FactCheck: The truth about the public sector pensions row
The claim
“The proposals actually lead to better pensions for low and middle income earners”
Chris Huhne, BBC Question Time, 24 November 2011
Cathy Newman checks it out
All the mud-slinging between the unions and the government tends to obliterate the facts. The unions are striking over government plans to make them pay more into their pensions.
But beyond that simple statement of fact, there’s a lot of murk, claim and counter-claim. The unions say the changes to the pensions will make them worse off.
Ministers say on the contrary, an improved deal on the table would leave many low and middle income earners better off. What’s the truth?
The analysis
The unions say the government is “misrepresenting” the new pensions deal, and that it is wrong to insist the deal is better.
What is the new deal?
It’s worth remembering the changes already made to public sector pensions, says the deputy director of the Institute for Fiscal Studies (IFS). The Labour government implemented a “substantial cut” in public sector pensions by changing the pension age from 60 to 65, says Carl Emmerson, “making people pay in for five more years to receive the same pension for five fewer years”.
The current government is making the pensions less generous still by indexing pensions payments in line with increases in the Consumer Prices Index (CPI) rather than the Retail Prices Index (RPI).
It also proposes a rise in pension contributions of £2.8bn by 2014/15, as well as pegging the retirement age to the state pension age of 67 and moving staff from final salary schemes to career average schemes.
So people are paying higher contributions and working longer. And they are being asked to pay more out of a salary that has been frozen for two years, and that from 2013 will rise by 1 per cent at the most.
Announcing the small pay rise yesterday, George Osborne said public sector pay had risen twice as quickly as pay in the private sector over four years. He said the 1 per cent rise was tough, but fair to private sector taxpayers.
Despite all this, the government still claims it has managed to carve out a better deal for low and middle income earners.
Public versus private sector
Paul Johnson, director of the IFS, told FactCheck: “The key point is that public sector workers have vastly better pensions than the private sector, and this is a remarkably generous offer.”
Indeed, figures from the Hutton Report show the average public sector pension payout is around £7,800, and the median is £5,800.
Most public sector workers are on defined benefits pensions, where the level of final pension is fixed. This is virtually extinct in the private sector, which is more likely to offer defined contributions (DC) – where the pension payment depends on the pot accumulated by the person when workers retire.
The National Association of Pension Funds (NAPF) says the average lump sum a newcomer to the private sector will accrue in a DC pension is around £20,000, paying out around £1,400 per annum.
A better deal?
While on the whole the public sector might get a better deal than the private sector, Mr Johnson said the government is wrong to claim it’s a better deal than public sector workers are currently on.
He said: “The combination of extending the age to 65 and increasing contributions makes people on average worse off. It wouldn’t be worth the government doing otherwise. The government will raise money in the short term.
“On the whole people will be worse off…Huhne can’t say that it’s a better pension (for low and middle income earners). It can’t be true, on average.”
The government could offer FactCheck no proof that the deal is better for all low and middle income earners, it only pointed us to the handful of cherry picked case studies they set out earlier this month.
You do the maths
Nick Clegg meanwhile has urged people to check it out for themselves on the government’s calculator. He said last week: “The only thing I ask them to do between now and next Wednesday is to sit at their desk, flip open their laptop, get on to the government website and look at what we are actually offering and compare it to what they are being told by their union bosses.”
He didn’t mention however – as the Cabinet Office admitted to us – that the calculator does not take account of the change in pension contributions, “because the government has yet to decide how to structure or tier contributions in the new scheme”. The reforms propose a £2.8bn increase in contribution payments by 2014/2015.
Despite this, the calculator still doesn’t prove that the new deal is better than the current one. The Public and Commercial Services union (PCS) goes as far to say that every example it has tried shows that the current pension scheme delivers a higher pension than the proposed pension scheme – even at the age of 68.
For example, a 35-year old admin officer who has worked in the civil service since 2005, and earns £18,300, and a 40-year old job-sharing manager on £12,000 with 10 years’ service – would both lose money under the new scheme.
The move to CPI alone lops £15,000 and £6,380 off their respective pension pots over 20 years. And under the new scheme, if the 35-year old retired at 60 she’d receive 25 per cent less per week than under the old scheme. And if she worked until she was 68, she’d get £361 less per year.
Meanwhile, if the 40-year old retired at 60 her pension would be 12 per cent lower under the new scheme, rather than the old. And if she worked another seven years, she’d still end up with £76 less per year than under the current scheme.
