There is a well known quotation that says “There are lies, damned lies and statistics”.
The current controversy over Public Sector Pensions in the media and the various reports remind one strongly of this. Nowhere does it apply more widely than in pensions, where they are used to confuse.
Statistics are factual; errors occur when they are applied out of context or more widely than intended.
The final report on Public Sector pensions has now been published and appears to offer little new from the interim report, in spite of the consultation period. The approach is limited with the main emphasis on dire predictions of increased life expectancy and the potential taxpayer costs.
The report, like the interim one, is taken up with complex mathematical models and jargon which appears designed to confuse and does. It is doubtful whether the authors even understand it, I don’t.
It advocates transparency but does not practice it. There are no actual facts or budget figures giving income and expenditure for schemes; costs are given at £25bn and projected to rise to £33bn by 2015.
Such figures are hard to come by; Pension Trends give Private but no Public scheme values; Gad 2009 gives average salaries, pension and member details, but information is spread over other reports.
The Blue Book gives PS contributions as; mpe-£6.7; mpr- £7.9 and social (SERPS?) -£5.1bn, which corresponds to averages of 6.5%, 7.3% and 5%.
The report gives NHS at 5-8.5%;Teachers at 6.4%; Police/ Fire at11-8.5%; Civil Service at 1.5-3.5% ; armed forces nil and Employers at 14% for NHS and Teachers, with the others almost twice this. There is no attempt to separate out the subsidised areas, although higher earners are dealt with.
Expenditure figures available suggest a healthy £5bn surplus in the fully funded NHS, Teachers and Police/Fire at income of £19.2 and expenditure at 14.2 bn and does not justify increases.
In fact SERPS is an employee contribution (waiver of State pension rights) and not employer as generally taken. Adjusting this gives average employee at 11.5%. proposed increases of 3% would give employee at 14.5% rising as high as 19%, with employer at 4.3%, worse than the worst private scheme.
Change to a funded system are dismissed as not needed as pensions are guaranteed by the taxpayer, and yet there are screams at present costs. Change is said to cost £20bn per year but has not been justified.
The panic over increased life expectancy is the scapegoat for all changes. A chart comparing 1950 to 2009 is given, and an example of a woman retiring at 60, stated as spending 45% of adult life in retirement, with the aim to reduce this to a third.
The sums do not add up, life expectancy is given as 24 years to age 84, some 68 years of adult life, which only gives 35%, close to target, also only half these women will reach age 84.
1950 was the post war deprivation period; the NHS and major health and safety campaigns have made massive inroads into mortality rates and it is debateable whether this will continue much further.
Selected pension schemes abroad were considered, but the successful American PS scheme ignored.
The attack on PS pensions is gathering pace with all the technological weapons of the media being deployed and is based on creating envy by using distorted, exaggerated and questionable statistics and facts, e.g. “The gold plated scheme, paid for by the taxpayer, which the rest are denied”.
In fact the majority are not; they pay substantial contributions with normal Employer and SERPS for a meagre pension of 25%. Change is needed in the taxpayer subsidised areas of Civil Service, Armed Forces, MP’s and higher earners. The basic flaw in unfunded schemes also needs attention.
The counter attack from representatives and unions has been non- existent. There are now threats of outdated strike action which will only alienate public opinion and support.
Effective action would involve:-
· Action on the legality of the unfunded scheme; these are hard earned personal pension savings, which are not allowed to accumulate and grow but diverted to benefit someone else.
· Promoting the real facts of PS pensions; contribution and benefit levels etc. for the majority. These contributions are additional to NI pension provision that others depend on.
· Demanding full pension fund accounting for each scheme. Available information is disjointed.
· Questioning statistical projections and relating these to the unsustainable nature of the scheme.
· Dissociation from DB Private scheme contraction which result from excessive benefits, taxation, contribution holidays and poor management.
· Accepting the reasonable changes needed
· Strong promotion of the Public Sector, its service and devotion to the community.
· The Social- Economic advantages of the Public Sector and their income and pension spend.
In the absence of such action, all of the 5.4 million workers should mount their own counter attack. They should write, text, e-mail their representatives; Unions, the media; MP’s; and Government Ministers.
The solution of increased contributions, delayed retirement, reduced benefits is only a short term one. The basic “Pay as you go” system is uneconomic, cannot be maintained and is grossly unfair.
The general public should also be very much afraid; the State pension system is built on the same unstable foundation and is already undergoing similar changes of increased NI contributions, delayed retirement and decreasing benefits. Private pensions are moving in the same direction (see other blogs)
Savings Annuities Public Sector NHS Teachers Police Local Government Hutton
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