Are public sector pensions really unaffordable?

When the state retirement pension was introduced in the UK almost exactly a hundred years ago, it was paid to people over 70 years of age. Life expectancy was 71.5 years. More recently, the pension has been paid at 60 for women and 65 for men, and average life expectancy is about 80. The cost has been compounded by those working in the public sector receiving occupational pensions as well, but what's often overlooked is that the employees have contributed to them.

With what amounts to something close to a general strike due to happen on Wednesday (30 November), I see that the National Union of Teachers has issued this press release:-

Our research shows that, during the lifetime of the Teachers' Pension Scheme (TPS), £46.4 billion more has been paid into the scheme than has been paid out.

The NUT has calculated the total payments into and from the TPS over the period 1923 to date, using its official valuation reports and accounts. Adjusting these figures in line with GDP growth shows that at least £46.4 billion more in current prices has been paid into the TPS in contributions over the years than has been paid out in pensions.

This follows earlier reports by the National Audit Office and the House of Commons Public Accounts Committee which show that the long-term costs of the TPS are already declining following earlier reforms. The long-term picture contrasts sharply with the government's arguments that the current imbalance between contributions and payments makes teachers' pensions unsustainable.

Christine Blower, General Secretary of the National Union of Teachers, the largest teachers’ union, said: "The NUT's research proves two points. First, funding public sector pensions is a complex area; we won't allow our opponents simply to ignore those parts of the story that don't suit them. Second, it is a long term issue; policies shouldn't be driven by short-term considerations. There is no £46.4 billion to hand. The fact is, however, that the government has accepted a long series of cheap loans from teachers' pension contributions before complaining about paying the pensions promised in return."

The Tories have taken £3.7 billion from public sector provision as part of their austerity cuts. They prefer that to ideas such as taxing financial transactions between banks, or raising Inheritance Tax for millionaires, and in fact Osborne is very keen to remove the 50% tax band for the highest earners.

This government has tried to discredit the forthcoming action by saying that the unions don't have a mandate for it. Well they do. If people are sent a ballot paper and can't be bothered to send it back, that's their choice and at least they've had the opportunity to vote. Anyone who is against industrial action would surely have returned their ballot papers. Anyway, using that argument, the Tories have no mandate to be in power. They received the votes of 36.1% of the 65% who bothered to vote in the last general election, which means that just under 23.5% of the electorate voted for them - and those who voted for their Lib Dem stooges certainly weren't voting for pernicious right-wing Tory policies.

The average public sector pension is £5,600 per annum. If private sector pension provision is generally poor because of lousy employers, it doesn't mean that the pensions of public sector workers should be lowered, it's another issue. That's just part of the typical Tory "divide and rule" ethos, where you set one part of the community against another instead of against them.

I think Wednesday's action is wholly justified. There are people going on strike - such as head teachers - who have never done so before. If a country can't make decent provision for its oldest citizens after a lifetime of work, it's not a country of which I can be proud.

The occupational pensions issue is the very essence of what Toryism is all about : propaganda against the elements in society of which they have a pathological hatred and any amount and size of lies with which to fuel it.

The Tories are epitomised by the likes of the weedy and seedy Michael Gove who is at the forefront of the present attempts to discredit the upcoming action. He - like every true Conservative - is a dissembling little diseased rat, for whom no untruth is too outrageous or too large to spout forth. Pity those who have to rely on working for such a despicable government only to have their promised contractual rights trampled upon so wantonly.

How grateful I am not to be one of them, and how I hope that Gove and those of his poisonous ilk (pensions secure , naturally) are hounded from office in the fullness of time, their backsides smarting from a richly-deserved kicking from a disgusted electorate ...

Why dont we make it law that Occupational Pensions in the Private Sector and Public sector and exactly the same. Each pays in the same percentage and each receives the same upon retirement.
This way no one is different and no one can/or all can complain.

In the current situation I would like to see to Unions make as much noise about the loss or huge reduction on Private Sector Pensions, that way their decision to strike does not just look like a case of Politics over substance. It would be good to see a massive Private Sector strike to try and get their pensions back.....No Supermarkets or other shops open, No garage forecourts open, No pubs or restuarants, no electricy, Telecoms, water or gas companies...Now that would be a strike to have and the loss of all these thing we take for granted for a few days would be worth it to highlight the loss or reduction of Private Sector Pensions

'Each pays in the same percentage and each receives the same upon retirement.'

Are you talking about 1/80th of the final year's salary, for each year worked to a maximum of 40/80ths. with a minimum retirement age of 67 for all and anyone taking early retirement would have the pension value reduced.........

Oh and you have the choice to stop paying into the pension scheme on reaching 40 years service but the value would be frozen at that point with no option to increase its value if pay was to increase........

I wonder how some of these big company bosses would cope with this instead of their multi-million pound payments into their pension pots after just a few years in post? Like Fred Goodwin got from RBS.................

