Prior to the last election I argued that the MPs’ pension fund should be closed, preventing any new members joining and stopping further accrual by existing members. I suggsted it be replaced by a modern money purchase scheme similar to the experience of most private sector companies. There are few final salary schemes left for new members in the private sector. This could be the prelude to a wider public sector pensions reform to limit future costs to taxpayers by changing the terms on which future contributions could be committed.
My view did not prevail. The Coalition government did, however, agree that public sector pensione generally were unaffordable. They recommended higher contribution rates for MPs and others in the public sector, and said these would control the costs of provision.
It is interesting to compare the costs of public sector pensions in the first Coalition Red Book in June 2010 with the costs in the latest version, Budget 2013:
2010 forecast £5.8bn 2012-13, £8.9bn 2014-15, £10.3bn 2015-16
2013 forecast £10.5bn 2012-13, £12.4bn 2014-15, £13.6bn 2015-16, £16.2 bn 2017-18
Michael Johnson and the CPS have done good work on this, setting out what they see as the pensions cost timebomb for taxpayers and making proposals to tackle the issue. A small part of it is the state assumes responsibility for the Royal Mail pensions scheme payments (£1.3bn). The rest is the rising cost of pensions in payment compared to contribution income.
The Red Book certainly reveals that action to date, seen as tough by some in the public sector, has not been sufficient to avoid a very large increase in taxpayer contribution to public sector pensions.