The Future of Public Sector Pensions

The dramatic rise in life expectancy and longer retirement has created serious concerns about the long‐term affordability of public sector pensions. Drawing on insights from a recent inquiry into public sector pension reform, commissioned by the Conservative–Liberal Democrat Coalition and led by the author, this article outlines the challenge faced by policy makers and sets out how it should be addressed. It argues that, with 12 million people active in this part of the pensions system, and estimates that the gap between contributions and payments will grow from £3bn to £10bn in the next decade, the government has no choice but to enter the ‘lions’ den’ of pensions’ policy. It contends that any long‐term solution is to be crafted cannot be based solely on economics, but must also answer fundamental questions of ethics and equity.