Simply levelling-down public sector pensions would be a "short-sighted" approach both in the short and longer-term, the Association of Consulting Actuaries says.
The trade body's response to the Public Service Pensions Commission's initial consultation under Lord Hutton said the objective should be to create a "fairer" pension system across the public and private sectors.
It said government policies to reinvigorate private sector pensions must reflect a similar objective to the public sector, identifying an affordable replacement income in retirement to target over a career.
The ACA added the system should have "safety valves" to control costs and benefits via "middle way" solutions - i.e. risk sharing schemes - that can be applied in similar ways in both the public and private sectors.
ACA chairman Stuart Southall said: "Introducing ‘middle way' designs into the public sector now would, we believe, help stimulate the wider recovery in voluntary ‘quality' pension provision that is required across-the-board."
The ACA's three key objectives for a new public sector pensions structure are:
- aspire to be regarded as a "fair" system by all taxpayers - both those working in the public and the private sectors, and one where there is not an unreasonable transfer of an increasing unfunded cost falling on future generations of taxpayers; but it should
- ensure that the public sector pensions offered are sufficiently attractive to help recruitment and retention of good quality employees into the public sector i.e. pensions that will continue, in combination with the State pension, to provide a decent standard of living in retirement; however
- there needs to be some better safety valves and flexibility in the new structure to cope with the stresses that any system will come under over time.
