Now is the time to start building a fund for public sector pensions

Your article highlights a report from the Fabian Society that suggests a number of tax changes in order to redistribute pension tax relief towards lower earners (Reeves could raise £10bn a year by reducing pension tax relief, report says, 26 August)
As attractive as these proposals may be to a government seeking some funding liquidity, they do not address the much bigger structural problem the UK faces with respect to pensions – which is the growing deficit attached to defined benefit pensions for the public sector.
According to figures from HM Treasury, in 2021 the UK net deficit stood at £3.8tn, of which more than £2.6tn was due to net public sector pension liability, having grown from £1tn in 2011/12.
A sustainable and fair pension system is essential for an ageing population, and surely that has to be underpinned with funding, rather than relying on tax receipts from future generations. Perhaps now is the time to establish mechanisms to deliver sustainable and funded pension schemes for all public sector workers.
Of course it would be a huge, complex, expensive and unpopular initiative and would take decades to fully implement – but it’s not impossible. If the aim were to create a fund of around £2.5tn at today’s values, then an annual investment of around £30bn – assuming investment returns of 4%-5% – would likely take around 60 years to deliver the necessary funds. The benefit would be the elimination of 60%-70% of the national debt at that time along with a funded pension scheme. In the intervening period, the current method for paying today’s pensioners would need to continue, so one possibility would be to divert some of the current pension tax relief to this endeavour. Unpopular today – certainly – but future generations would eventually be thankful.Emeritus Professor Stephen CaddickWorthing, West Sussex