Page last updated at 09:18 GMT, Monday, 15 December 2008

Public sector pensions probe call

Money

Business leaders have called for an independent commission into the "ballooning" taxpayer bill for public sector pensions.

A 1 trillion "tab" has been run up, heightening the need to look at costs and financial rules, the CBI said.

Deputy director general John Cridland argued it was important to know whether the taxpayer "can afford it".

But union leaders said ensuring workers had "dignity" and a "decent" income in retirement was of paramount importance.

'Difficult and painful'

The CBI's report said most public sector pension schemes would place a "massive and growing" burden on future taxpayers, yet it was difficult to build a clear picture of the liabilities.

Meanwhile, private firms had made "difficult and painful" reforms to their schemes, such as increasing employee contributions or introducing more cost-effective arrangements.

If we are to have the public services that make our society civilised then it is only right that we recognise that public servants should get a decent pension and that this carries a bill
Brendan Barber, TUC

Companies paid more than 33bn into schemes last year, up from 7.7bn a decade ago, but they still faced a deficit because of the stock market turmoil, said the CBI.

In contrast, a growing number of public sector workers were eligible for a pension and most could retire at 60 or earlier as well as benefiting from full inflation-proofing, the report added.

Mr Cridland told BBC Radio 4's Today programme that public sector workers had earned 29bn in pension benefits last year, but had contributed 19bn.

He said: "We need an independent commission so that the public and business community know just how much of our tax is going to fund this gap...

"The public sector is its own employer. It needs to establish the affordability of its pensions with the unions."

'Aspiring'

The CBI said the public sector retirement age should be increased and employee contributions should be raised.

Mr Cridland said: "It is a fantasy that stronger pensions are justified because public sector workers are paid less. They aren't. No wonder that many businesses are reporting that state jobs are distorting the labour market."

But Mark Serwotka, general secretary of the Public Sector Services Union, told Today: "It's not true to say the public sector has retained a retirement age of 60."

He added that a quarter of civil service staff earned less than 16,000 a year.

Mr Serwotka said: "We need to be aspiring not to a race to the bottom but for people to have decent pension provision in old age...

"We need to ensure that people in the public sector can look forward to a retirement with some form of dignity."

'Properly funded'

TUC general secretary Brendan Barber said: "If we are to have the public services that make our society civilised then it is only right that we recognise that public servants should get a decent pension and that this carries a bill."

Shadow chief secretary to the Treasury, Philip Hammond, said: "An incoming Conservative government would set up an independent Office for Budget Responsibility to conduct a full review - but we would be delighted if such a review were to start now."

Liberal Democrat work and pensions spokeswoman Jenny Willott said: "The CBI are entirely right to call for an independent commission to look at the affordability of public sector pensions...

"If public sector pensions are to be sustainable in the long term, we must ensure that they are fair and properly funded."

A Treasury spokesman said: "Reforms introduced by the government - including changes to the age at which pensions are paid and cost capping - will ensure substantial savings for the government.

"Public sector pension costs are published in Budget documentation and this shows that all the government's long-term liabilities, including pensions, are fully affordable each year now and into the future."

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