The Tories are epitomised by the likes of the weedy and seedy Michael Gove who is at the forefront of the present attempts to discredit the upcoming action.

Mr Hornby! How dare you, sir! Nice Mr Gove is going to forego having a complimentary fruit bowl in his office. You must surely agree that that makes people's concerns about their jobs and pensions seem trivial.

No I agree with Mr. Hornby and Ivan....Please have a strike, if fact lets have loads of them every week until the whole country has gone to pot...Brilliant!!! I would love to see our borrowing interest rate up to the same levels as Italy and Spain because I really think just like my Labour brothers, that is the best way to economic recovery.

It's the Tories fault that we are all living longer now and they and the tax payer should pay for it. We don't care that so many workers in the Private sector get a rubbish or no pension at all, because we will only mention Company bosses when it comes to the private sector and the lowly workers when it comes to the public sector...Viva la Revolution!!!

Phil Hornby wrote:The occupational pensions issue is the very essence of what Toryism is all about. .... I hope that Gove and those of his poisonous ilk (pensions secure , naturally) are hounded from office in the fullness of time, ...

Correspondence to The Independent quotes the pension payable to a couple of Government Ministers directly involved in the confrontation with Wednesday's anticipated Strikers.
Chief Secretary to The Treasury, Danny Alexander's Pension Pot £440,942 is expected to produce £26,404 p.a., and Cabinet Office Minister Francis Maude, has a Pension Pot of £731,883 that should yield him £43,825 a year. Obviously other members of this Government are expecting similar munificence.

To the average Public Sector Worker, this scale of a Pension belongs in La La Land.

Even the "Boss's Trade Union", The Institute of Directors, is squirming about the level of Pension now being awarded to Company Directors, and says that Shareholders should have the right of veto the recommendations of Remuneration Committees.

Thanks OW for proving my point...

Once again you compare company bosses to the average public sector worker....So now compare the average public sector worker with the average private sector worker and come back to us with your comment again

I thought I was comparing the Pensions of Leaders and The Led.

Why don’t we make it law that Occupational Pensions in the Private Sector and Public sector and exactly the same?

blueturando. I can’t argue with that sentiment. However, wages in the private and public sector have never been comparable. A person leaving university with a degree in Physics has always earned considerably more in the private sector than by going into teaching, but the understanding has always been that even if your salary isn’t wonderful, at least your pension at the end of your career will be decent.

I believe that earnings, on average, used to be higher in the private sector than the public sector but that recently that no longer applies. I would argue that it isn’t because public sector workers are well paid, but that in many cases private sector workers are not. The reasons for that are complex. Some employers won’t make pension provision for their workers, and others just can’t afford to do so. But the issue should be about raising private sector pensions, not lowering public sector ones.

This shouldn’t be a fight between private and public, as the Tories want it to be, it should be an all-out attack on the hideous policies of a government that has an ideological – almost pathological – hatred of anything public. Personally, I hope that the one-day strike this time becomes a two-day strike next time, then a three-day strike and so on, until this evil shower are forced out of office and into the dustbin of history.

So now compare the average public sector worker with the average private sector worker and come back to us with your comment again

Blue, you are "off on one"

I can only speak for train drivers!

Public Sector train drivers - LUL (londin unnergroond ltd) Sheffield, and Tyneside Metro - when I worked for it - now owned by JD Schecter are ALL on the same pension renumeration package. THEY HAVE TO BE!!! OK OK not all pay exactly the same wage, but pensions are calculated in a similar fashion in all companies!

It is the PUBLIC SECTOR that does MOST of the training, and the pubic sctor companies are seen as nurseries to the private sector train companies. If they were not the same, no one would swap over to new grass!!

I don't know why I suddenly thoght of this:

As part of his elevation to Barclays chief executive, Diamond will in effect be forced to take a pay cut. As the head of Barclays Capital, the investment banking arm, he took a basic salary of £250,000 but earned around 100 times that through bonuses and share incentive packages – standing to receive as much as £60m in the years ahead.

The bank has admitted today that while his basic salary will rise to around £1.3m, his earning potential will be scaled back so that he will be able to earn around 7.5 times this amount in bonuses – a pay structure that will be more familiar to other bosses of FTSE 100 companies and capping his bonus potential for the first time. His potential maximum pay is now around £11.5m.

Diamond's appointment was welcomed by City analysts, but criticised by the GMB union. Its general secretary, Paul Kenny, said it was "insulting and divisive" to promote an investment banker following the damage caused by the financial crisis.

Ivan wrote:

The Tories are epitomised by the likes of the weedy and seedy Michael Gove who is at the forefront of the present attempts to discredit the upcoming action.

Mr Hornby! How dare you, sir! Nice Mr Gove is going to forego having a complimentary fruit bowl in his office. You must surely agree that that makes people's concerns about their jobs and pensions seem trivial.

