Richard Tice<\/a>, would damage the public finances rather than save money \u201cand end up costing taxpayers tens of billions of pounds in the years to come\u201d.<\/p>\nThe union challenged Tice after he said he would want to change public-sector pensions from a defined benefit system to a defined contribution scheme for new entrants, a move that would mirror what has happened in the private sector and would result in less generous payouts in retirement.<\/p>\n
A defined benefit scheme gives a guaranteed annual income for life after retirement, while a defined contribution pension provides a pot that can be drawn on until it runs out.<\/p>\n
Tice said he believed Prospect had misunderstood the changes he proposed and that the move would help the country avoid a slide into bankruptcy on the back of huge unfunded pension liabilities, which he said ran into trillions.<\/p>\n
\u201cIt has increased in the last 20 years from \u00a3750m to somewhere between \u00a31.5tn and \u00a32.5tn,\u201d he said.<\/p>\n
\u201cThe liability is growing and it\u2019s off balance sheet. It\u2019s one of the reasons that the Office for Budget Responsibility\u2019s numbers over the next 25 years show our debt-to-GDP under a low productivity scenario rise from 100 to 200%.<\/p>\n
\u201cGiven we have got a bit of space in the electoral cycle, let\u2019s have a rational grown-up debate about this. I want to sit down with the unions and say: Do you want to be responsible for looking your grandchildren in the eye and saying \u2018our union bankrupted your future\u2019?<\/p>\n
\u201cI\u2019m not saying change the existing terms and conditions. I\u2019m saying for new employees. There is a massive difference. There is a cashflow impact but that is tiny compared to the balance sheet liability which is much, much greater.\u201d<\/p>\n
Tice said it was similar to the issue of funding the triple lock on state pensions, which Reform has refused to guarantee would be kept if the party won power.<\/p>\n
Prospect said the current arrangements for pensions were affordable. The union predicts Reform\u2019s plans would represent a net cost because public-sector defined benefit schemes are unfunded, and therefore today\u2019s contributions pay for today\u2019s pensions.<\/p>\n
In defined benefit schemes, employee and employer contributions go straight into the Treasury pot and register on the balance sheet. Prospect said moving public-sector pensions to such schemes would mean a loss to the Treasury of all those current member contributions. Payments today would pay for pensions that would be ultimately drawn in future, it added.<\/p>\n
Mike Clancy, the general secretary of Prospect, said: \u201cReform\u2019s plan for public-sector pension would set off a ticking timebomb in the public finances that will end up costing taxpayers tens of billions of pounds in the years to come and blow a gaping hole in their tax promises.<\/p>\n
\u201cAttacking public-sector pensions, while cutting back pay and staff numbers, would only worsen the current recruitment and retention crisis, and would plunge the services people rely on into staffing chaos.<\/p>\n
\u201cPublic servants are not punchbags for Reform politicians, and their pension pots are not piggybanks that can be raided. These are the people who all governments depend on to deliver our services, and Reform would do well to remember that.\u201d<\/p>\n
The Treasury\u2019s independent forecaster, the Office for Budget Responsibility, has said the \u201creal test of the affordability of these pensions is the likely trajectory of gross payments over time set against the tax base that will finance the payments.<\/p>\n
\u201cIn the long-term projections in the 2024 fiscal risks and sustainability report, we estimated that annual payments out of the schemes would fall from 1.9% of GDP in 2023-24 to 1.4% of GDP in 2073-74.<\/p>\n
\u201cThis is based on the assumption that contributions, which are linked to average earnings, rise more quickly than payments, which are assumed to be uprated by CPI inflation.<\/p>\n
\u201cThis suggests that if these assumptions hold, then these schemes do not pose a significant fiscal risk in themselves, but they do make up a significant share of the government\u2019s overall liabilities, which are projected to continue to rise over the next 50 years.\u201d<\/p>\n
Giving a speech in the City of London on Wednesday evening, Tice said: \u201cWe have to have a grown-up discussion about unfunded defined benefit pension schemes. I don\u2019t think it\u2019s unreasonable to sit down with the unions and to say: \u2018Look, for new employees, we can do this differently.\u2019<\/p>\n
\u201cThe private sector did this 20 to 25 years ago, but if we\u2019re not even prepared to have that discussion, then we\u2019re just not going to make the progress that we need to because \u2026 it is completely unsustainable.\u201d<\/p>\n
Tice also clarified that it remained Reform policy to abolish inheritance tax, despite the party leader, Nigel Farage, having cancelled \u00a390bn worth of tax-cut pledges in a speech earlier this week.<\/p>\n
\u201cIn order to keep people here and in order to attract people back into the UK \u2013 the brightest, the best, the most successful entrepreneurs \u2013 we\u2019ve got to get rid of inheritance tax,\u201d Tice said.<\/p>\n","protected":false},"excerpt":{"rendered":"Reform UK\u2019s plans to make public-sector pensions less generous could cost billions extra a year and cause a…\n","protected":false},"author":2,"featured_media":265029,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[64,63,99,186,184,185],"class_list":{"0":"post-265028","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance","8":"tag-au","9":"tag-australia","10":"tag-business","11":"tag-finance","12":"tag-personal-finance","13":"tag-personalfinance"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/265028","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=265028"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/265028\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/265029"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=265028"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=265028"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=265028"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}