UK - The Association of Consulting Actuaries (ACA) has warned against any "significant revisions" to the Parliamentary Contributory Pension Fund (PCPF) until there is a wider review of public sector pensions.
In its submission to the Senior Salaries Review Board's (SSRB) assessment of the £367m (€432m) PCPF for MPs, the ACA warned a number of issues raised in the consultation such as the "interaction with remuneration and total reward" and "international comparisons" would be better addressed by a wider review examining how the PCPF and other public sector schemes might need to be reformed, to bring them into line with private sector schemes.
The SSRB review, ordered by the Prime Minister in February - to examine ways to keep the Exchequer costs to the scheme at 20% or less of payroll - is looking at a number of cost-cutting solutions including changing accrual rates, altering the normal retirement age, or even making a fundamental switch to a defined contribution (DC) scheme. (See earlier IPE articles: SSRB consults on future of MP pensions and UK considers switch to DC for ministerial pensions)
However, ACA warned against either switching to a DC scheme, which it claimed is much more volatile and does not offer the same economies of scale as a defined benefit (DB) scheme, or integrating the PCPF into another funded scheme or becoming an unfunded arrangement, such as the civil service pension scheme.
It argued the changes to a DC scheme or unfunded/funded arrangement are "too significant" to be considered outside of a wider review and warned there would be "considerable public and private sector disquiet to a reform that would weaken the funding basis of the scheme".
That said, ACA submitted a number of recommendations to help keep costs below the 20% target level in the short-term, ahead of an anticipated wider review of public sector pensions, as this might take "some time to report and for any changes to be implemented".
Instead, it suggested the PCPF should move to a career-average DB structure, as although this is "unlikely to have a significant impact in the short-term" it may provide protection if MPs' pay-levels are realigned, while revaluation to reflect inflation should be capped at 2.5%.
Other recommendations include:
Keith Barton, chairman of ACA, said: "These interim proposals represent about the limit of genuine risk-sharing currently available, whilst retaining a DB approach which we continue to favour given the volatility associated with DC and DB's greater operating efficiency."
But he added changes to the legislation to allow wider risk-sharing "could provide additional flexibility in the running of both private and public sector funded schemes, like the Parliamentary scheme".
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