Naturally, I apologise humbly for such an outburst. Doubtless the removal of the aforementioned fruit has been occasioned by some disaffected individual having had a predictably unproductive meeting with Gove and leaving in a huff, having first squeezed the Minister's plums... :affraid:

'Hardman' Gove Spells It Out

(msn)
" I'm just not having it - I mean, some of those lollipop ladies will retire at only 83 on as much as £4.75 a week..."

Congratulations on the birth of your child.
Beggar or Billionaire? Choose one.

When was the last time that teachers and nurses crashed the stock market, wiped out banks, took billions in bonuses and paid no tax?

They deserve our support.

IVAN....People have to look at both Private and Public pensions. The country is not just made up of public sector workers, as much as you and a good few of the posters on here would like it to be. I didn't see the unions calling for strikes when this happened...so who speaks up for the private sector workers??? To me and many others the strike today is seen as political and the example below just goes to prove that

Gordon Brown's tax raid on pension funds has snatched £17,000 from every worker's retirement pot, research says today.
Yet the value of public sector schemes - funded by taxpayers - has soared to an astonishing £1trillion.
Opposition MPs, business chiefs and campaigners demanded an investigation into the growing 'pensions apartheid'.
Gordon Brown's decision in 1997 to axe tax relief on dividends paid to pension funds has cost each worker nearly £17,000, a report says
The report, The UK Pensions Crisis, is the work of the TaxPayers' Alliance and Terry Arthur, a fellow of the Institute of Actuaries.
It says Mr Brown's decision in 1997, when he was Chancellor, to axe tax relief on dividends paid to pension funds has cost private occupational schemes £175billion.
This amounts to £16,600 for each of the 10.5million retirement pots of current workers. If the pensions being paid to retired staff are taken into account, it is still an average deficit of £6,000.
Mr Brown's decision forced companies to make up massive shortfalls and began the decline of final salary schemes.
The number of members of private sector schemes has fallen from 6.1million in 1995 to 3.6million last year. At that rate, says the report, there will be no paying-in members of occupational schemes within 12 years.
The growing gulf between private and public sectors has become an increasing source of bitterness over recent years and this is particularly acute in the current economic crisis.
The average private sector worker retires with a pension pot worth £25,100 - enough to pay them about £1,700 a year. The average public sector worker will retire with a pot of £427,275 - worth £17,091 a year.
Private sector workers pay £14billion a year into their own retirement funds, but contribute around £21billion through their taxes for the pensions of retired public sector workers.

Read more: http://www.dailymail.co.uk/news/article-1082511/Browns-17-000-tax-raid-EVERY-private-pension--value-cushy-public-sector-schemes-soars-1trillion.html#ixzz1f8c4BFrQ

Blue,

Do you think that as a public sector worker, I did not take out a separate PRIVATE PENSION? This was (in good days) to fund the schooling of my two granddaughters!
Not worth as much as a light now!
I removed this early due to my present condition and I only got 1/3rd of the money I ME MYSELF had paid in, due to Broon's bu55ering about with pension pots! ( Thatcher was nae better laddie back in the 80s so dinnae tell this Scot that the Consev Cons SPIT are the panacea for all pension ills! - see the pension holidays that she allowed employers to take) 1/3rd taken by Pearl as "administration" (We are taliking WELL over 10K!) and the other 1/3rd as a pension for my Wife at about £6.80 per week. (Is my lady going to live untill she is 280 years of age??) This because Broon decreed that not ALL money could be taken out of a pension company! I would have been FAR FAR better off now, to have put that money in a bank! It was payment from a car crash - I had police officers as witnesses that I was NOT blameworthy and the other parties insurer reluctantly paid out. (the ONLY time I have felt like kissing a Police Officer!!)

My Public Sector Pension? I get more from the ministry in Disability Living Allowance and Mobility! so I cannot see what all the crying is about - do you grudge me that little sum? which combined with my PUBLIC pension, is still less than HALF the weekly wage I picked up!

OH by the way

HAPPY St. Andrew's day!!

The average private sector worker retires with a pension pot worth £25,100 - enough to pay them about £1,700 a year. The average public sector worker will retire with a pot of £427,275 - worth £17,091 a year.

I love the use/missuse of numbers.................

Take the 'average' private sector worker who started work at 16 and retired at 65, who you claim has a 'pension pot of just £25,100 well if they had just put the £42 a month to have 'saved' (put in the bank) this sum during their working life they would have at least earned a little interest making the 'pot' a little bigger.......And therefor have more each year to live on..........

If what as some on here and else where is true and private sector workers are paying much larger sums then the fund managers must be taking massive management fee's and did you notice that Gideon wants these pension funds to invest in British companies the banks won't lend to........

In regards to the 'average' figure of £17,091 pension for public sector workers they would have to have a final salary of £34,182 a year to get this and as the maximum pay a trained staff nurse is likely to achieve is only at best £35,100 and that is working full time on nights, the use of 'Average' is more likely to be a gross over estimate but then again the link given with these figures is the Daily Wail so we should take them with a very LARGE PINCH OF SALT............

