Turner warns on public pensions

Lord Turner's Pensions Commission issued its report last month

Members of public sector pension schemes may have to retire even later than 65.

The suggestion was made on Wednesday by Lord Turner, head of the Pensions Commission, to a committee of MPs.

The future of public sector schemes was outside the remit of Lord Turner's recent report, which suggested raising the state retirement age beyond 65.

But he told the MPs that public sector workers may have to adjust to longer life expectancy by retiring later too.

In October, the government agreed with public sector trade unions that, from next April, new recruits to the civil service, teachers and NHS pension schemes would have a standard retirement age raised to 65.

In the face of threatened strike action by the unions it was agreed that current members of the schemes would keep their present retirement age of 60.

Careful words

Answering questions from the MPs, Lord Turner discussed the ideas contained in his recently published 460-page report.

Adjustments will have to happen to the schemes Lord Turner

He acknowledged that the future of the public sector schemes was not within his remit.

But, choosing his words carefully, he made it clear that they too should consider raising their retirement ages, and he suggested this should happen automatically if life expectancy continued to rise.

"I think the public sector has to have a philosophy that says whatever is the present generosity of the promise we make to people, and the present cost to the public purse, we've got to have a formula that keeps that roughly stable over time," Lord Turner said.

"So to the extent that life expectancy goes up in future, we are feeding that through in a fairly automatic basis; adjustments will have to happen to the schemes to keep the generosity stable, and the generosity of a pension promise is the combination of an annual pension multiplied by the number of years you receive it," he added.

This year's deal between the government over the three public sector schemes in question has been bitterly criticised by the CBI employers' organisation.

Chancellor Gordon Brown also told the CBI conference last month that there remained "a lot of work to be done" on the deal.

Despite his comments, both Work & Pensions Secretary John Hutton and Trade & Industry Secretary Alan Johnson have stated that the government will stick to the new arrangements.

The government has also announced plans to change the Local Authority pension scheme. This will mean its members cannot retire early on favourable terms and will have to work until the scheme's standard retirement age of 65 before receiving a full pension.