The Treasury however maintains that: “The government has been clear that because people are living longer, public service workers will have to work longer. Some will also have to pay more, so there is a fairer share of the cost between taxpayers and employees. But if they are on a low and middle income, when they reach their scheme pension age they will get as good a pension, or better, than before.”
Cathy Newman’s verdict
The government claim that the overhaul of public sector pensions will enrich many low and middle income earners is fanciful. Raising the pension age and increasing what people pay into their pension pots will make employees – from managers to admin officers – worse off on average.
Having said that though, public sector pensions, even after these reforms, will still be the envy of many a worker in private enterprise.
With the eurozone imploding, and the British economy on the brink of another bitter recession, there’s a risk that the unions are fighting the wrong war by striking over what still look like very decent retirement prospects.
The analysis by Emma Thelwell
There are 62 comments on this post
Well theres the thing isn’t it “compared to private sector pensions”.
I think you should drop “relatively” in the last line “relatively decent retirement prospects”.
Compared to their parents and grandparents everyone’s pension is getting far worse, and this has been happening through prosperity and bust.
I think we need to ask ourselves why this is in general, and what the long term endgame is, as at the moment it all looks rather sad and curious.
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Pension contributions by the government need to reduce because people are living longer, and because britain is becoming less prosperous, which is only set to continue due to the decline of the West. The gold-plated final salaries of our parents are unaffordable due to changing demographics, there will be less youngsters in the future to pay the pensions of the growing numbers of old folk.
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In my view the UK is not becoming less prosperous it is just that the banks, companies, etc are draining money away from ordinary people and into their own pockets. The 99% of ordinary people who actually produce the wealth should have a fairer proportion of that wealth, and especially in the form of pensions, for the private as well as public sectors. Theres no point in living longer if we live in an extended state of poverty whilst the rich can still afford their champagne life styles.
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What is usually forgotten is that one of Gordon Brown’s first acts as Chancellor was to change the tax on pension funds resulting in an increased take for the Treasury of approx £5bn per annum. Now, look at the size of the hole in pension funds and multiply the number of years by 5. There you have by far the biggest factor in gutting Britain’s pensions.
Sad to reflect that in 1997, Britain (along with the Netherlands) had the best funded pensions in Europe.
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I do not think it is fair to say that a median pension of £5,800 (just over a £100 a week) is a “very decent retirement prospect”. Pensions in the private sector are a disaster ( except for the very well off) but I think that is a poor argument to make nearly everyone,s in the public sector worse. If the government need to save money on pensions the first thing they should do is cap pension tax relief at 20% and stop high rate tax payers get tax relief at 40%. This would save an estimated £7 billion a year, significantly more than the net cost of public pensions. And no I have never worked in the public sector – and I have a private pension that has benifited from the 40% tax relief for high earners…
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This sounds sensible to me.
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‘there’s a risk that the unions are fighting the wrong war’
Ordinary people are striking today for fair pensions for all and to save the public sector from being dismantled. Talk of unions fighting wars is lazy journalism. Don’t forget that public sector workers have contributed to their pensions and will pay tax on them when they retire. Most will be on less than £5k. How would you feel if your private pension provider went back on the contract you had signed up to ?
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The thing is with private pensions is that you are being driven by market values not final salaries. the contract you sign up to has variables & does in fact change. The fiction that the private sector is better paid is that, fiction!.In my experience the private sector work longer hours for more years & with less holidays. We all however make choices as to what jobs we do. The reality is though that many in the private sector have had pay cuts not freezes & to think they should fund the public sector is in itself unfair. If the unions want fairness lets see a comparison of both pension schemes private & public, show equal contributions for the same timeframes & show the likely pension benefits.
That way people will see the truth one way or another & fairness may be judged.
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If private pensions are so bad surely the onus should be on improving them so that everyone has a better standard of living when they retire.
Make people who work in the public sector worse of because everyone else has had their pensions destroyed seems like a backwards step.
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Why don’t the unions go to court to get an injunction against the government to prevent them from making changes to existing agreements instead of striking. It would be far cheaper and better for everyone. Anyone else that makes changes to or reneges on legally binding agreements would have to justify it in law or pay compensation so why are the government any different.
Also I would like to know what are the current pension arrangements for MP’s, shadow cabinet members, cabinet members and the PM? Have any changes been made to their pensions because of the public finances?
