Safety valves are necessary in the public sector to ensure that change in the reforms is sustainable, says the Association of Consulting Actuaries (ACA).

In response to the Public Service Pensions Commission’s call for evidence, the ACA said the Commission should aim to produce a system which looks to ‘fairer’ pensions across the public and private sectors, and identifies an affordable replacement income in retirement to target over a career.

A number of safety valves should be installed along the way to control costs and benefits using middle way solutions, ones that can be applied to both the public and private sectors.

The contrast between pension provision in the private and public sectors is highlighted in the ACA’s submission, with the public sector offering defined benefit (DB) pensions linked to final salaries covering over five million employees, but the private sector having 87 per cent of DB schemes closed to new entrants and around a fifth also closed to existing members.

In response to the call for evidence, ahead of an interim report by Lord Hutton in late September, the ACA proposes three key objectives for any ‘new’ pensions structure in the public sector.

The ACA says the structure should aspire to be regarded as ‘fair’ by taxpayers; ensure that the pensions offered are sufficiently attractive to help recruitment and retention of good quality employees into the public sector, and that there needs to be better safety valves and flexibility in the new structure to cope with the stresses that any system is under over time.

Stuart Southall, ACA chairman, said: “Introducing ‘middle way’ designs into the public sector now would, we believe, help stimulate the wider recovery in voluntary ‘quality’ pension provision that is required across-the-board.”

Share Story: