By Louisa Peacock
A report by the Public Sector Pensions Commission yesterday urged the Government to raise employee and employer contributions to pay for the size of public sector pensions liabilities, estimated by independent actuaries to be £1.2 trillion – far higher than the Government’s £770bn figure.
Other proposals include increasing the retirement age from 60 to 65, closing the scheme to future accrual, and more radical plans such as switching to career-average or hybrid schemes.
Gillian Hibberd, former president of the Public Sector People Managers’ Association, said the current final salary scheme was no longer viable and warned crucial front-line services and jobs would be adversely affected if the costs were not brought down.
“In its current form, workers must accept the final salary scheme is no longer affordable. Closing it to future accrual, or creating a hybrid or career-average scheme, are all serious considerations. Without changes, in the current economic climate, the squeeze on budgets will inevitably lead to service cuts or job cuts, and that shouldn’t happen. We need pensions reform.”
The recommendations by the Commission, made up of experts from leading bodies including the Institute of Directors and Institute of Economic Affairs, come ahead of the Coalition’s newly created pension reform body, chaired by former Labour minister John Hutton and due to report in October.