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Ian, Your suggestion that public sector workers should go to law is well made, given that government is proposing to renege on important aspects of public servants’ terms and conditions, which are explicitly laid out in contracts of employment the comprehensive documentation of the various schemes and the statutes that underpin the schemes. It is arguably true to say that there is nothing discretionary about the employers’ obligations, which is not often true in the private sector. Unfortunately, in effect all that the administration needs to do in law is to legislate. This is the obverse side of the statutory nature of the schemes: constitutionally, Parliament is supreme. Were it merely a matter of contract and only executive action were required I suspect there would be a legal challenge. Plus on one aspect: the replacement of the indexation method by RPI with CPI IS subject to a legal challenge because it WAS done by executive action. If they can get the rest through the House of Commons, game over, though it would be much better to get an agreement. That links to your pointing out the weak moral authority of MPs here, to which add a weak political mandate for Lib Dems..
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Well the unions did in fact take the government to court, and won. The government then simply went and changed the law so they could push through their changes.
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The government always make the argument for public sector cuts very one dimensional. Lets not forget that there are other factors at work here. On average, public sector salaries are lower than their private sector counterparts doing the same or similar role. This has always been an accepted part of public sector employment because the overall benefit package used to work out the same or better, pension, job security, flexible working etc.
With constant erosion of other public sector benefits; pension, retirement age, conditions, this is no longer the case and I will be very surprised if the government will persuade the necessary numbers of the next generation of employees into public service
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The government are thieves.This is not what people signed up for when they began working in the public sector, people may have decided to stay in the public sector because of their predicted pensions. How much do mps get for their pensions why are they not having their pensions reduced. They should not have given the bankers their bonuses. They are taking money from pensions because it is profitable.
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All this because of the lack of regualation in the financial sector who incidentlly still pull the strings of the Government.
Dont forget public sector workers are also tax payers. Unions negotiated changes to pensions 2 years ago.
This Government makes it up as it goes along.
It will soon be RIP NHS, so public pensions will then be effectively private pensions in the end one day anyway.
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Why don’t the leaders of our country lead by example and take the deal they offer the public sector workers.
Let’s see if they are happy with their lot then, after all they helped skin this country by their greed on the expenses debarcle and then let their greedy banker buddies finish this country off. Come on Cameron get your house in order lead by exapmle!!!
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I took the very difficult decision to strike today. As a higher earner in my late 30s, I accept that I will need to pay more and earn less – angry though I am that this government has reneged on the deal that we negotiated with the labour government. These are extraordinary times and I accept that we should play our part in easing the financial burden. I took industrial action today for two reasons. Firstly, to protect those in relatively low paid public sector jobs who are set to be taxed a further 3% on their earnings with the deal currently on the table. Secondly and most importantly I took action to protect the education system to which I have dedicated my professional life. I cannot stand by and watch excellent graduates pass teaching by because of frozen pay, fundamentally unstable pension provision and a lack of employment because our young and energetic students are being taught by exhausted 68 year old teachers???!!!
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Most public sector workers are perfectly reasonable and I suspect could live with the shift to 66, as proposed by Hutton, even though this reduces the value of their pensions by around 30% (assuming the final pension reached the same value (which it doesn’t) and people die at 80). The problem is that the Government have not settled for a 30% reduction in costs but have gone beyond Hutton for additional savings in two ways – first by making the change from RPI to CPI (which Hutton said would reduce the value of the pension over its lifetime by a further 20%) AND secondly by increasing pension contributions by around 3% for most staff. Coupled with the pay freeze, this means a massive pay cut for anyone in the public sector. IF the Government were to remove the increased pension contributions and do something about MPs and the super-rich, then that might solve the dilemma. For the moment though, the idea that we are all in it together is laughable.
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To talk about the low pensions of dinner ladies is far too emotive. They are on low pensions because they are on relatively low wages and that relativity applies to everyone whatever their earnings
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Agree with most of the above – why is the private sector used as the golden mean – so we all have to be grateful we have something. If I invested my pension contribution or indeed got that and my employer contribution to acumulate – in my hand week on week – month on month – surely I’d get a better deal than those managing our pension monies now. No one can live on £100 per week – with today’s rising costs -let alone 5.10yrs down the line. Its all to create a nation of “slave grateful labour” at the beck and call of the few fat cats at the top. Would anyone believe a word that this tory Cabinet utters. ?
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2 excellent points have been made here. First, the one about pensions for MPs: are they bearing any of the pain and, if not, why not? Secondly, the point about 40% tax relief on higher paid people’s pensions. How on earth can that be right and why have the Government not changed this ludicrous unfairness? It would raise funds AND would level the playing field for those on lower incomes. The higher paid would still receive 20% tax relief, the same as the everybody else and therefore perfectly acceptable.
