“ Nearly two years after it consulted, the government has chosen to stick rather than twist on the valuation of public service pensions. This means that the cost of a public service pension is going up at a time when pension costs for other schemes have fallen very significantly. It begs the question – how long can the two very different public and private sector regimes survive alongside each other?
The government had three objectives and stability has been moved to the bottom of the pile with a review every four years increasing uncertainty for employers. Whilst it seems right in principle to reflect economic conditions, there is no easy way to do this and choosing an approach based on the OBR’s long-term economic growth is “finger in the air” and creates unnecessary uncertainty for pension schemes designed to span generations.
Government departments, schools and NHS trusts may take some comfort that spending budgets will be adjusted to compensate for very significant pension cost increases, but this will need to be seen to be believed. However, universities and independent schools will receive no compensation so this will put significant pressure on these organisations, many of whom are already having to look hard at their pension options.
The consultation approach opens by recognising that public service pensions are a crucial part of the total remuneration package provided to public servants. Whilst some might call for benefit reform as a result of increasing costs, the most important thing for public servants is to be enabled to understand the value of their pensions, by far and away the second biggest part of their pay package.”
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