CBI calls for independent commission on unfunded state pensions

The government must come clean to taxpayers about the ballooning cost of public sector pensions, which are running up a trillion pound tab, the CBI has warned.

The employers’ group is calling for an independent commission to examine the financial rules, costs, and levels of taxpayer subsidy that underpin public sector pensions.

It wants its findings to then be a starting point for a debate on what it says is a much-needed reform of the pension schemes, the majority of which are not funded and will place a massive and growing burden on future taxpayers.

Employers reckon that unfunded public sector pension schemes have liabilities of over 915bn. Around a fifth of the UK workforce is enrolled in public sector “defined benefit” pensions, which are usually linked to final salary.

John Cridland, deputy director general of the CBI says: “Public sector workers should have a good retirement, but we need to talk openly about how we split the bill. The debt that is being racked up is truly eye watering and is set to get much worse.
Taxpayers who are struggling to build their own personal pension will be lumbered for decades by the cost of covering public sector workers who retire years earlier on risk-free pensions.

The private sector has had to face up to what its pension commitments will cost, and has made huge efforts to put its own house in order. All we ask is that government does the same for its five million employees.

TUC General Secretary Brendan Barber says: “Much of the cost of public services is made up of the wages of public servants like nurses, teachers and civil servants, and a decent pension will always make up a significant part of any wages bill. If we are to have the public services that make our society civilised then it is only right that we recognise that public servants should get a decent pension and that this comes at a price.

“But the CBI is behind the times. Significant changes including later retirement ages and risk-sharing have been negotiated by unions across the public sector. This is not always the case in Britain’s gold-plated boardrooms.

“The real scandal though is the huge amounts in means-tested benefits provided by taxpayers every year to pensioners whose employers were too mean to provide them with a decent pension. Of course private sector workers who do not get a pension have every right to be angry, but the solution is to provide a decent pension in every workplace, not play the politics of envy with public sector pensions.”