Finally, I should like to add the point about the ridiculous closed shop operating in boardrooms, where the executives sit on each other’s remuneration committees and award themselves obscene pay rises, be it in basic pay, bonuses or share options. This IS relevant to the pensions issue because it fosters a sense of unfairness in public sector workers as well as in the rest of the public who are in ‘normal’ jobs. This creates enormous anger, making it urgent that the rules are changed to alter remuneration committees and, very importantly, the attitudes of the ‘investment institutions’ that turn a blind eye whilst being in the same cosy club themselves.
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Why is it unfair that you get tax relief on the 40% tax rate? I would hardly say that anyone earning just over £37,400 and supporting a family as well as trying to ensure a decent pension for them on retirement is having unfair advantage over anyone.
If a teacher can finish their career on £38k and then enjoy a pension of £25k, index linked for life, which in the private sector would require a pot of £675k to achieve, then why should the tax relief on 40% be abolished. Do you know how hard it is to accumulate a pot of £675k? I earn £50K (after 20 yrs working with 25 to go), contribute 12% (far more than any public sector worker) and can only dream of amassing that amount in my pot and enjoying the pension a teacher or similar public sector worker gets.
The public sector worker pays a fixed percentage each month so abolishing the 40% tax relief would make absolutely no difference to them but would make a considerable difference to me and others paying 40% tax who are in money purchase schemes.
If public sector workers were on the same deal as the rest of us then I’d say fine, go ahead and abolish it but should I have my already paltry pension made worse still.
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Agree with you about the MPs pensions though. They should have money purchase schemes like the rest of us and then perhaps they would look after pensions for all.
We used to have the best private sector pensions in Europe until Greedy Brown wrecked them with his £5bn a year stealth tax grab – well over £60bn now.
We’ve been kicked enough whilst trying to do the right thing for our futures. Leave us alone.
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How do public sector pensions work? Essentially there is no pot of money, retired workers pensions are paid for by current workers contributions. If these contributions exceed the amount needed the treasury keeps it to spend as it chooses! The teachers and NHS currently pay in more than they take out, therefore their negotiating position is that they do not need to change. Although the agreement they have is that they must negotiate if the need for change arises. The Government started with a blank sheet of paper and came up with an extremely poor alternative. This was slightly improved in the “generous offer” but it is miles away from the current affordable scheme.
Private schemes cannot work in the same way. When a teacher or nurse moves school or hospital they still pay into the same scheme. When a private sector worker moves its a different scheme (if they are lucky) and changing jobs could lead to lots of little schemes with different contribution rates. What is needed is for the government to get the private sector to have a series of national pension schemes with a requirement for worker and employer to contribute at an agreed rate. The result would be Fair Pensions For…
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There is an easy solution to this impasse. All rights to date are protected and transferred to a private provider who collects new contributions from both the employer and employee. The employee then has a choice of level of contribution. Having worked in the pension industry, I am convinced that few employees would want to contribute to the level required to receive their current benefits. If the employee does not like this, easy, find new employment. The advantage of this is that the liability moves from the tax payer to beneficiary just as in the real world of the private sector.
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MP’s pensions are a big secret, they accrue at a higher rate of 1/40th instead of 1/60th they also get protected after so many years ie: after 5 years I believe they get full rights. I must mention that like the old Fire fighter pension scheme (now abolished) they pay 11% . currently most public sector pensions require a 7.5% contribution I think.
Most public departments excluding MP’s had no pay rise in 2010 this was then delayed and some now face 4yrs with out a pay rise. Also I should mention that the extra 3% rise in contribution will be used to pay off the national deficit ,and will not be put into the pension pots!
Oh and the MP’s pension contribution won’t rise.
The problem was that 30yrs ago when they started the pensions the government spent the money thinking that the people paying into there pension would only live a couple of years.
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“fighting the wrong war”? If being told to work longer pay more and get less does not justify trade union resistance then what does?
Could the high status well paid and well connected national televsion journalist care to give us her view about when, and over what, should trade unions act to serve their collective interests?
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Firstly the Government claimed that they were going to make changes because the current pensions schemes were not sustainable in the long term. Until someone pointed out that this simply wasn’t true.
Then they tried to sell it that low and middle paid workers would be better off. Again, this has been shown to be for the most part simply not true.
