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NAPF calls for career average pensions in UK local government schemes

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UK - Career-average pensions are the way forward for the public sector, the National Association of Pension Funds (NAPF) has argued in its submission to the Hutton Review.

The organisation said that career average should take the place of final salary schemes, as this would have the twofold benefit of reducing pension bills while protecting workers on lower wages.

The NAPF's chief executive Joanne Segars said that career average was the "most promising option" for guaranteeing sustainable public pensions.

"Career average pensions will also bring employees and employers on a more equal footing when it comes to risk sharing. The arrangements currently in place put the burden of risk on the employers and the taxpayers. It is fairer that members of staff also share risks," she said.

Segars added that it was crucial any changes target employees "disproportionately benefit" from the current system.

In its full submission to Lord Hutton's review of public sector pensions, the NAPF also reiterated that the creation of a large-scale local government pension schemes should be considered and, where this was too complicated, schemes should be encouraged to jointly tender for investment mandates, or put in place framework agreements with managers to avoid time-consuming re-tendering.

The comments echo those made yesterday by Mike Taylor, chief executive of the London Pension Fund Authority, who said a career average approach should be employed as part of a shift to a shared risk system.

Taylor also called for a cap on pay for which these new measures should apply, saying: "The £75,000 cap may seem high, but as an example, it would encompass 98% of the active membership of the LPFA's scheme whilst still achieving Lord Hutton's objective of fairness."

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