Tories row back on Cameron's public sector pensions warning

David Cameron embarked on a damage limitation exercise yesterday after he was criticised for suggesting that a Conservative government would phase out favourable pension schemes for up to 5 million public sector workers.

A Conservative spokesman said no changes would be introduced without "extensive discussions" to the public sector final salary pension schemes, which guarantee that the pension payments of teachers, NHS staff and civil servants are linked to salaries. Cameron was forced to row back after the TUC accused him of frightening public sector workers with his warning that he would like to see their pension schemes aligned with those in the private sector.

Over the past decade the private sector has moved to money purchase schemes. Payments are based on contributions from employers and employees.

The row began when Cameron told business leaders in Manchester that it was time to end the "apartheid" between private and public sector pensions. In remarks reported by the Financial Times, Cameron told the Greater Manchester Chamber of Commerce: "We have got to end the apartheid. We are getting into a situation now where pretty much everyone in the private sector has gone to defined contributions and the final salary schemes are closed."

He said MPs should set an example because "we have got to be able to turn around to the rest of the public sector and say that over time it does make sense to move towards defined contribution."

The Tory leader accused the government of refusing to act because Labour was dependent on financial support from the trade unions. "This is something where the government has been remarkably feeble, partly because they are in hock to the public sector unions," he said.

Critics have said the government has made only minor reforms to lessen the burden of the £650bn public sector pensions liability. Recent changes would save £13bn over 20 years.

Brendan Barber, the general secretary of the TUC, said: "This will come as a bolt out of the blue to the millions of hard-working public servants that see a decent pension as a vital part of their reward for doing tough jobs on pay that is often far from generous.

"It is the kind of issue that could make the difference in marginal seats at what polls suggest will be a close election."

A Tory spokesman said: "We know public sector pensions are a big challenge ... We have always said that moving MPs on to a defined contribution scheme will help in time with public sector pensions ... Clearly any changes would involve extensive discussions with interested parties."