As a public sector worker I accepted the argument for a 2-year pay freeze. I accept that there is no such thing as a ‘job for life’ anymore and that the possibility of redundancy or privatisation hangs constantly over my head. I also accept that people are living longer and therefore I should expect to retire later in life.
What I cannot accept is this criminal attempt to try and change my T&C’s of employment that I entered into in good faith when I became a civil servant 10 years ago.
I echo the comments made earlier that more effort should be made to improve private sector pensions rather than degrade public sector ones, and that if the governement had shown true leadership by reforming the pensions of MP’s first and making them ‘fairer’ before attacking civil service pensions, then perhaps they could take the high…
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Who really wants an exhausted 67 year old teaching their 5 year old or teenager? Yet if “burnt out” teachers leave at 60, they’ll lose 20% of the pension they’ve paid into over 45 years. Their final pension will be much less than is currently paid, despite government claims to the contrary. MP’s seem to be hanging on to their pensions so their outrage at public sector concerns is hypocritical to say the least. Of course, if you are a company director or an MP who has office and domestic assistance, it isn’t a great problem to work until you’re 70 or older. To middle professionals who face daily interaction in stressful situations and manual and unskilled workers, working when over sixty is not such an easy option. Perhaps the government is expecting a reversion to a younger death rate amongst these groups to ease the financial burden. They may well be right.
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Having had a dig at your verdict I do think your fact check provides a good service. What I’d like to know is whether graduates in the private sector have better or worse pensions than graduates in the public services. I’d also like to know how all facets of pay and remuneration compare between graduates in the two sectors of the economy. Any chance of this?
Thanks in advance
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I am a paramedic. I have a number of issues with the proposed changes.
1. the increase in retirement age. police and firefighters will still retire earlier yet my job is just as physically demanding. I cannot envisage carrying people down stairs after the age of 60. The risk of injury becomes far higher.
2. The NHS pension scheme makes money (it’s in profit) and already pays the government £2.3 billion pa. Why should we pay even more?
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The Govenment say that they are negotiating with teacher unions tomorrow, (1-12-2011) but they are not negotiating in good faith! Successive governments have commissioned independent acturial assessments of teachers pension contributions, comparing that which is being paid in, to that which is being paid out. The current government have deferred these assessments for the past two years. I ask myself why? (I asked Danny Alexander and I’m still waiting for a reply) I suspect the figures have been calculated and “buried” or that they know (as the commons accounts committee estimates) that teachers pensions are affordable. Why don’t they show us “the books” and then agree on a settlement based on ALL the facts on the table!
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In simple terms the economy is not far off 50% Public sector and 50% Private sector and with a few minor exceptions it is the private sector that generates almost all of the wealth, that is not to denigrate the Public Sector as many of these jobs are vital to everyone, but why does the average wealth producer have to subsidise the pensions of those in the public sector? Who do you believe the Unions or the Government? A simple way to resolve this is for the government and the unions to agree to appoint an independent actuary whose job would be to calculate in financial terms the value of the average private sector pension and to reform public sector pensions to an equivalent level. I don’t think the Unions would take up this offer. Does anyone know why the Public Service Unions believe Public Sector employees deserve better pensions than those who work in the economy to produce the wealth that funds the pensions?
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Divide and conquer….shame on all commentators without thinking repeating the comparison between private and public pensions. The nasty party will be happy to stir it and create division when only a scandalous 12% of private workers have pensions.
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Its about time the politicians were held to account for deliberately misleading the public. There has been a very worrying trend of misinformation and lies inside and outside of parliament from coalition members that is in excess of being ‘politics’.
This Govt is now, to my mind, the Ministry of Truth. We have finally arrived at Airstrip One.
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Public Sector is not being asked to pay extra into pension fund. It is a straight 3% tax on Public Sector workers, going into treasury coffers to bail out bankers and not to pension funds.
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What the government are attempting to do amounts to nothing more than ‘highway robbery’. They constantly announce that they are making a fair offer, but how is it legal to open the lid to someones pension scheme and demand that they pay an average of an extra £80 per month and receive less benefits? They are principally taxing a certain percentage of the population and in this case are taxing the Public Sector workers. £80 per month! This is not a fictional amount, this is the Actual amount I will pay extra, per month, if the government get their way. Whats gives them to right to enter a ‘Private Pension Scheme’ which is self dependent? Oh yes, because its making money and successful – unlike the Conservative Government !!! (yes 3 !!!). As far as I am concerned, they should not be interfering directly with this pension. Their attempt of bartering is that of a bad double glazing salesman, who goes in with a ridiculously bad offer and then halves it to make it sound more appealing! No attempt of offer will be accepted. You should not be interfering or even legally allowed to take any money off us via our pension contributions. BACK OFF!!
