Radical public sector pensions reform can no longer be dodged, says IoD

Dated: 7 October 2010

Responding to Lord Hutton’s interim report, the Institute of Directors (IoD) makes the following points:

Key points:

  • We welcome that Lord Hutton recognises the “status quo is not tenable” in public sector pensions and that his final report will look at a “range of radical solutions”.
  • Only when his final report is published will we see if the Coalition has the appetite to deliver the strong, radical reforms to public sector pensions that are needed.
  • It is unfortunate that Lord Hutton says the public sector should provide pensions to which the private sector should “aspire”. This implies a continuation of some form of Defined Benefit scheme in the public sector at a time when these are fast becoming extinct in the private sector for good reasons.

When Hutton publishes his final report, the Government must not duck the problem. Failure to deliver some of the following options would show that the Government is not serious about pensions reform:

Short term reform options

  • An immediate increase to employee contribution rates across the board


Long term reform options

  • Increase pension ages
  • Reducing accrual rates
  • Introduce career average schemes
  • Introduce a ceiling on the level of pensionable pay
  • Cap the degree of inflation indexing of pensions
  • Move to funded defined contribution in the public sector
  • Move to notional defined contribution in the public sector

Commenting on Lord Hutton’s interim report, Malcolm Small, Senior Adviser on Pensions Policy at the IoD said:

“Only when Lord Hutton’s final report emerges will we see the appetite of the Coalition for delivering the strong, radical, reforms that are necessary to make public sector pensions affordable in the long term. Any failure to implement radical options would show that the Coalition is not serious about public sector pensions reform. This would be a disaster for long term public finances. Taxpayers can’t afford another government postponing the difficult decisions on public sector pensions.”

ENDS

Contact Points

Edwin Morgan
Media Relations Manager
Institute of Directors, 116 Pall Mall, London SW1Y 5ED
Tel: +44 (0)20 7451 3392
Mob: +44 (0)7814 386 243
Email: edwin.morgan@iod.com
Website: www.iod.com/policy

Notes to editors

  • The Institute of Directors (IoD) was founded in 1903 and obtained a Royal Charter in 1906. The IoD is a non-party political organisation with approximately 38,000 members in the United Kingdom and overseas. Membership includes directors from right across the business spectrum – from media to manufacturing, e-business to the public and voluntary sectors. Members include CEOs of large corporations as well as entrepreneurial directors of start-up companies.
  • The IoD provides an effective voice to represent the interests of its members to key opinion-formers at the highest levels. These include Government ministers and their shadows, parliamentary committee members, senior civil servants and think-tanks. IoD policies and views are actively promoted to the national, regional and trade media. Follow us on Twitter to get the IoD’s reaction on business and public policy issues.
  • The IoD offers a wide range of business services which include business centre facilities, with ten UK centres (three in London, one each in Reading, Birmingham, Cardiff, Manchester, Nottingham, Norwich, Edinburgh, Glasgow and Belfast) and one in Paris, conferences, networking events, virtual offices, issues-led guides and literature, as well as free access to business information and advisory services. The IoD places great emphasis on director development and has established a certified qualification for directors – Chartered Director – as well as running specific board and director-level training and individual career mentoring programmes.
  • For further information, visit our website: www.iod.com