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Public-sector pension contributions “out of kilter”

6 April 2010

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Public-sector pensions must be reviewed by the next government in order to reduce the “trillion pound burden” they place on the taxpayer, an employers’ organisation has said.

The Confederation of British Industry (CBI) said public-sector pension benefits were worth on average 26% of salary. That, coupled with a large number of workers contributing to “unsustainable” final salary schemes, is fuelling a public sector black hole of £10bn a year as employers struggle to bridge the gulf between contributions and payout levels.

The CBI said the relationship between staff contributions and final payouts was “out of kilter” and that the disparity between the public and private sector needed to be addressed by an independent commission dedicated to reviewing the state of Britain’s pension crisis.

In a report published recently, the CBI said it was time for the public sector to “pay its way”.

All public-sector staff should be moved off guaranteed defined benefit schemes, which include final salary and career average pensions, the report said.

Increased lifespan, higher retirement age and final salary schemes were all contributing to an unsustainable situation, the CBI said.

Copyright © Press Association 2010