Pensions minister Guy Opperman has warned public sector defined benefit schemes should be reformed, branding the system unsustainable.
In an interview with The Sunday Times, Opperman argued public sector pensions “should be reformed, and a government in the future has to address that”.
“It is not sustainable for this state, or any state, on a long-term basis. It’s a practical reality. I don’t believe it is the case that in 10 to 20 years’ time we’re all going to be in defined benefit schemes,” he claimed.
The latest figures, published on June 6, showed net public sector pension liabilities increasing by 15.6 per cent between the 2018-19 and 2019-20 periods, reaching almost £2.2tn, mainly due to changes to mortality assumptions.
The net public sector pension represents 44 per cent of the government’s total liabilities and is the largest liability in the government’s accounts, It does not include the state pension.
Opperman added that a reform would apply “as much to the civil service and to members of parliament or anybody”.
“We are going to move to a different type of pension scheme, and the public sector is the last bit,” he added.
Public sector schemes were reformed in 2015, after an independent review conducted by Lord Hutton of Furness suggested creating new schemes to manage some of the costs and risks to the Exchequer of providing public service pensions.
The new schemes include features such as pension benefits based on career average revalued earnings, and transitional protections were put in place for those close to retirement, which remained in the old schemes.
However, these transitional arrangements were found by the Court of Appeal in 2018 to constitute unlawful age discrimination in relation to firefighters and judges, known as the McCloud case, and a remedy which covers all public-sector schemes is being implemented.
Maria Espadinha is the editor of Pensions Expert