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I’ve worked in the private sector for one of the largest firms in the world. They killed off our final salary pensions many years ago, as the payments out, after labour plundered the pension funds by taxing them, was far more than the contribution in. So we had no choice but to retire later and pay a higher contribution. My annual pension at 67 is predicted to be a little over £3k. So do in feel that they are getting a raw deal, nope! Did they cost me today, yep £90 for child care!
And after all, who really pays for the public services, the private sector. They may pay tax, but the gap has to be filled by others not on the governments pay roll!
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So the deal stinks. The only positive factor is that private sector workers have had their pensions plundered more effectively by their bosses than Cameron is.
Basically the future will be rich pensioners like Chief Executives of failed banks who get taxpayers money and the rest claiming means tested benefits because of poor pensions.
I work in the public sector and people cant afford the extra hike in contributions so they will simply come out of the scheme. This will make sustainable schemes become unsustainable.
The Government is simply plundering the pay packets of public sector workers because they can.
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Why is it that all of the right wingers bitterly attacking public sector staff are not themselves in the public sector if it is so wonderfully lucrative? They seem to have already forgotten (or frittered away) the enormous sums of money that they made during the lengthy economic boom of the Blair years. My friends from University who went into the private sector invested their money wisely, still have jobs and are undoubtedly far richer than I am or ever will be. A public sector pension would never make up for the vast difference in pay.
I am sick and tired of the constant refrain that public sector workers are a drain on the tax payer. Here’s some news for you. Many of us will not draw a pension for decades to come and in the meantime we pay income tax, National Insurance, VAT, council tax and all the rest, just like everyone else does (or is supposed to).
I genuinely sympathise with private sector employees who make significant contributions and are then ripped off by their pension providers, but I do not feel sorry for the, all too common, private sector worker who chooses not to save for his retirement until he is well into his fifties when it is far too late.
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You say, “The unions are striking over government plans to make them pay more into their pensions. But beyond that simple statement of fact….”. THIS IS NOT A STATEMENT OF FACT as the extra money collected would NOT go into pension schemes but straight to the treasury. It is an extra income tax on workers in the public sector that this government so detests and is determined to privatise. I work in the private sector and have a very poor private pension (Whatever happened to private = good, public = bad!)My wife and daughter both work in the public sector and were on strike today for the first time in their lives, despite threats from employers to their job security and career prospects if they went on strike. This is an idealogically driven raid on the incomes of low paid workers whose pension scheme, as it stands now, would be in surplus for the next 20 years!
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What nobody in Government seems to mention, or maybe I’ve missed it in all the usual spin, is that Civil Servants actually PAY TAXES!
The way various reports are worded it is almost as if the Private Sector pay taxes which contribute towards Public Sector salaries/pensions but could not one argue that Civil Servants ALSO pay taxes and therefore contribute towards their own salaries/pensions?
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This is very useful for actual figures to be shown on what is often a subject covered with rhetoric and spin from both sides. It seems like both public and private sector pensions are inetivably squeezed due to longer life expectancy and retirement ages not increasing in line with that. A long term solution to this problem needs to be found so that both public and private pensioners can achieve a more sustainable future.
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The politicians and the mainly right wing media have been trying to play off the public sector against the private sector all day. Private sector pay has always been far higher than the public sector which is why the public sector has always offered good pension terms to offset low wages. I have no sympathy for workers who are not prepared to fight for their pensions, especially private sector workers who thought they were way too good to be in a union. Public sector workers and their unions have already under previous re-negotiations agreed to pay more for their pensions and work longer. Which currently makes them highly affordable with costs going down in the future.Private pensions should be equalised upwards to the same level as public pensions. Private companies paying their senior managers millions can easily afford it.
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How can Paul Johnson call public service pension provision “remarkably generous”?
What the Hutton Report actually says is
“1.11 The Commission firmly rejected the claim that current public service pensions are
‘gold plated.’ The average pension paid to pensioner members is around £7,800 per year,
while the median payment is around £5,600. It also rejected the idea of a ‘race to the
bottom,’ emphasising instead that public service pensions should ensure adequate retirement
incomes for those who have devoted their careers in the service of the wider community.”
