Career average the answer for public sector, Leadership Summit hears

Independent consultant John Ralfe’s claim that public sector pensions cost £30bn a year – compared to the official figure of £15bn – laid the foundation for debate on policy necessary to reform the public sector.

Niki Cleal, director of the Pensions Policy Institute, said: “It is important for the government to think about what is it trying to achieve exactly through public sector pensions? 

“I have genuine concern for the affordability, sustainability and fairness of public, versus private, sector pensions.

“On the more radical side of reform, the government should consider a hybrid scheme, career average or a funded national defined contribution system, which has been very successful in Sweden.”

But Mick McAteer, director of the Financial Inclusion Centre, voiced alarm over the amount of scaremongering about public sector pensions, musing it would not help to solve the crises.

On the public and private sector disparity, McAteer said: “We are looking at an age of austerity defined by the politics of envy.”

He cited the importance of long-term pensions reform over a short term political fix, and agreed with Cleal a career average structure or prefunded system could work.

Founding director of the Centre for Retirement Reform Margaret Snowdon countered the emphasis should be on increasing the retirement age universally, considering the economic climate, to avoid perpetuating envy between the two sectors.

Snowdon claimed the current situation was unsustainable, as people born today have a life expectancy of 103, which original pensions schemes were not designed to cope with. She advocated 70 as a more realistic retirement age.

She added: “Raising the retirement age has to come with providing new jobs for young people so there is not just a shift in unemployment.”