This blog is another diversion from the main course, but I feel that there is an urgent need to respond.
The attack on Public Sector Pensions increases daily with many misleading and incorrect statements designed to brainwash the public to believing that they are paying these pensions directly from their own pockets as a taxpayer’s burden.
This is untrue and not supported by the facts, yet there is little rebuttal of these claims or a counter attack within the public sector or the unions or representatives.
Of course all public sector costs come from taxation; the Prime Minister could be considered as a burden on the taxpayer.
PS workers are being warned of contribution increases of up to 3%, effectively a pay cut, in addition to a proposed two year pay freeze, a further pay cut of some 6%.
Yet pension contributions overall are similar to the private sector, and benefits are considerably lower. The State accounts bible, the 2009 blue book shows PS contributions as:-
Employers - £7.85bn; Employees - £6.69bn; Imputed Social - £5.12bn; Total - £19.66bn
Average Employee contributions are 6.5%, giving Employer at 7.3% and Social at 5% (SERPS rebate).
These contributions are Employment costs and not direct Taxpayers costs.
2009 Gad report shows the largest, the NHS, has an average wage of £20,900 and average pension at £5,200, just 25%, Teachers are similar; half the return on contributions of a funded private sector scheme.
This is not value for money, even with current poor pension returns, increased contributions make it worse.
The Taxpayer’s burden arise from the subsidised Civil Service, Armed Forces, higher earners and MP’s pensions, which should be treated as Department costs. The other major schemes have some £5bn surplus.
The root problem and threat to PSP is the unsustainable “pay as you go” nature of the scheme.
Contributions from hard earned wages, which should build up and grow are being spent immediately on existing pensioners (see Blog1). With a worker / pensioner ratio of 1.4 , this requires a 37% wage contribution to yield a 50% .pension, an impossible and unaffordable scheme.
This costs three times the equivalent funded scheme and is of questionable legality, being a criminal mis-use of personal pension savings and funds, arising from your own and employment contract contributions and SERPS rebate from NI. Change to a funded scheme would give larger benefits and major savings.
Public sector pensions are just the start, they also include Local Government and University pensions. The State pension has the same unfunded problems and the second pension is under attack and will disappear.
There is a need for a secure, well managed funded universal defined benefit pension scheme to replace all the failing, outdated and uncertain schemes and the speculative investment base they depend on.
It is time for action and protest; not the street demonstrations which can be taken over by hooligans, but in this high tech electronic age by E-demonstrations.
E-mail your MP; the Prime and deputy Prime minister; DWP; your union/confederation representative; NHS or Teacher boards. Contacts can be found on directgov.uk. Use Facebook and similar sites.
Strongly object to the contribution increases, the use of your pension savings and SERPs rebate to pay another’s pension and subsidise non contributors; query the legality; poor return and unfairness of the unfunded scheme. Make your voice heard! People power is effective as recent events have shown.
The Big Society starts here by Public Sector employees and all others demanding a fair deal from the coalition. We may all have to tighten our belts but it needs to be fair and justified.
.Savings Annuities Unions
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