03/11/2011
By Ilonka Oudenampsen
Industry figures have met the government’s revised proposals for public sector pension reform announced yesterday with approval and are now waiting to see how the unions will respond.
Barnett Waddingham partner Graeme Muir said: “The fact that Mr Cameron has indicated to the commons that the changes will mean in some cases even bigger pensions than before will most likely give some reassurance to public sector workers, however, the bottom line is that whilst some may receive bigger pensions than before they will have to pay in more and for longer to get their bigger pensions – an outcome that seems fair enough.
“The suggestion that the local government scheme could still retain a final salary scheme if it could be justified is intriguing - Lord Hutton does no doubt not believe it. It does seem hard to believe that whilst there are good reasons to treat the local government pension schemes (LGPS) differently; that this extends to retaining a final salary formula - albeit a career average scheme with earnings revaluation - is not a million miles away anyway.”
Buck Consultants managing director Fraser Smart added that the new offer could provide a decent outcome for public sector workers and that unions should seriously consider halting their planned industrial action. “The measures are designed to protect the less well paid and ease the hit on those closest to retirement, whilst maintaining pensions at a level that is still far better than the private sector,” he said.
“Promising that the proposed key changes won’t affect anyone retiring in the next 10 years is a significant concession, and government is treading a fine line between avoiding strikes and potentially giving too much away. Questions remain about what happens in ‘year 11’ under the new criteria – whether there will be a cliff edge or whether changes will be phased in over time, the latter inevitably bringing with it additional expense.”
He also pointed out that as a nation we cannot afford to continue with the current public sector pensions system. As the population is increasingly ageing, the strain on the taxpayer is simply too great.
Sackers’ public sector unit head Michaela Berry commented: “Although the government yesterday set out its preferred scheme design for the future, it has finally recognised that there are differences between the schemes and workforces. The government is therefore consulting with unions both centrally and at individual scheme level.
“The unions do have scope for diversity in the future design of public sector pensions as the consultation progresses, as long as the cost ceilings that have been set are met for each scheme. This may prove useful in smoothing the way to implementation of the reforms as each scheme can focus on its specific needs; however it remains to be seen if this offering will be enough to prevent the planned strikes."
CBI director-general John Cridland concluded: “These proposals offer additional protection to public sector workers, particularly to the low-paid, while still achieving the essential reform which taxpayers need. It is not in the interests of public sector workers to plough on with industrial action, which would cause significant disruption to everyone.”
