I see this argument/opinion posted frequently in the news, on Reddit, and from family members, so I thought I'd share my perspective. I'm genuinely interested to hear if I'm wrong or if I've missed something, so opinions are very welcome.

Disclosure: I work for the NHS and currently pay into a defined benefit (DB) pension scheme.

Issues with the current DB schemes

1. Most are unfunded schemes. Money paid in by current employees is used immediately to pay existing pensioners, rather than being invested. This creates an ever-increasing liability on the public balance sheet.
2. Most private sector workers don't have access to DB pensions. This raises understandable questions about fairness between the public and private sectors.
3. Members have no investment risk. Unlike defined contribution (DC) schemes, the investment risk sits with the employer (ultimately the taxpayer), not the individual.

Using the NHS Pension Scheme as an example:

It's an unfunded scheme, so all of the money collected in a given year (employee contributions plus employer contributions) is used to pay current pensioners.

• Average employee contribution: 9%
• Employer contribution: 23.7%

Why I don't think "just replace them" is a viable argument

1. The upfront cost of switching to a DC scheme

If you move everyone to a DC scheme, employees' 9% contributions would no longer be available to fund current pensioners—they'd instead be paid into individual pension pots. The Treasury would therefore need to replace that lost funding.

On top of that, the employer would also have to contribute to employees' new DC pensions. Even assuming the legal minimum of 3%, that's an additional cost.

So, from day one, switching everyone would increase the public sector wage bill by around 12% (9% to replace the lost employee contributions, plus 3% for new DC employer contributions).

2. The savings wouldn't happen overnight

In countries that have made similar changes, it's taken around 15–30 years for the financial benefits to emerge. (ChatGPT gave me a summary of examples, including Australia.)

That's because all pension benefits already earned still have to be honoured. The cost only gradually falls as existing pensioners and members with accrued DB rights leave the system over time.

3. Then there are the political realities

• Around 1 in 6 workers are employed in the public sector, according to the ONS, and most have access to a DB pension. That's a significant proportion of the electorate.
• Employees would almost certainly expect higher salaries to compensate for losing a valuable pension benefit. I've seen estimates ranging from 20–30% of salary.
• More broadly, politicians know that people don't like changes to pensions. The public reaction to pension-related policy changes over recent years demonstrates how politically sensitive the issue is.

In summary

To replace public sector DB pensions, a politician would likely have to:

• Anger a large section of the electorate (roughly 1 in 6 workers) by reducing pension benefits.
• Increase salaries to compensate employees (say 20%, for the sake of argument).
• Cover the additional transitional cost of around 12% per employee while existing DB pension obligations continue to be paid.

That would imply an increase in the public sector pay bill of roughly 32% in the short term, in exchange for savings that may not materialise for 15 years or more.

That's why I think the argument that we should "just replace DB pensions with DC pensions" is much easier to make than it is to implement.

What have I missed?

(I used chatGPT to edit this for clarity/grammar)