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PwC identifies huge delivery challenges for public service pension reform
Many new schemes will need to be set up to accommodate changes and both old and new schemes will need to be run in parallel for decades to come.
In response to the publication of the final report of the Independent Public Service Pensions Commission (the IPSPC), Steve Beet, public sector partner at PwC, who led a research team commissioned by the IPSPC, said:
"Lord Hutton has set out a comprehensive blueprint for the future of public service pensions. It is for the Government to decide how to respond to the commission’s recommendations, but really significant changes to the structure of public service pensions are inevitable. Schemes will face big challenges in implementing these reforms and must start preparing now. Even if they do, the timetable is extremely tight. Without real drive from the top and dedicated effort immediately, we are not confident that these critical changes will be delivered on time, with schemes ready for members to build up rights under the new arrangements by 2015.
"We anticipate that many new schemes will need to be set up to accommodate the package of reforms, and that both old and new schemes will then need to be run in parallel for decades to come. "
The report also sets out some details of how schemes will be expected to manage implementation of all of these changes, including extensive informal and formal consultation with members, big changes to scheme and administrative governance and consolidation of administration across schemes.
Steve Beet, public sector partner at PwC, said:
"Reforms will need to happen without disrupting services to existing pensions in payment and against a backdrop of significant changes elsewhere in the public sector and severe pressure on resources.
"It is essential that activity starts now, as Government considers the Commission’s recommendations, to plan for the work that will be needed and to secure the key skills and resources necessary for what will be a very challenging programme of change. The review’s focus on implementation will be key to the successful delivery of any reforms to public service pensions."
Private sector impact
Mark Packham, pension director at PwC, said:
"The private sector will welcome the direction of travel but may still balk at the costs of protecting benefits. Much of the savings will emerge from measures already outlined on CPI inflation matching and higher member contributions.
"Attention will now switch to the terms that have to be offered to transferring staff when public services are outsourced to private providers. Consultation on this has already started and terms may well change more quickly than public sector pensions themselves.
"Looking more widely, employers with a culture that benchmarks against the public sector will find an influential reference point in the Commission’s recommendations, especially the risk sharing ideas around linkage to state pension age.
"A picture of the future of overall public sector remuneration is emerging which will become clearer still when Will Hutton reports on fair pay next week."
In January 2011, the Commission invited a research team from PwC to undertake qualitative ‘consumer’ research with public service workers and members of the general public. The main objectives of the research were to provide insight into the views of a sample of current public service employees in relation to (a) the main options for public service pensions; and (b) the key features of such pensions. The research also sought to assess wider levels of understanding in relation to key elements of public service pensions, including longevity, scheme design and how they are presented. The report can be obtained from http://www.hm-treasury.gov.uk/indreview_johnhutton_pensions.htm
Steve Beet is available for interviews and can comment on the challenges and implications on public sector employers.
Government & Public Sector & Business Recovery PR Manager, PwC
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