If you want to see how much your pension could have been in the NHS use the calculator on this link.......

http://www.ppa.org.uk/pensions/calculators/basic/basic_modeller.htm

The average public sector pension is £5,600 per annum.

The abolition of a tax credit (which had already been reduced by Norman Lamont) doesn't constitute a 'raid'. Nothing was taken out of any existing pension pots by Gordon Brown, and every government is entitled to make changes to the rules applying to tax credits.

Ivan


If/When/As I put money in a pension company, it is NOT for the gubmint to take ANY money out! They tax the money as I get paid my pension!, are you saying you AGREE to paying tax on that moneys all the way along the line as well?

I see the whole pension debacle as a massive fiddle, and it is the account holder who is being fleeced - putting my (PRIVATE PENSION) money in a current account would have put about £25k in my bank account now, but that has been sucked up in swindles by Pearl and Gubmint! THAT IS CASH NO-ONE EXCEPT Messrs ASHCROFT AND GREENE AND A FEW CABINET MINISTERS CAN AFFORD TO LOSE!

Strangely in the name of equality, it's good for a socialist thief to take money out of private pension funds, yet bad for a torie to do the same to public sector workers.

As Ivan has pointed out it's easy to use the "average" as a guide to figures for pension pots. Civil servant at grade 1 probably has a pension exceeding £70,000 pa, joe blogs on minimum wage probably has a pension of below £3,000 pa. Add enough participants from the end you prefer to balance out at £17,000 pa.

Personally I believe the working man has been shafted by both both governments irrespective of whether they were/are public or private workers. The moment mp's vote for their own pension and expenses freeze and link their wages to the working man and not top executives from private companies, then I'll be prepared to listen to and respect their points of view. As is they're all tossers and I can't wait to listen to them wail when th culling of seats start..........end rant

Governments of all complexions would prefer us to spend most of our income while they are in office. There is no obvious advantage to them in having grateful pensioners thirty or forty years down the road.

I am a reasonable person, and I am a great believer in compromise, therefore I do agree that in the present economic crisis, most people should make sacrifices for the good of the country and for the future prosperity of the generations to come, but it must be based on fairness.

So the government has a point, people are living longer, pension contributions that were sufficient 30 years ago are no longer applicable, any reasonable person can surely accept these facts.

Any fair and reasonable government would surely change the rules for all new employees, but leave the terms and conditions in place for existing employees who signed along the dotted line 5, 10, 20 or 30 years ago, its simply not fair to pull the carpet from under peoples feet.

Its rather like signing an agreement with a bank to save so much per week towards an agreed sum in 10 years time, and then the bank changes the rules after you have paid into the fund for several years, its just not on.

And why are there so many selfish people around ?

One often heard comment is "I work in the private sector, and I dont get a pension as good as teachers or customs officers do" - in effect these people just dont think anyone should get more than they do, its pure selfishness.

The government has taken every possible opportunity to demonize public sector workers, constantly comparing the private sector to the public sector, you could see the anger and bitterness in David Camerons heated comments today in the House of Commons, the secretly held hatred of all things state and publicly owned is becoming visible, coming to the surface.

And then theres the government threats to withdraw any offer on the table, or to legislate against unions and make new laws making harder to go on strike, iron fist tactics, certainly no sign of compromise there, and what makes it so hard to believe is that many of these threats are coming from Liberal Democrat ministers - they are now tory appologists, its almost as though they are in self destruct mode, they actualy dont want to be re-elected.

the government threats to withdraw any offer on the table, or to legislate against unions and make new laws making harder to go on strike, iron fist tactics, certainly no sign of compromise there,

Last summer was promised to be a time of strikes and marches.


If Came, Ca er him! keeps this up, we are going to have a winter of discontent.

The right of the Tory party have an elitist aristocratic arrogance that many in Britain's middle classes feel.

The working man and woman in this country means nothing to them.

Nothing the Tory's do has anything to do with expense, because we are a very wealthy country, look at overseas expenditure.

The Tory's are at the very top of our class system, the middle classes want to be there, and our lower classes havent got a chance.

The Tory's want to keep the status quo, and they will throw everything at you to keep the status quo, because they dont wont the average Brit to become one of them.

This pensions crisis is based on class and privilige, it is not about expense.

The Tory's will always be successful at driving wedges between the old and the young, between the public and the private, because Britain's working class consolidation has gone

Ivan wrote:When the state retirement pension was introduced in the UK almost exactly a hundred years ago, it was paid to people over 70 years of age. Life expectancy was 71.5 years. More recently, the pension has been paid at 60 for women and 65 for men, and average life expectancy is about 80. The cost has been compounded by those working in the public sector receiving occupational pensions as well, but what's often overlooked is that the employees have contributed to them.

With what amounts to something close to a general strike due to happen on Wednesday (30 November), I see that the National Union of Teachers has issued this press release:-

Our research shows that, during the lifetime of the Teachers' Pension Scheme (TPS), £46.4 billion more has been paid into the scheme than has been paid out.

