Business and unions do battle over pensions

Attempts to reform public sector pensions have caused fresh controversy at the Labour conference.

Unions leaders have warned of major strike action if the government seeks to raise the retirement age for public sector workers.

But the CBI said that changes must be made and called on the government to "face down the unions".

Meanwhile, the Institute of Directors also said that the "gold-plated" public sector pension schemes should be closed.

And work and pensions secretary David Blunkett said that reform of the UK pensions system should be seen in the wider context of an overhaul of the welfare state.

Union anger

Dave Prentis, general secretary of Unison, was on Monday set to tell the Labour conference that anger at the proposed reforms is growing.

"Unless the prime minister and the government wake up to that fact, they will face the biggest strike since 1926 in a matter of months," he says.

"Local government and health workers never went into public service for the pay, perks or bonuses, but one thing they were able to rely on was an adequate pension.

"They had a contract with the government - so they thought - to enable them to retire with a pension which provided security.

"They paid into their scheme and now they see it being snatched away."

Reform call

The union position was condemned, however, by CBI chief Sir Digby Jones.

He said that failure to reform public sector pensions would lead to an unacceptable and unfair tax burden on companies, their employees and pensioners.

"Without reform, we face the spectre of a 'pensions underclass', with private sector employees and companies struggling to fund pension benefits for themselves, whilst they and even tax paying pensioners are forced to pay for a more generous and earlier retirement for government workers," he said.

"The 'I'm alright Jack' attitude of many public sector union officials really is showing itself.

"Just who is the public sector for, the people who it serves or the people who work in it? The unions' attitude to pensions reform provides an unacceptable answer."

Sir Digby argued that while private companies have had to reassess how they provide pensions for their staff, little has been done to address public sector provision in the face of people living longer and healthier lives.

"This time, the government must face down the unions and grasp the nettle on public sector pension reform," he added.

"It will not get away with publicly declaring its intentions for a second time and backing down at the first sign of trouble."

Retirement age

In its report, published on Monday, the IoD said that the retirement age should be raised to 70.

Publishing its submission to the Turner commission, the business body also said that means testing for the state pension should be scrapped.

"We really have to start looking at some very strong medicine to cure the UK pension problem," said director general Miles Templeman.

"Sacrifices have to be made by all of us for the sake of future generations.

"The government need to make tough decisions that not everyone will be happy with."

Wider view

Speaking on BBC Radio 4's Today programme, Blunkett said there was not simple solution to the pensions problem facing Britain.

Raising the retirement age is not "a panacea on its own and it of course has to be balanced with what period of time people start working in their working lives", he said.

Blunkett also said that the Turner commission would be looking at compulsory savings for pensions.

"I think the commission will be looking at a combination of measures... because we said nothing was off remit," he added.

"But I want to see the issue of retirement income in the wider sphere of the massive reform to the welfare state."