CBI calls for review of public sector pensions

Business leaders today renewed their call for a review of public sector pensions, calling for a shift from "unsustainable" final salary schemes.

The CBI said a more affordable system was needed if the "trillion pound burden" on the taxpayer was to be contained.

A report claimed there was an annual unfunded public sector black hole of 10bn, partly because staff contributions were "out of kilter" with payout levels.

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The business group said the picture was complicated because public sector pensions varied greatly in size and structure depending on the employer.

Some, such as the local government scheme, had more transparent arrangements and were funded, unlike the civil service, which was unfunded, said the report. Public sector pension benefits were on average worth 26 per cent of salary every year, far higher than private sector norms, and the total cost will increase as people lived longer, it was claimed.

The CBI urged the next government to set up an independent commission within weeks of taking office to investigate pension costs.

The report, Getting A Grip: The Route To Reform Of Public Sector Pensions, argued that the public sector needed to "pay its way" for their pensions.

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All public sector staff should be moved off guaranteed defined benefit schemes, which include final salary and career average pensions, said the report.

CBI deputy director-general John Cridland said: "This is a difficult and emotive area, and not one that should be rushed. Public sector workers deserve a good retirement, but they and their employers should pay their own way.

"The pensions black hole is over one trillion pounds and rising, and taxpayers cannot be left to make up the difference.

"Guaranteed final salary pensions have entered the history books in the private sector, but the state has not squared up to the issue for its own workers."