The NUT has calculated the total payments into and from the TPS over the period 1923 to date, using its official valuation reports and accounts. Adjusting these figures in line with GDP growth shows that at least £46.4 billion more in current prices has been paid into the TPS in contributions over the years than has been paid out in pensions.

This follows earlier reports by the National Audit Office and the House of Commons Public Accounts Committee which show that the long-term costs of the TPS are already declining following earlier reforms. The long-term picture contrasts sharply with the government's arguments that the current imbalance between contributions and payments makes teachers' pensions unsustainable.

Christine Blower, General Secretary of the National Union of Teachers, the largest teachers’ union, said: "The NUT's research proves two points. First, funding public sector pensions is a complex area; we won't allow our opponents simply to ignore those parts of the story that don't suit them. Second, it is a long term issue; policies shouldn't be driven by short-term considerations. There is no £46.4 billion to hand. The fact is, however, that the government has accepted a long series of cheap loans from teachers' pension contributions before complaining about paying the pensions promised in return."

The Tories have taken £3.7 billion from public sector provision as part of their austerity cuts. They prefer that to ideas such as taxing financial transactions between banks, or raising Inheritance Tax for millionaires, and in fact Osborne is very keen to remove the 50% tax band for the highest earners.

This government has tried to discredit the forthcoming action by saying that the unions don't have a mandate for it. Well they do. If people are sent a ballot paper and can't be bothered to send it back, that's their choice and at least they've had the opportunity to vote. Anyone who is against industrial action would surely have returned their ballot papers. Anyway, using that argument, the Tories have no mandate to be in power. They received the votes of 36.1% of the 65% who bothered to vote in the last general election, which means that just under 23.5% of the electorate voted for them - and those who voted for their Lib Dem stooges certainly weren't voting for pernicious right-wing Tory policies.

The average public sector pension is £5,600 per annum. If private sector pension provision is generally poor because of lousy employers, it doesn't mean that the pensions of public sector workers should be lowered, it's another issue. That's just part of the typical Tory "divide and rule" ethos, where you set one part of the community against another instead of against them.

I think Wednesday's action is wholly justified. There are people going on strike - such as head teachers - who have never done so before. If a country can't make decent provision for its oldest citizens after a lifetime of work, it's not a country of which I can be proud.

With the true immense wealth that Britain really has, I find this media and political statement, that "people are living longer", as an excuse for government to pay a pathetically low State pensions to our elderly people, as frankly obscene.

Yet saying this, the majority seem to have swallowed this line, hook, line, and sinker.

The truth of the matter is never discussed on the media, and it's that the right of the Tory party in Government do not believe in either the role of the State, or indeed the State pension.

It's an uphill struggle to convince some people that they should organise a pension for themselves. Nobody wants to think about getting old, or falling ill, or dying.

Why not? If they think that they know how to avoid those things they could make a fortune out of selling the information to the rest of us.

Repost of my latest blog post (skwalker1964.wordpress.com):

News this week that set me thinking: the government ran at a surplus of over £16 billion in April - thanks to it taking on the Royal Mail pension scheme. This action put the pension scheme assets of about £28 billion into the public balance sheet, giving a big, one-off boost to the public finances. The significance of this doesn't seem to have drawn much attention in the media.

Apparently, this move also meant taking on a projected liability in the scheme of £37 billion, but the government was happy to take the immediate positive hit in spite of the supposed deficit. If you think this poses a big question as to why they would do this, when their expressed aim is to eliminate the deficit, you'd be absolutely right.

They say that actions speak louder than words. Since it came to power, the coalition government has waged a constant propaganda campaign to convince the public at large that the country can't afford to continue its current public-sector pension schemes. Words and phrases like 'unaffordable', 'gold-plated', 'unsustainable', 'untenable' are bandied at every opportunity, the clear aim being to convince the public that unions who resist the changes are being unreasonable, greedy, unrealistic - and to try to ensure that when industrial action is taken (which is really the only weapon that unions can wield), they do not have public sympathy. And largely, this tactic has worked - ask the average person whether public sector pensions are sustainable without reform, and if they're not employed in the sector themselves, or a close relative of someone who is, they'll answer an emphatic 'no'.

And yet, and yet...

Here we have a government that uses all the above terms with abandon in its propaganda war - yet when it is taking on an additional supposed net liability, what does it do? Does it ring-fence the £28bn to offset against the 'huge' liability and reduce the burden on the long-term public finances? No. It banks the money like a shot to offset against the deficit of a single month, and proposes to sell off this surplus, which, by definition, it will have to do for less than its face value. (see http://www.telegraph.co.uk/finance/budget/9158721/Budget-2012-28bn-of-Royal-Mail-pension-assets-to-pay-down-national-debt.html)

You see, this is what governments do with surplus pension funds when they're available - they put them into the general coffers and use them for whatever they feel like. Much is made by the coalition, and by their friends in the right-wing media, of the idea that most public-sector pension schemes are 'unfunded'. The Royal Mail scheme has been a funded one - members' contributions are put into a 'pot', which is then invested, hopefully grows, and the funds sit there ready to pay out when members retire and need to start drawing a pension.

