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Dave Prentis: The politics of pension envy are perverse
THERE is a lot of rubbish spouted about public sector pensions. They are described as "gold-plated", "unaffordable", and a "drain on the taxpayer". Inevitably, this is coupled with calls for those who provide our public services to share the "pain" of the private sector.
Some employers' organisations, politicians and pressure groups appear desperate to provoke pension envy and drive an artificial wedge between workers. They want to drive down standards, pay and conditions in a
race to the bottom.
It is perverse at a time of economic downturn, when many find it difficult to save for retirement, that they push for the closure of viable pension schemes which consist mainly of low-paid workers.
It all seems to be a bit hysterical and is fuelled by a growing number of companies planning to close down their final salary schemes, including to existing staff. Barclays, Morrisons, Fujitsu, IBM and Dairy Crest are the latest to consider this option.
They often cite rising costs and pension deficits. But there seems little doubt that employers are using the recession as an excuse to cut costs and provision, where this may not be necessary.
The truth is there is not an awful lot to envy in public sector pensions. Yes, they do provide valuable benefits and there are an awful lot of people in the country who don't have access to an occupational pension scheme, let alone a decent one. But they are, by no means, "gold-plated"; for most employees they could be described as "tin-foil plated".
The average pension in local government is 3,800 a year, but for women, it's less than 2,000 and in the NHS it is 6,500, although this figure is distorted by the 20 per cent who are relatively high earners – GPs, hospital doctors. For the many, the low-paid who make up the hospital team, their pension is much lower than that.
Paying into a public sector pension scheme is a sound way of saving for retirement. NHS employees pay between 5 and 8.5 per cent of their salaries into the scheme and local government staff between 5.5 and 7.5 per cent.
If they didn't have them, they would have to rely more heavily on state benefits. Research in 2006 showed that if the local government pension scheme did not exist, based on just the current pensioners, it would cost the taxpayer 2bn a year in increased means-tested benefits and lost tax revenue
Pensions can be relatively high for those at the top, the high-earners, such as judges, senior civil servants, senior army personnel and for MPs. But they are nowhere near the huge sums we read about for the bosses of big companies or financial institutions, many of whom contributed to the current recession that is affecting all pension estimates.
It must be remembered that only a few years ago, there was a major review of public sector pensions. There were particular problems in local government, where pension holidays and bad investment decisions pushed some of the funds into the red.
But, in all the schemes where we have members, we sat down with employers and agreed terms that protected current employees' rights and contributions that were also affordable and sustainable for the future.
Taking the long view is a necessity in determining pension provision. I have seen some figures thrown into the equation that would be true only if everyone decided to retire tomorrow, with the maximum entitlement and lived to be 100.
We are an ageing population, so the question shouldn't be why have
public servants got a viable pension scheme? It should be, "Why haven't all workers got access to a decent pension scheme?"
We should question why is it that those at the top in the private sector, the high earners, get great pensions? And then ask, don't the workers in those companies, who created the wealth, deserve a decent pension, too?
Even where the bosses perform badly, they still get to keep their pensions. Look no further than the former boss of the Royal Bank of Scotland, Fred Goodwin, whose actions led to the collapse of his bank, who walked away with a 700,000 a year pension, part of which he later refused following public pressure. That's still real gold-plate.
We have to help people save towards their retirement, when they are working. This idea that the employer has no responsibility in the
matter has to be challenged. They have to wake up and realise that this growing trend towards defined contribution pension provision, with low employer contributions, is not the answer.
Most people will never be able to build up decent enough pensions and may face poverty in retirement. And we will all pick up the tab for that.
The Government can – and must – encourage employers to provide good schemes. If it doesn't, the cost to the state (and the taxpayer) will be astronomical as millions reach pension age with inadequate savings.
Dave Prentis is the general secretary of Unison.
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Saturday 26 May 2012
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