Public Sector pensions have gone quiet, whilst the Government presses ahead with its changes regardless of comments, suggestions or opposition. It continues with outdated and unsustainable “pay as you go” systems, without any apparent regard to pensions being a person’s future resulting from personal savings.
There is a “daddy knows best” attitude in the present Government, which runs contrary to all its statements and PR on empowering the people; to get it right occasionally would help but there are constant U turns and changes.
Both Parties in Power have forgotten all election promises, and produce policies without thought, which then have to be changed and cobbled into second rate compromises or abandoned.
We have stringent economic policies, increasing taxation creating redundancies, withdrawing essential services and causing misery, mainly to the poor and under privileged, which now extends well into the middle classes. Yet the odd million or more still appears out of the hat for something or another from savings made somewhere, which is ridiculous. You either economise or you don’t, savings made cannot be spent elsewhere or they are unnecessary in the first place.
Pensioners are one of the major victims of this so called progress to a better economy, with the prime concern being how to prise them away from their money, whether it is income, savings or even the value of their homes.
The latest victim of this plunder and ill thought policy is the Royal Mail Pension scheme, mentioned in Blog 67. In exchange for £28bn of Fund assets to be taken into Treasury coffers, the State will give promissory notes for future pensioners.
Existing members will become part of Public Sector pensions and see contributions rise accordingly and benefits diminish giving poor returns, whilst pensioners will see their income held at the minimum level possible.
In previous blogs we have not looked at how defined benefit pension scheme actually performed and we have here a good example. Investment income from the assets meet 60% of the pension payments of £912 million, with fund growth of 8% last year, with market predictions suggesting this could be maintained for the next ten years.
The scheme has been closed to new members and at present rates of retirement will take 30 years for active and deferred members to retire, with 25 year life expectancy the fund needs to last 55 years; pensioner population is increasing annually by 0.7 % due presumably to longevity, less than half the State projection rate.
Inflation increases in payment are 3.1%, so that a 4% return on investments would meet this and the pensioner increases; contributions will steadily reduce over the next 30 years and combined with even modest returns the fund assets would survive the pensioners by some 25 years. They could even remain unchanged if present returns are maintained.
The Fund deficit of £10.2 billion (now given at £8bn) is made up of ££7.5 bn of asset write down with no detailed explanation of how liabilities are arrived at. There appears to be a set of rules for defined benefit schemes which are not applied to State or other schemes, resulting in the decline of the only worthwhile pension scheme.
The Royal Mail is in profit, yet the Government appears intent on selling this off, probably at a loss and to the detriment of its customers, the largest rise in postal costs have just been announced and will hit those who are currently struggling to live. All to allow privatisation; it should remain a profitable community service.
The Pension Fund is healthy; it should be transferred to an Independent body, run for the benefit of members, whose savings it is, re-opened to new members with revised terms. Contributions should be clearly stated with SERPs rebate separated from Employer’s contributions which are overstated, they are in fact 6%, 5.2% and 12%, with average pension at £7,000 pa. Little different to or more generous than other DB schemes.
It would be a criminal act to liquidate the scheme; transfer to members with Independent Trustees would make more sense with the scheme remaining active for all Postal workers.
Annuities, Public Sector, NHS, Teachers, Police, Local Government, Hutton, State Pensions, Transport, Comment
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