UK - Introducing shared risk through a career average scheme for the public sector is the only way to achieve long-term sustainability and lasting reform, Mercer says.
The consultant urged the government to adopt a career average orientated package of reforms over alternatives such as a one-size-fits-all approach or a simple defined contribution set up, which is said was "not suitable for such a diverse sector".
Mercer public sector pensions principal Paul Middleman said: "Although currently, particular benefit structures apply fairly consistently throughout the sector, individual schemes have evolved different design characteristics to reflect the nature of their membership.
"A single ‘unified public service scheme' design, identical in application for all, is not appropriate. Flexibility to apply and adopt overall design principles by each of the main public sector schemes must be allowed.
The consultant said individuals within the public sector have widely differing risk appetites based on factors such as overall financial security, job security, level of earnings, other income streams, and level of understanding and knowledge.
It said progressive risk-sharing options should be made available to employers, so that the overall remuneration packages they offer are appropriate for their staff.
Middleman also expressed concern over the implementation of government policy in driving employee contribution levels higher.
"It might be necessary to create some form of protection from high contributions for lower paid public sector workers," he said. "This would prevent many people voluntarily withdrawing from their schemes because they couldn't afford the contributions."
Middleman, there are significant disparities in current levels of employee contributions between various public sector schemes.
For example, 1.5% of salary is payable by employees under the civil service "classic" scheme, while employee contributions in the Local Government Pension Scheme range from 5.5% to 7.5%. The NHS scheme requires employee contributions of up to 8.5%.
The Pensions and Lifetime Savings Association (PLSA) has announced it will shrink its board by more than one-third as part of a governance overhaul to make it "agile and more appropriate".
Smaller FTSE 350 defined benefit (DB) schemes were nearly 15 percentage points less well-funded than larger schemes in 2017, according to a Goldman Sachs Asset Management (GSAM) analysis.
The advent of collective pension systems could help the UK avoid demographic challenges which will make it "impossible" for society to help savers in retirement, experts say.