Public sector pension reform is not enough to deal with an ageing population, that’s the message from the Association of Consulting Actuaries.
The news that public sector pension costs are to double over the next four years has encouraged the ACA to suggest that a pensions review should look at public and private sector pension reform , including NEST, and take into account state pension changes, before moving on to look at the financing of elderly care.
They say that despite plans for reform, the Government will face problems further down the road as the bill for pensions outweighs employer’s contributions.
ACA estimates that currently the amount paid to 2.5 million public sector pensions is around £20billion a year with employee contributions of around £4billion and employer contributions of around £12billion, leaving £4billion to be picked up by the Treasury.
ACA Chairman, Stuart Southall, said: “The danger is that, without corrective action, tomorrow's taxpayers could see this annual cost escalate rapidly in the years ahead if there are continued advances in longevity - with pensions payable for longer than expected - and if there are changes in the proportion of pensioners relative to contributors (and taxpayers). These scenarios are both likely in the UK over the coming years.
"An independent review body needs to look at both sectors so there is the potential for pension costs and benefits to be generally evened out between the private and public sectors. Such a body might conclude, for example, that pay-as-you-go is an unstable way of meeting pension costs in an ageing society and that, over time, there should be a change in approach.
"In looking at pensions in the round, it seems to us that it would be sensible to examine at much the same time what could be done to address the financing of elderly care through pension arrangements. Again, some joined-up thinking might help to address what is an increasingly serious dilemma for an ageing society."
The full details of the Government's pension plans are likely to be announced within the emergency Budget on 22 June.
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