An 'unfunded' scheme is one where the cost of current pensioners is covered by the contributions of those who are still working - who in turn rely on subsequent generations to pay in to cover their costs. But the decision as to how contributions would be handled wasn't made by the workers or their unions. It was taken by the government that set up the schemes - who knew that, in earlier days when people didn't live so long, there would be substantial surplus contributions that they could spend on other things. In effect, these funds were set up in such a way that they would act as an additional tax on public-sector workers, who would make a net contribution to the finances of the country.

Governments of all stripes have profited from this arrangement for decades. Teachers' pension contributions, measured across the lifetime of their pension scheme since it was set up, exceed what has been drawn to pay retired teachers' pensions by £46 billion (see www.teachers.org.uk/node/14349). But those funds didn't go into a 'pot' to cover eventual pension liabilities. They went into the public purse and benefited the country as a whole - public and private sector workers alike. The government hasn't had to dip into a fund and acquire this lump sum like it has with the Royal Mail fund - it's taken this money in a continuous stream since the scheme was set up.

Likewise, NHS workers' and local government workers' schemes have been making a contribution of billions of pounds into the treasury every year - and continue to do so. Yet the government is trying to impose higher contributions and a longer working life on workers in these sectors (while at the same time freezing wages), on the basis that - projected far into the future - the schemes are 'unsustainable'. Is that true?



In short: no. The graph above was published by Lord Hutton - yes, the same Lord Hutton whose report the government is using to justify the structural changes to public sector pensions. The graph shows the projected cost of pensions as a percentage of GDP out as far as 2060. As you can see, the cost of pensions relative to GDP, even in the worst-case scenario represented by the upper-edge of the purple band, is lower than the cost now. Now here's the real kicker - the figures used to create the graph are based on an unchanged pension structure.

Yes, you read that correctly. Without making any changes to pension contributions, without switching to a career-average calculation instead of a final salary one, and without making public-sector workers work longer, the cost of pensions relative to national income is going to go down. (see http://www.guardian.co.uk/politics/reality-check-with-polly-curtis/2011/nov/28/pensions-public-sector-pensions, a bit more than 1/3 of the way down the page).

Now, even unions admit (same link as just above) that if you look at all public sector pensions as a whole, there is currently a deficit of approx. £4 billion per year. Looks bad, doesn't it? Especially if you choose to forget that these same funds have been putting money into the treasury for decades. But what does that really mean? The right-wing Telegraph said about the £9 billion theoretical deficit that it was equal to about £365 for every household in the country. On that basis, a deficit of £4 billion (I'm excluding the Royal Mail £9bn because the government is choosing to take on that debt, and the £9bn is not per year - it's across the lifetime of the liabilities of the scheme) for public sector pensions equates to £162 per household per year.

That might sound like a lot. But as with anything, how big something looks depends on your perspective. And taxing households is far from the only way of generating revenue to cover any pension deficit.

As reported by various newspapers (for example here: http://www.guardian.co.uk/money/2011/dec/06/hmrc-tax-deal-vodafone), HMRC made a 'deal' with Vodafone to let them off a tax debt of around £7 billion. This debt was accumulated over a few years, but even so, simply taxing Vodafone properly would have covered a major part of the annual pension cost. Tax even 3 or 4 companies properly and the cost is more than covered - and in an eminently sustainable way.

Or try another angle of view. The cost to the treasury, every year, of giving tax relief on pension contributions to the richest 1% in this country (yes, the same 1% who became £155 billion richer according to the Times Rich List!) was around £10 billion (www.guardian.co.uk/politics/reality-check-with-polly-curtis/2011/nov/28/pensions-public-sector-pensions again). It would be easy to change the tax relief laws for the pension contributions of the super-rich and more than cover the pension costs of our hard-working public-sector workers, whose pension contributions have been boosting the public finances for generations.

So, even leaving aside considerations that we as a country owe it to our public workers, in pure financial terms, to provide them with the pensions that were promised to them when they took the jobs, this government has a number of alternatives to fund any 'pension gap' without taking money out of public workers' pockets (which depresses the economy to boot!). They just don't have the sense to use them - and prefer to pursue an ideological aim, disguised as something else. Yet again.

This government has plenty of 'form' for this kind of behaviour. We should know better than to believe them. We do know better.

And you know what? If the worst comes to the worst and it takes a slightly bigger slice of my tax contribution to fund a fair, decent pension scheme that should be a source of pride to our country rather than a target for attack - well, I'm cool with that.

Nice post sky.

Not Sky, just Steve. Those are my initials and surname - I was born well before Star Wars

Point taken Steve.

