AXA, the French insurance group, has called on the UK’s three main political parties to spell out how they plan to tackle the increasing cost of generous public sector pensions.
The insurer wants public sector workers to start contributing to their pensions during their careers rather than receiving a set income in retirement. It added that the current system of funding for public sector pensions is not sustainable, given the large budget deficit. In 2008 alone the cost to the country of public sector pensions was more than £45bn – equivalent to around 80 per cent of that year’s budget deficit.
Paul McMahon, managing director of Axa Corporate Benefits, said: “An affordable solution for the country would be for the public sector to migrate towards offering defined contribution schemes (DC) as the private sector has already done. Provided that members begin saving early enough, and increase their contributions moderately during their lifetime, DC plan members should receive good pension benefits when they retire.”
Axa revealed that six in 10 voters believe it is unfair people in the public sector generally receive better pensions than the private sector.