NAPF: Public sector pensions must move to career average

Public sector pensions must be moved from final salary to career average arrangements to become sustainable, the National Association of Pension Funds (NAPF) says.

It also calls for the government to cap pension payouts for high earning public servants, and to allow public sector workers to top up their pensions with an additional defined contribution (DC) scheme if they wish to save more.

The proposals form part of NAPF's submission to the consultation on public sector pension reform.

"Career average pensions are the most promising option for providing a sustainable, affordable and fairer public sector pensions system," says Joanne Segars, chief executive of NAPF.

"While it will reduce the costs of public sector pensions, it will also protect lower paid workers who don't usually have significant salary spikes late in their careers.

"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."

She adds a reformed state pension, combining basic state pensions and second state pension, could help public servants save for retirement.

In October, Lord Hutton's interim report on public sector pension reform said possible options included: career average schemes, notional DC schemes, or collective DC schemes.

The final report is due in March with the new budget.