandatory, with all workers contributing at least 8% of their salary. It would be controlled by the individual, who would also be able to select their own retirement age at any point after 60. There would also be a flat rate of income tax relief and Pension Credit will continue to provide a minimum income guarantee.

National Insurance would be scrapped and income tax increased by 7p to cover the fall in revenue. 

Ben Thomson, chair of Reform Scotland, said: ‘The key problem with our pension structure is that those faithfully paying National Insurance and those paying into a public sector occupational pension scheme have no ownership over their pension assets. They are not paying into a personal pot for themselves – they are paying for today’s pensioners and are dependent on an increasingly stretched next generation to pay for them.

‘This is hugely insecure and unsustainable. It’s time to grasp the nettle on pensions and end the conspiracy of silence that exists in all political parties on this issue.’

He added that UCPs would, unlike most public sector schemes, be fully funded, providing a sustainable solution for the country’s finances.

‘The UCP will take power away from politicians and give it to people,’ said Thomson.

‘It will ensure that workers have control of their own circumstances in retirement, including the ability to retire any time after they 60. And it will free the next generation of the burden which our pensions system places upon them.’

Spacer

CIPFA logo

PF Jobsite logo

Did you enjoy this article?

AddToAny

Top