Prime Minister of UK makes call to scrap Member of Parliament final pay pensions

February 16, 2009
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In a bold move the current Prime Minister of Britain wrote a letter to a parliamentary review board asking them to consider moving the MP gold-plated pension plan to a contributory plan.
This is possibly a first step in the reform of the public sector pension system in the UK.
This article that was sent to me by Julian Rhone is certainly a shocker and will generate a lot of controversy in the coming months.
Critics of the public sector pension system have come to the conclusion that the defined pension system is an unsustainable burden for taxpayers over the long term. The amount of money that needs to be pumped into the system to fund the public sector plans is huge and no longer palatable to most taxpayers. The system in the UK, in my understanding, is a pay as you go system. Whereas in North America some attempt, however feeble, has been made to accumulate pools of money to fund the obligations. Both are unsustainable for taxpayers.
In a shocking comment Brown stated in his letter that “The Government is committed to providing public-service pension schemes that are affordable and sustainable in the long term, consistent with the principle of fairness for all taxpayers and between generations.” The comment is shocking because although most taxpayers knowledgeable of these plans feel the same way it is suicide for politicians to actually state this fact.
As reported in The Independent the Prime Minister urged the SSRB chairman, Bill Cockburn, to consider the “full range” of options to reduce the taxpayers’ contribution. These would include “increases in the pension age; changes in the provisions for retirement on the grounds of ill health; increases in MPs’ contributions; changes in the accrual rate, changes in the maximum level of benefits that can be built up and the merits of defined-contribution structures”.
The Independent stated that the heat that politicians are taking from the private sector and taxpayers is painful. For Brown to write a letter like this, it is more painful than the wrath that will be hailed down upon their heads by the public sector unions. This is a good thing. For far too long, in the interests of political expediency, public sector defined benefit pensions have been excluded from debate by legislators around the world.
As I have watched the debate and analysis of public sector pensions move across the globe, there is a trend for major changes to first surface in the UK and the rest of Europe and then proceed to cross the ocean. Let’s hope this is a trend that is on it’s way to our shores.

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