In all the thousands of column inches and the hours of media coverage that were produced last week can anyone remember any of the commentators or politicians really giving an in depth analysis of the public sector pension issues. We were assailed by all the usual political sound bites and lazy journalistic clichés like ‘all in this together’; ‘public sector have to take some of the pain to reduce the inherited deficit’; ‘we just can’t afford it’, ‘these gilt edged public sector pensions’; ‘lucky to have pensions that the private sector can only dream of’; ‘tax payers are fed up with funding these pensions’; ‘private sector propping up the public sector’; ‘militant trade unionists itching for a fight’ or ‘holding the country to ransom’ and so it went on. Any judgments about the issue should be made in the full knowledge of what is a very complex situation and how come in this age of wall to wall news coverage I certainly didn’t come across anything giving sufficient detail to make any rational conclusions.
Take the statement about taxpayers being fed up with funding these pensions. In fact for every £1 the taxpayers pay to public sector pensions they pays £2.50 to private sector pensions. And by the way all public sector workers are taxpayers too. Of course this artificial division of public v private in the pension debate is a cheap political trick to garner public opinion to support the raid on public sector pensions. All sections of the working community should be entitled to decent occupational pensions to augment that provided by the state.
It’s a pity that only 40% of the private sector workforce benefit from pensions of any kind. Perhaps if the bloated directors, chief executives and shareholders didn’t cream off so much of the profits in excessive salaries and bonuses there might be more available for the rank and file to enjoy a reasonable pension.
Oh and what about the statement of these ‘gilt edged’ or ‘gold plated’ public sector pensions. Five million people working in the public sector qualify for pensions including those in local government, civil service, NHS, teaching, police force, fire service and armed services. The average is some £7,000 a year but the vast majority are less than £5000. The average in local government is £4,000 and just £2,000 for women.
The real gold plated pensions are with the highly paid executives in the private sector. A TUC survey in 2008 of 346 directors of 102 of the UK’s top companies found the average expected pension would be £201,000 some 25 times that of the ordinary employees expectation of £8,100. The study found that the majority of these senior directors could expect a pension of £330,000. If public sector pension schemes are ‘gold plated’ how would you describe these?
The affordability of public sector pensions long term has become a mantra in the media and indeed is the basis of the government’s argument that given increased life expectancy employees will have to contribute more and retire later and have reduced benefits in order to maintain the viability of the schemes in perpetuity. Over the last 3 or four years the majority of the schemes were renegotiated with the government to take account of just that. The pension age has been increased from 60 to 65, in line with private sector schemes, the armed forces, police and fire service being retained at 60 in view of the physical demands of the work.
Nurses, teachers and local government employees are now paying more than before the reforms towards their pensions with possible further increases following reviews every 3 or 4 years in light of financial circumstances. Similarly, if higher pension benefits or life expectancy increases demands on the schemes it is agreed that the employees will bear a greater proportion of the resulting costs.
So arrangements are in place in the main to ensure that the schemes are affordable as recently agreed.
How does this square with the knowledge that has now emerged that any savings arising from the government’s new proposals will be applied directly to offsetting the deficit and not be applied to the needs of securing the future of the public sector pension schemes? The government appears to be saying ‘we need to reform your pension scheme again to provide the resources to ensure it’s continuation -- but any funds we raise through this process will be used to reduce the deficit we inherited’. At best this is warped logic or plainly just disingenuous.
As for the private sector ‘propping up the public sector’, of course this is another sound bite which ignores the fact that in reality the two are completely mutually dependent. Without an effective public sector the private sector would be far less effective itself. The public sector provides the infrastructure of transport, planning, economic development, education, health and welfare. It oils the machinery for the private sector to operate. The pension funds themselves with contributions from members and employers invest huge sums in the UK economy. Decent wages and pensions also attract workers to provide the services that the private sector depends on.
This, then, is not militants spoiling for a fight or holding the country to ransom. Just dedicated teachers, nurses, bin men, home helps, traffic engineers and so many more demonstrating to make the point that all workers should have a decent pension. They were making the point also that they have been and will be taking much more pain of a further 750,000 lost jobs and continuing wage restraint while obscene salaries and bonuses continue to be enjoyed by a certain sector of our community who seem to be totally immune from this notion that we are all in this together.
In the final analysis as well, decent pensions for all workers ensure that a smaller proportion of the population will be living in virtual poverty in the future wholly dependent on state benefits and so many more of the health and social services inevitably arising from that with all the attendant massive costs to the government and the tax payer
This has to be sensible even if it is Keynesian economics.
Written by A.J.