To understand pension deficits it's necessary to look into the pure spite of Tory dogma, such as Chancellor Nigel Lawson's threat to apply a penalty tax to any Company running a surplus on its pension fund.

Just realised this thread isn't in UKeconomics, where I meant to post it - not sure how I managed that!

Any way to move it over or do I just need to start the thread again?

If you aren't co-habiting with a moderator it may require Divine Intervention.

skwalker1964 wrote:Repost of my latest blog post (skwalker1964.wordpress.com):

News this week that set me thinking: the government ran at a surplus of over £16 billion in April - thanks to it taking on the Royal Mail pension scheme. This action put the pension scheme assets of about £28 billion into the public balance sheet, giving a big, one-off boost to the public finances. The significance of this doesn't seem to have drawn much attention in the media.

Apparently, this move also meant taking on a projected liability in the scheme of £37 billion, but the government was happy to take the immediate positive hit in spite of the supposed deficit. If you think this poses a big question as to why they would do this, when their expressed aim is to eliminate the deficit, you'd be absolutely right.

They say that actions speak louder than words. Since it came to power, the coalition government has waged a constant propaganda campaign to convince the public at large that the country can't afford to continue its current public-sector pension schemes. Words and phrases like 'unaffordable', 'gold-plated', 'unsustainable', 'untenable' are bandied at every opportunity, the clear aim being to convince the public that unions who resist the changes are being unreasonable, greedy, unrealistic - and to try to ensure that when industrial action is taken (which is really the only weapon that unions can wield), they do not have public sympathy. And largely, this tactic has worked - ask the average person whether public sector pensions are sustainable without reform, and if they're not employed in the sector themselves, or a close relative of someone who is, they'll answer an emphatic 'no'.

And yet, and yet...

Here we have a government that uses all the above terms with abandon in its propaganda war - yet when it is taking on an additional supposed net liability, what does it do? Does it ring-fence the £28bn to offset against the 'huge' liability and reduce the burden on the long-term public finances? No. It banks the money like a shot to offset against the deficit of a single month, and proposes to sell off this surplus, which, by definition, it will have to do for less than its face value.

You see, this is what governments do with surplus pension funds when they're available - they put them into the general coffers and use them for whatever they feel like. Much is made by the coalition, and by their friends in the right-wing media, of the idea that most public-sector pension schemes are 'unfunded'. The Royal Mail scheme has been a funded one - members' contributions are put into a 'pot', which is then invested, hopefully grows, and the funds sit there ready to pay out when members retire and need to start drawing a pension.

An 'unfunded' scheme is one where the cost of current pensioners is covered by the contributions of those who are still working - who in turn rely on subsequent generations to pay in to cover their costs. But the decision as to how contributions would be handled wasn't made by the workers or their unions. It was taken by the government that set up the schemes - who knew that, in earlier days when people didn't live so long, there would be substantial surplus contributions that they could spend on other things. In effect, these funds were set up in such a way that they would act as an additional tax on public-sector workers, who would make a net contribution to the finances of the country.

Governments of all stripes have profited from this arrangement for decades. Teachers' pension contributions, measured across the lifetime of their pension scheme since it was set up, exceed what has been drawn to pay retired teachers' pensions by £46 billion But those funds didn't go into a 'pot' to cover eventual pension liabilities. They went into the public purse and benefited the country as a whole - public and private sector workers alike. The government hasn't had to dip into a fund and acquire this lump sum like it has with the Royal Mail fund - it's taken this money in a continuous stream since the scheme was set up.

Likewise, NHS workers' and local government workers' schemes have been making a contribution of billions of pounds into the treasury every year - and continue to do so. Yet the government is trying to impose higher contributions and a longer working life on workers in these sectors (while at the same time freezing wages), on the basis that - projected far into the future - the schemes are 'unsustainable'. Is that true?



In short: no. The graph above was published by Lord Hutton - yes, the same Lord Hutton whose report the government is using to justify the structural changes to public sector pensions. The graph shows the projected cost of pensions as a percentage of GDP out as far as 2060. As you can see, the cost of pensions relative to GDP, even in the worst-case scenario represented by the upper-edge of the purple band, is lower than the cost now. Now here's the real kicker - the figures used to create the graph are based on an unchanged pension structure.

Yes, you read that correctly. Without making any changes to pension contributions, without switching to a career-average calculation instead of a final salary one, and without making public-sector workers work longer, the cost of pensions relative to national income is going to go down.

Now, even unions admit (same link as just above) that if you look at all public sector pensions as a whole, there is currently a deficit of approx. £4 billion per year. Looks bad, doesn't it? Especially if you choose to forget that these same funds have been putting money into the treasury for decades. But what does that really mean? The right-wing Telegraph said about the £9 billion theoretical deficit that it was equal to about £365 for every household in the country. On that basis, a deficit of £4 billion (I'm excluding the Royal Mail £9bn because the government is choosing to take on that debt, and the £9bn is not per year - it's across the lifetime of the liabilities of the scheme) for public sector pensions equates to £162 per household per year.