Indeed, achieving a full pension under the civil service classic pension scheme involves 40 years service! Do oft-quoted and divisive comparisons between public and private pension consistently take account of the length of service or the qualications and experience of those involved? I suspect not, but the news juggernaut doesn’t worry about such details.
Private sector observers fail to understand the anger among civil servants and others because they forget that decades of relatively poor pay settlements in both boom times and slow-downs were justified partly on the basis of public our…
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These figure of £7800 and £5600 apply to pensions currently being paid and bear no relation to the pensions that will be paid to most of today’s public sector workers with several years full-time service. Those low pension figures are due to a large number of those with short-term periods of employment in the public sector and to those who only worked part-time, and applies to past wage levels earned years ago. It also seems to be forgotten that most of those currently drawing a public sector pension get an additional amount of around £5000 a year from the state pension — as will those yet to retire.
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The government announced on 14 October 2010 that, from 2011-12, the annual allowance for tax relieved pensions savings for individuals would be reduced from £255,000 to £50,000. This was expected to save £4bn.
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The figures of average public and private pension are astounding. Can anyone live on such sums? No they can’t. All the politicians, business people and the other high earners, as one writer puts it above are fantastic and their tax relief should be abolished.
What a wretched country it is that tries to lower low average pensions in the public sector by comparing them with even lower ones in the private sector. Good pensions for all should be a priority for any decent government. But we all know we have no decent government.
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the examples above are why there is little support – why should public sector workers be entitled to retire at 60 when the rest of us are going to 68?
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Simple. If a public sector worker started at age 18 then by 60 he or she will have worked 42 years. During that time they will have contributed 6% or more to their pension using their money.
The local government pension scheme has assets, is in surplus, and can pay out based on their contributions. On average a man will receive 7,800 pounds per year and a woman will get around 5,000 a year.
Some of these workers do intensive manual work and after carrying bins, helping people in and out of bed, cleaning, and so on their bodies are simply worn out.
Moreover with the massive cuts in public service many workers in their late 50s are being asked to go.
Often it’s not entitlement but rather having to retire. It’s not a lifestyle choice but rather going before they are pushed.
Would people prefer they just claim benefits and live off the state until they are 66? I guess the Daily Mail readers would call them scroungers and benefit cheats.
So they retire on usually modest incomes. Many of the retired then do part-time work to top-up the inadequate public sector pension.
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You say “The unions are striking over government plans to make them pay more into their pensions.
But beyond that simple statement of fact…” THIS IS NOT A STATEMENT OF FACT. The extra money collected would NOT go into pension schemes but straight to the treasury. Current public sector pension schemes are in surplus to the tune of £2billion annually and are projected to stay in surplus for 20 years. This is an extra income tax levied only on workers in the public sector which this government so detests and is determined to privatise. I speak as a private sector worker with a lousy private pension (Whatever happened to the vibrant private sector always being better?)My wife and daughter work in the public sector and are on strike today for the first time, despite threats from their employers about their future job prospects and career advancement. The majority of strikers today were women. Billy liar Cameron thought a bunch of low paid women wouldn’t strike. Maybe what he’s done is start to make women see him for what he really is.
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Perhaps the real question is not why are UK public sector pensions so generous but why are private sector pensions so poor.
Has everyone forgotten the report by the RSA published in 2010 under the title: “Building the consensus for a People’s Pension in Britain”.
A couple of highlights –
•A huge proportion of our pensions disappear in fees – with charges swallowing up to 40 percent of the value of the pension.
•If a typical Dutch and a typical British person save the same amount for their pension, the Dutch person can expect a 50 percent higher income in retirement.
•That minor changes to our regulatory framework could boost pension returns by 39 percent.
Let’s campaign for better private sector pensions rather than forment a culture of jealousy with the public sector.
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I am concerned about another element of apparent economy with the truth. Spokespersons have said repeatedly that those within 10 years of retirement will be unaffected by the changes. (I am within 10 years of retirement.) The Prime Minister was careful to say when the offer was improved that ‘if you are within 10 years of your normal retirement age’ you will be unaffected.
In my case, for example, my ‘normal retirement age’ – the expected age in the current scheme, is still 60. Due to a change in the pension scheme in 2002, I already have to work to 64 to have a full pension, but that does not count as my ‘normal retirement age’. Current proposals by the Government give protection only to the age of 60 and any work I do after that would be under the new rules. Moreover, the new rules would mean that I could not retire at 64 but would have to work to 65 to receive any benefits under the new scheme. That hardly means I am ‘unaffected’.
It is possible the Government may negotiate proper protection, but they have certainly made no commitment to do so as yet.
