Magazine article Public Finance

Public Pensions Cost £10Bn a Year, Says CBI

Magazine article Public Finance

Public Pensions Cost £10Bn a Year, Says CBI

Article excerpt

Business leaders have called for sweeping reform of public sector pensions, which they say are adding £10bn to government spending every year.

A CBI survey published this week found that the total taxpayer liability for pensions for public sector workers was £1 trillion, or £40,400 for every UK household. This is well above the last official government estimate in 2008, which put the hlack hole at £770bn.

According to the business lobby, pensions are now worth on average 26% of every state worker's salary, far more than in the private sector. The cost to the taxpayer has been compounded by a 1 million increase in the number of public sector workers over the past decade, and is only likely to increase as people live longer.

The CBI called for an end to the current defined benefit model, which guarantees future payouts related to length of service or final salary. The April 6 report suggested moving to the Swedish 'notional defined contribution' approach, linking pensions more directly with how much an employee puts in rather than relying on taxpayer contributions. The retirement age for existing and new state workers should also be raised to match the state pension age.

CBI deputy director general John Cridland said public sector workers and their employers 'should pay their own way*. …

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