That might sound like a lot. But as with anything, how big something looks depends on your perspective. And taxing households is far from the only way of generating revenue to cover any pension deficit.

As reported by various newspapers HMRC made a 'deal' with Vodafone to let them off a tax debt of around £7 billion. This debt was accumulated over a few years, but even so, simply taxing Vodafone properly would have covered a major part of the annual pension cost. Tax even 3 or 4 companies properly and the cost is more than covered - and in an eminently sustainable way.

Or try another angle of view. The cost to the treasury, every year, of giving tax relief on pension contributions to the richest 1% in this country (yes, the same 1% who became £155 billion richer according to the Times Rich List!) was around £10 billion. It would be easy to change the tax relief laws for the pension contributions of the super-rich and more than cover the pension costs of our hard-working public-sector workers, whose pension contributions have been boosting the public finances for generations.

So, even leaving aside considerations that we as a country owe it to our public workers, in pure financial terms, to provide them with the pensions that were promised to them when they took the jobs, this government has a number of alternatives to fund any 'pension gap' without taking money out of public workers' pockets (which depresses the economy to boot!). They just don't have the sense to use them - and prefer to pursue an ideological aim, disguised as something else. Yet again.

This government has plenty of 'form' for this kind of behaviour. We should know better than to believe them. We do know better.

And you know what? If the worst comes to the worst and it takes a slightly bigger slice of my tax contribution to fund a fair, decent pension scheme that should be a source of pride to our country rather than a target for attack - well, I'm cool with that.

The real cost of Public sector Pensions is around 1.7% of UK GDP and that falls in 2030 to 1.6% and 1.4% by 2060. The hard fact is public sector workers are already making a sacrifices with a two year pay freeze announced by Gideon himself in 2010. (OBR) The income gap between public sector workers and private sector workers is now 4.3% for men and 10.5% for Woman working in the public sector (IFS)

Add inflation to that which has escalated under the Tories to 5%, in real terms, you will find that most public sector workers and lowest paid recived a fixed rise of just £250. the Pensions Policy Institute, an independent research charity, puts average public sector salaries at £25,600 and those in the private sector at £25,300, nother myth. The average public sector pension is £7,000 compared with the average personal pension of £5,000.

I keep hearing about so-called gold plated public sector pensions. yet can only find can only find Gold epaulets that remain for Army officers. who pay nothing from there salary towards pension contributions and what's more can still retire at 60 years old. while fire fighters pay an equal contribution with the state at 37%. with fire fighters each paying between 8.5% and 11% of there salary. while the police officers pay 9.5% to 11.% of their salary. How many of the private sector do that as per cent of there income? and low incomes at that?

THE PRIVATE SECTOR, THAT WAS DE-REGULATED UNDER MRS THATCHER IN THE 1980s. SO HOW WELL IS THAT DOING THEN? I WOUNDER? LETS TAKE A LOOK

The deficit facing private sector pension funds fell by nearly £40 billion over the last month, the latest statistics have revealed.
The safety net for underfunded pension schemes at insolvent employers - the Pension Protection Fund (PPF) - said that the aggregate deficit of 6,533 schemes was £158.6 billion at the end of October, which was down on the £196.4 billion shortfall recorded in September.

But the aggregate deficit of 6,533 schemes was £158.6 billion at the end of October remains around £150 billion more than it was a year ago when a shortfall of £5.1 billion was recorded.
The PPF added that the comparison with the previous year's figures has been affected by changes made to its calculations in April, which saw liabilities increase by 3.6% and the total balance cut by £34.9 billion.

However, many in the private sector have higher incomes but pay small contribution with millions having no pensions at all. after they fell out of company schemes after the De-regulation of the 80s that today see just 15% of private employees with any sort of private pension at all and as we can see has blow a gaping hole in the private sector's second-class contribution schemes.

Did private sector workers question the running of private sector pensions? No it has not

Did Private sector workers march when companies failed to keep up with contributions? NO that did not

Did private sector worker question underfunded pension schemes that has left an aggregate deficit of 6,533 schemes was £158.6 billion at the end of October 2011? NO they did not

Did they come on here and posted about how bad the private pension deficit? NO. They did not

So there seem many who do not wish to work in the public sector and take lower wages for 40 years but feel envious of public sector pensions yet do not wish to work within the sector? but believe its quite fair to race them down to the bottom.

However, the Government sign these public sector pensions and now in my view duty honour them.

WELL I HAVE A PRIVATE PENSION AND PAY 11.2% OF MY INCOME INTO IT. BUT GOOD LUCK TO THE PUBLIC SECTOR EMPLOYEES, AS THIS IS ONE PERSON WHO IS NOT ENVIOUS OF YOUR PENSION. THAT YOU SIGNED IN GOOD FAITH

Well, there it is. Magic!

Two for the price of one!

Supermarkets Rule!!

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Good luck!