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Wednesday 29th February 2012 | 00:01
Policy Exchange Press Release
Police officer pensions have become “unaffordable for taxpayers” and a drain on police budgets. A new report today by leading think tank, Policy Exchange, reveals that the rising cost of police pensions means that the taxpayer is now picking up around 80% of the bill, with total costs standing at £2.5billion a year, the equivalent to £1 in every £7 of total police expenditure.
The report found that the cost of police pensions has risen significantly over the past 15 years – from less than £1billion a year in 1995/6 to almost £2.5billion a year in 2009/10, or a 79% increase in real terms. This increased cost is due to rising life expectancy and in recent years, fewer active members. New data reveals that two police authorities are supporting the costs of more retired police officers than active and deferred members combined.
Taxpayer contributions more than doubled from £951million to £1.9billion between 1995/6 and 2009/10 - the equivalent to hiring 17,500 more officers - while police officer contributions fell from 31% to 23%. 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.
The report, which is published as the Home Office prepares to make changes to police pensions, also reveals that 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 that in 2009/10, the average annual police officer pension payment was £15,600 - £8,100 more than an NHS worker, £6,800 more than someone in the armed forces and £4,800 more than a teacher
- Each year a police officer on the 1987 pension scheme works, they accrue pension benefits worth an average of 35% of that year’s salary, on top of their own contributions. By 2018, the average male officer who retires after 30 years’ service is expected to claim their pension for longer than they paid into it
- 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 of service. Chief constables receive around £7.5 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 over
To avert a future funding crisis, the report recommends:
1. In the short term, 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
2. In the longer term, the government should design a New Model Police Pension scheme. This scheme, phased in over time, 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.
Edward Boyd, author of the report: “Police officers’ pensions have become increasingly unaffordable for taxpayers. 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.
“We desperately need a new police pension scheme fit for the modern world. Without reducing costs, police officer pensions will become unaffordable for taxpayers and for officers themselves.”