UK - The government is being urged to scrap unfunded public sector pension schemes to boost local authority budgets.
The calls follow a Home Office announcement that the number of police officers in service had reached a record 131,548, and that the 3.4% rise in police numbers for the 12 months to September 2002 was the biggest yearly increase since 1976.
Experts say that with pensions continually eating into local authority budgets, unfunded schemes for teachers, firemen and the police should be scrapped and new recruits put into funded arrangements. This, they say, would free up extra revenue.
The Bain inquiry on firefighters’ pay and conditions, for example, showed that pension costs would eat up 25% of the fire service budget by 2007.
West Midlands Pension Fund chief pensions officer Mike Woodall said: “The government should be looking – on a strategic and long-term basis – at bringing new recruits into a funded scheme, thus avoiding the big bang effect of having to find the cash to pay for their existing liabilities.”
And last year Simplification Report author Alan Pickering claimed unfunded schemes lacked “fiscal discipline”.
Mercer Human Resource Consulting worldwide partner Ken Barclay added: “At the moment it is the taxpayers who are picking up the tab for pensions.
“Most local authorities put in sizeable pension expenses in their accounts and then seem to lop them out and carry on as normal.”
But he said there would be problems with moving to funded schemes, particularly when dealing with people who have already retired and whose incomes are financed by active members.
And PricewaterhouseCoopers partner John Shuttleworth claimed that any wholesale move from unfunded to funded schemes would also hit taxpayers.
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