retirement income depends on contributions and investment<\/a> performance rather than a guaranteed payout.<\/p>\nCritics warn the changes would be unpopular with workers, could damage retirement pots and intensify recruitment pressures in already stretched local services.<\/p>\n
New FeatureIn ShortQuick Stories. Same trusted journalism.<\/p>\n
What would Reform change?<\/p>\n
Reform plans to stop new workers from being able to join local government DB pension schemes and enrol future hires into DC plans instead.<\/p>\n
People already enrolled in DB schemes would stay in them.<\/p>\n
DB schemes \u2013 often described as \u201cgold-plated\u201d \u2013 guarantee an inflation-linked income for life, and have seven million members, while DC pensions build individual pots whose value depends on contributions and investment returns \u2013 with a payout figure not guaranteed.<\/p>\n
The party also proposes merging nearly 100 local government schemes into a single \u00a3500bn structure, requiring a much larger share of assets to be invested in UK companies and infrastructure projects.<\/p>\n
Reform argues that increasing how much is invested in the UK to around 25 per cent \u2013 from below 4 per cent today \u2013 could unlock roughly \u00a3100bn of additional investment in domestic markets.<\/p>\n
Two decades ago, about 40 per cent of UK pension savings were invested in British companies, but now there is much more invested in overseas firms.<\/p>\n
What is a sovereign wealth fund?<\/p>\n
A sovereign wealth fund (SWF) is a state-owned investment fund that manages large pools of national assets with the aim of generating long-term returns.<\/p>\n
Several countries have such funds, including Norway and Singapore.<\/p>\n
Such funds often invest in financial products, buying stakes in companies, to provide financial benefits in the future. Reform argues that adopting an SWF and pouring pension money into UK-based companies, housing and infrastructure will support growth.<\/p>\n
Why do the experts think it is a bad idea?<\/p>\n
There are several issues with Reform\u2019s plans, experts have warned.<\/p>\n
Steve Webb, former pensions minister and partner at pension consultants LCP, said: \u201cIf switching billions of pounds into different investments would generate better returns, these large pension schemes would already be doing it.<\/p>\n
\u201cThe risk when a government tells schemes how to invest in pursuit of the government\u2019s agenda is that the member loses out.<\/p>\n
\u201cIn this case, if local government pension funds achieved poorer returns, this would mean councils would have to find more money from council tax payers to make up the shortfall.
\u201cIn addition, councils may have to offer higher wages to new recruits if the pension package on offer was made worse.\u201d<\/p>\n
Tom Selby, director of public policy at AJ Bell, added that Tice is \u201cspoiling for a fight with public sector trade unions\u201d.<\/p>\n
Any move to change the system would \u201calmost certainly result in industrial action among those affected by what would inevitably amount to a watering down of their pensions\u201d, he said.<\/p>\n
\u201cUltimately, these schemes need to have enough assets to pay members\u2019 pensions and if the strategy goes wrong, it will be the members who are left paying the price.\u201d
Public sector pensions have faced increasing scrutiny in recent times because they are largely unfunded, meaning pensions are paid from current taxation rather than from a pre-funded pot.<\/p>\n
This can create significant long-term liabilities for the state and ultimately future generations of taxpayers.<\/p>\n
Yet many government workers have been promised a guaranteed retirement income and to change that now would not be a popular move, experts argue.<\/p>\n
Jason Hollands, managing director of Evelyn Partners, explained: \u201cSuch reform would be politically contentious. Members of public sector DB schemes are exposed to very little risk as the liabilities sit on the shoulders of taxpayers.<\/p>\n
\u201cMoving to a DC system, like most of the private sector, would transfer much of that risk to employees, creating less predictable retirement outcomes.\u201d<\/p>\n
Mike Clancy, the union general secretary of Prospect, said: \u201cReform\u2019s proposals for public sector pensions are a terrible deal for both workers and the taxpayer.<\/p>\n
\u201cReform are still refusing to admit that their pension changes will add billions to public spending in the medium term, money that would need to be found from cuts or tax rises.<\/p>\n
\u201cTheir plans to attack employment rights are completely out of touch with what voters want, and would plunge millions back into precarious work.<\/p>\n
\u201cReform\u2019s offer to working people is now clear: insecurity at work and poverty when you retire.\u201d<\/p>\n
Reform UK has been contacted for comment.<\/p>\n","protected":false},"excerpt":{"rendered":"The right-wing party’s proposed changes would ‘almost certainly result in industrial action’ and be a ‘huge mistake’ Plans…\n","protected":false},"author":2,"featured_media":447722,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[84,4176,4178,4174,4175,734,70,4204,56,54,55],"class_list":["post-447721","post","type-post","status-publish","format-standard","has-post-thumbnail","category-personal-finance","tag-business","tag-finance","tag-pensions","tag-personal-finance","tag-personalfinance","tag-public-sector","tag-reform-uk","tag-retirement","tag-uk","tag-united-kingdom","tag-unitedkingdom"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/447721","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/comments?post=447721"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/447721\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media\/447722"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media?parent=447721"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/categories?post=447721"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/tags?post=447721"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}