Public services staff in Tayside and Fife face pensions deficit
Public service employees across Tayside and Fife who are heading for retirement face a potential black hole in their pension schemes.
- By Marjory Inglis
- Published in the Courier : 21.05.10
- Published online : 21.05.10 @ 06.13pm
Thousands of firefighters, police officers, teachers, NHS workers and civil servants across the regions are relying on the next generation of public service employees to fund their pensions.
This is at a time when the pool of younger people available for work is shrinking and the elderly population is increasing.
Cash the employers and employees pay in to pension schemes is not being invested for the future but paying for existing pensioners who are drawing on the scheme with the expectation that future generations of employees will do the same for future generations of pensioners.
However, there will be fewer people contributing to the pension pot when more people are drawing from it.
A paper placed before health chiefs meeting in Dundee stated that a national study to be undertaken this year would look at the cost of major public sector pensions and their "financial sustainability."
Around one million people, a fifth of the whole population of Scotland, have a direct interest in public sector pensions, either as employees who are members of a scheme or as former employees collecting a pension, according to Audit Scotland, the watchdog body that scrutinises public spending.
The watchdog is to study the cost of public sector pension schemes in Scotland and publish its findings towards the end of this year.
The aim of the study is "to evaluate the current position of, and current developments affecting, the six main public sector pension schemes in Scotland."
The project brief placed before members of NHS Tayside's audit committee, meeting in King's Cross Hospital yesterday, states that only the local government pension scheme is a "funded scheme," using pension contributions to invest in assets and to earn a return sufficient to meet the future pension liability.
Fluctuations
However, that scheme has been affected by fluctuations in the value of invested assets. In 2008-09, the aggregate deficit on the local government pension scheme for Scotland's 32 councils was £3.1 billion.
"The other main public sector schemes adopt a pay as you go model, where no fund is built up to cover future pension payments," states the project brief, adding that contributions from employers and employees are "applied to pay current pensioners and dependents."
Firefighters, police officers, teachers, NHS workers and civil servants are all in payasyougo schemes. When there are "shortfalls of contributions," they are paid for by the government.
An Audit Scotland report in 2006 highlighted that "unfunded liabilities" of public sector pension schemes in Scotland were increasing and meeting the costs would add to future public spending demands.
The project brief states that the new study will "review the main risk factors reported for each scheme and what steps are being taken to mitigate the risk of increasing costs." It was placed before health bosses for information only and was not debated.
An Audit Scotland spokesman said, "The cost of public sector pensions is significant, and it has risen in recent years.
"In our study we will aim to assess the position of the six main schemes in Scotland and look at the short, medium and longterm spending implications.
"We also want to look at what scope there may be for changes, so as to improve the transparency and understanding of pension costs and liabilities."
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