I am afraid this is a symptom of lack of competence and contributes to the lack of trust in the Government’s…
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How can Paul Johnson call public service pension provision “remarkably generous”?
What the Hutton Report actually says is
“1.11 The Commission firmly rejected the claim that current public service pensions are
‘gold plated.’ The average pension paid to pensioner members is around £7,800 per year,
while the median payment is around £5,600. It also rejected the idea of a ‘race to the
bottom,’ emphasising instead that public service pensions should ensure adequate retirement
incomes for those who have devoted their careers in the service of the wider community.”
Indeed, achieving a full pension under the civil service classic pension scheme involves 40 years service! Do oft-quoted and divisive comparisons between public and private pension consistently take account of the length of service or the qualifications and experience of those involved? I suspect not, but the news juggernaut doesn’t worry about such details.
Private sector observers fail to understand the anger among civil servants and others because they forget that decades of relatively poor pay settlements in both boom times and slow-downs were justified partly on the basis of our modest…
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The local government pension is made up of around 100 separate local schemes with around 140 billion pounds in assets to pay pensioners.
The problem with people talking about “public sector pensions” is that there are a number of schemes rather than one. The local government scheme is currently sustainable but may not be if people cant afford the extra contributions. Contributions that dont improve pensions but just go to the treasury.
Not my opinion per se but the Tory representative to the local government association who wrote to the PM.
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Just to comment on a comment made by Bruce.
Apart from Civl Servants, all other Public Sector Works pay into a proper pension scheme. The monies paid in are invested and pensions paid out from this pot of money. Current Employees DO NOT pay for retired members pensions. These pension schemes are self sustaining, Hutne agreed this, particularly after the changes agreed with the Labour Government.
As regards the Civil Servants they have a deferred payment system were a proportion of their salary is not paid to them but held back against paying already retired Civil Servants. This is a system decided on by previous Governments and it was their decision not to invest the defferred payments into an investment scheme. It is worth noting that with less Civil Servants in future to pay for current pensioners, there will need to be more payments from Tax payers to cover the difference.
As redards extra contributions, these are not going into the pensions shemes and are an extra Tax. IT IS NOT FAIR FOR ONE SECTION OF SOCIETY TO PAY MORE TAX (3% MORE – EFFECTIVELY MORE INCOME TAX). Since this Tax is not going into the pension schemes, it shows that the pension schemes are viable.
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CPI does not only effect civil servants pensions.
Other Pension funds such as BT have also been told to change their pension fund payouts from RPI to CPI, to match government payments.
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At the end of the current term of office 2015 even if they never serve in office again, Nick Clegg will receive an annual pension of £26,403. George Osbourne would get £32,977. Vince Cable £39,551. Andrew Lansley £39,825. Nice work if ya can get it
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Interesting to note that the “top” Civil Servants who told /are telling staff who may / may not get a pension of £5-£7,000 they must pay more; work longer and get a smaller pension have retired or are retiring, Normington £80,000 pension Gus O’Donnell £105,000 pension! Good pension if you can get it!
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Those who are against Public servants from fighting for their rights have not paid attention to the arguments that have been put forward. When the private sector were getting large pay rises and bonuses compared to public servants I didn’t hear them stating, “that’s isn’t fair” and that our public sector should get paid the same as us” but now some of them seem to be jumpping about saying that’s not fair on us poor tax payers but remember public servants also pay taxes and have had to manage on low income from the start of their employment. We are now paying for bankers and others who ensure that their monies go totax havens or use the loop holes which the government refuse to close. They believe that these so called pillars of industry will move abroad. If they do, let them go as they have proven their lack of loyality to this country. As public servants we accepted the two year pay freeze and now under the pretence of unafordable pensions, this government are taxing public servants because they felt that they would get away with it especially as a Labor MP wrote the report on which they have based their actions.
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[...] changes to public sector pensions, which led to widespread strikes. Mouse here for Related LinksFactCheck: The truth about the public sector pensions row This entry was posted in Syndicated and tagged pension, pensions, public sector, public sector [...]
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I worked in acute psychiatry as a nurse and manager for nearly 40 years before retiring at the age of 58.The stresses involved in such work cannot be appreciated by those who have not experienced them and i don’t think the majority of people fully understand this.Many nurses and doctors i have worked with have become ill themselves as a result.I have earned every penny of my pension and the same applies to ambulance, paramedic and fire staff. Clearly the work we do is not appreciated by the thieving scum who govern us.
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