"A defined benefit scheme gives a guaranteed annual income for life after retirement, while a defined contribution pension provides a pot that can be drawn on until it runs out. Tice said he believed Prospect had misunderstood the changes he proposed and that the move would help the country avoid a slide into bankruptcy on the back of huge unfunded pension liabilities, which he said ran into trillions."
"Given we have got a bit of space in the electoral cycle, let's have a rational grown up debate about this. I want to sit down with the unions and say do you want to be responsible for looking your grandchildren in the eye and saying our union bankrupted your future. I'm not saying change the existing terms and conditions."
A proposal would change public-sector pensions for new entrants from a defined benefit system to a defined contribution scheme, mirroring the private sector and reducing retirement payouts. Defined benefit provides a guaranteed annual income for life; defined contribution provides a finite pot that can be drawn down until it runs out. The change could increase annual taxpayer costs by billions and create a long-term fiscal ticking timebomb, potentially costing tens of billions over coming years. Unfunded pension liabilities have grown from 750m to an estimated 1.5–2.5tn in the last 20 years and remain largely off balance sheet, contributing to projected debt-to-GDP rises.
Read at www.theguardian.com
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