Oh dear – we’re too dear

Hello Bloggers…

This week I return to the vexed issue of public sector pensions (see previous Blog post – Looking at a Black Hole).

Radical new proposals from the European Union are being drafted in a 17-page pensions’ Green Paper that appears not to help the UK problem. John Cridland, deputy director-general of the CBI has been quoted as saying the EU paper is “misguided”. All in all if the proposals from the EU are implemented projections estimate this would cost Britain an eye-watering £500bn; with mounting concern about the adverse impact on economic growth. The CBI argue the EU ’one size fits all’ approach does not account for differences in the pension rules across Member States.

Add into the mix the deficit in public sector pensions funding and the problem appears to be gargantuan. A report published by the Public Sector Pensions Commission (7 July 2010) has warned that public sector workers may have to double their pensions contributions. Pensions consultancy Towers Watson estimate a pensions deficit of £1.2 trillion – nearly two thirds higher than official figures released about the shortfall.

The week has seen intense media speculation that the new pensions’ commission led by John Hutton (former Labour defence secretary) will require public sector workers to increase contributions to pensions’ schemes from as early as spring 2011. Civil servants could come under pressure first to increase their contribution rate from 1.5% – as it currently stands. Other options being bandied about include forcing higher paid public servants to make a higher contribution, and closing final salary schemes to future accrual.

Whatever option is chosen by Mr Hutton and the pensions commission tough choices and tougher decisions look inevitable.


By | 2017-07-30T12:23:35+00:00 July 12th, 2010|Categories: Dean Shoesmith|2 Comments


  1. Lucasta Grayson 16th July 2010 at 10:47 am - Reply

    Hello Dean,

    It is inevitable that there will be significant reform of public sector pensions but the timescales in which John Hutton’s team are expected to respond seem unrealistic. There is a real danger of a knee jerk reaction leading to ill considered changes causing real problems in the long term. I hope that the LGPS, which has already taken steps to reform itself and which is a funded scheme, is not lumped in with all other public sector schemes when reforms are considered.

  2. Dean Shoesmith 19th July 2010 at 9:01 am - Reply

    Many thanks Lucasta for your well-considered reply to my blog post. I think you make an important distinction about the difference between funded and unfunded pension schemes and I hope this is taken into account by the Public Sector Pensions Commission. I agree with you about the potential danger of a knee-jerk reaction – much of which is stirred (in my view) by sensationalist parts of the media.

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