By Claire West
The Government must focus on fact, not rhetoric, in the ongoing debate about the future of UK pension reforms, according to the South West’s largest independent firm of pension experts.
The comments, from Bristol-based BBS Consultants & Actuaries, were made in the wake of an independent commission’s recommendations about ways to tackle the rising cost of public sector pension schemes.
The commission, led by Lord Hutton, has published its interim report, which has raised concerns about the “final salary” nature of public sector schemes, and recommended that, in the long run, pensions accruing in the future should be changed, possibly to reflect average earnings over the member’s employment rather than their final earnings. In addition, increasing the contributions paid by members has been recommended as a short term measure to help control costs.
James Stanfield, Director at BBS Consultants & Actuaries, said: “Broadly speaking we welcome this report, which is a sensible contribution that takes the debate about pensions in the public sector forward. It is to be hoped this report will dispel some of the myths surrounding public sector pensions that have led to arguments and counter-arguments from various parties that have been widely reported recently.
“However, we do have concerns about some of the detail in the interim report, and in particular how certain facts have been presented.
“Lord Hutton himself cites an example of where a ‘high flyer’ can get almost twice as much back in pension, in real terms, than those on more modest earnings for the same amount of pension contributions paid over their working life. This example is at an extreme and the introduction of tiered contribution rates in some public sector pension schemes has reduced this inequality.”
Mr Stanfield rejected assertions from various trade unions that previous reforms of public sector pensions have adequately reduced the long-term costs of such schemes.
“A fundamental point is that whilst it is correct to say changes have been made over the last few years, including the raising of the normal retirement age of members in some schemes, these have only been applied to new joiners, meaning there are many more people in public sector schemes who are unaffected by the reforms. The cost savings from these measures are expected to take many decades to materialise.”
He added: “Of course we want to be supportive of the report and any reforms which may come about as a result, but we feel there needs to be more focus and debate around some of the detail, especially on the structure and form of public sector pensions in the future.”
The Government is due to give its response to the interim report, and the final report which is expected to be published in early 2011, as part of the 2011 Budget.