The next government should scrap the generous pensions paid to civil servants in favour of cheaper plans, the employers' association said on Tuesday.

The Confederation of British Industry (CBI) said the next government, which will be chosen in this spring's general elections, should tackle the liabilities connected to civil servants' pension funds, which it said would hit 1 trillion pounds at the end of the first quarter.

Citing public accounts for 2007/2008, it said pension liabilities exceeded pension assets by 10 billion pounds a year.

"We have to take a sensible approach -- make sure what goes out matches what gets in," CBI Deputy Director General John Cridland said.

He said the government was writing "blank cheques" in keeping the current pension regime -- which guarantees civil servants a portion of salary on retirement.

Cridland said the next government should mitigate public pension risks by setting up schemes that do not promise pensions, but instead are contributions from the employer and the employee accrued in a pension pot, which upon retirement is used to buy an annuity. This arrangement is called a defined contribution (DC).

Cridland said the current pension scheme would be ring-fenced and that civil servants close to retirement would retain their current pension terms.

"All politicians will find this difficult, but this is the elephant in the room. Some time, some place this has to be tackled because it cannot be left alone," Cridland said.

Unlike conventional DC schemes, the contributions paid in the civil service DC schemes would not be invested, the CBI said.

Assets would instead be used to pay ongoing pensions and at retirement, civil servants would receive the equivalent of their contributions plus interest calculated using such parameters as inflation or salary increases.

Cridland said a shift to DC, which is similar to the Swedish system, would effectively make currently unpredictable pension expenses, which ultimately weigh on the public purse, predictable.

He acknowledged the change would result in lower pensions

but declined to quantify the size of the savings or to spell out what element of interest the DC schemes should pay out.

Cridland said these issues should be tackled by an independent commission that would outline the reforms, much like the Pensions Commission set up in 2002 to look both public and private pensions