Think-tank warns police pensions ‘unaffordable’

Police officer pensions are “unaffordable for taxpayers” and a drain on police budgets, a report by think-tank Policy Exchange published yesterday (February 29) claims.

The report reveals the rising cost of police pensions means the taxpayer is now picking up around 80 per cent of the bill, with total costs standing at £2.5 billion a year, the equivalent to £1 in every £7 of total police expenditure.

It also found the cost of police pensions has risen significantly over the past 15 years, from less than £1 billion a year in 1995/96 to almost £2.5 billion in 2009/10, a 79 per cent increase in real terms. This increased cost is due to rising life expectancy and, in recent years, fewer active members.

In addition, new data reveals two police authorities, Durham and Lincolnshire, are supporting the costs of more retired officers than active and deferred members combined.

Taxpayer contributions more than doubled between 1995/6 and 2009/10 from £951 million to £1.9 billion – the equivalent to hiring 17,500 more officers – while police officer contributions fell from 31 per cent to 23 per cent.

In 2009/10, each household in England and Wales was paying £612 a year on policing. Of this, £83 – or £1 in every £7 – was spent on police officer pensions, up from £52 per household a year in 2001/02.

“Police officers’ pensions have become increasingly unaffordable for taxpayers,” said report author Edward Boyd.

“A growing pensioner population, primarily down to increased life expectancy coupled with only minimal changes in the retirement age, has increased costs substantially over the last decade.

“The more we have to pay for pensions, the less police forces have available to spend on hiring officers to fight crime.”

The report, published as the Home Office prepares to make changes to police pensions, also reveals police pensions are the most generous as a proportion of their pay compared to other public sector workers, excluding the judiciary.

The Hutton Review found in 2009/10 the average annual police officer pension payment was £15,600, which is £8,100 more than an NHS worker, £6,800 more than someone in the armed forces and £4,800 more than a teacher.

Current police pensions are geared towards much higher rewards for senior ranks. Every regular police constable in the 1987 pension scheme receives at least £4 for every £1 invested after 30 years’ service. Chief constables receive around £7.50 for every £1 invested.

Without reforms to the current pension arrangements all officers up to 2036 who receive their full pension entitlement will have a pension pot worth no less than £500,000 and up to £2million or more.

“We desperately need a new police pension scheme fit for the modern world,” said Mr Boyd. “Without reducing costs, police officer pensions will become unaffordable for taxpayers and for officers themselves.”

To avert a future funding crisis, the report recommends short and long-term measures.

In the immediate future there must be a move away from a final salary to a career-average scheme and a raising of the standard retirement age to 60, as Hutton recommends. Personal contribution rates may also need to rise, especially for the most senior ranks, but need to be affordable for officers.

Longer-term steps should involve the Government designing a new model police pension scheme. Phased in over time, this scheme would remain more generous than the public sector average, but would be less expensive and incorporate greater choice for officers. In line with moves towards a more modern and professional service, this new scheme should be open to civilian staff for the first time to help create a more united and flexible police workforce.