Pension advisers welcome changes to public sector pension arrangements

A number of IFA have stepped forward over the last 24 hours to champion the long-awaited pensions report from Lord Hutton yesterday. A number of pension advisers have been comparing the UK public sector pension system to that of a "Ponzi" scheme where effectively new money is used to pay out existing liabilities leading to larger and larger problems for the future. Whether this comparison is a little unfair is open to debate with but the idea of "robbing Peter to pay Paul" has been mentioned on numerous occasions.

If the situation regarding private sector pensions had remained unchanged, with final salary pension schemes historically very popular, there would have been little or no criticism of the public sector. However, due to diminishing investment returns, additional taxation of pension assets and other changes over the last few years the final salary pension scheme has all but disappeared from the private sector. We now have a situation where UK taxpayers are effectively funding a bottomless pit in public sector final salary pension schemes which are still based upon a member's salary upon retirement.

While a lot of the changes recommended by Lord Hutton make perfect sense it will be a very different matter pushing them through, especially in these difficult economic times.