It's all very well to say that contribution rates do not cover costs, and it's clear they do not.
However, public sector salaries are also lower than private sector ones.
My father, aged 55, is a public sector auditor, earning less than he would in the private sector but getting a (much, much) better pension as compensation. What would you do to this people? The government is up shit creek without a paddle, and there really is no way around it, although agreedly the whole concept of a National Insurance scheme where the so-called insurance is not invested, so you put in £100 today to get out £80 in 10 years time is beyond a joke, and government pensions, be they from public sector jobs, or even simply the state pension are an absolute disaster.
The problem with pensions is that it is a case of putting off a small bill today to make a bigger one tomorrow. If BA did not pay its pilots any pensions they would pay higher salaries, but they would not have such frightening liabilities basically holding the company to ransom.
Impressed by your analysis. What are the possible solutions or outcomes that you foresee?
Matthew,
You argument is based on a false premise that public sector salaries are lower than private sector salaries. From where did you get this idea?
Here is quote from Alice Miles in the Times recently:
"Incidentally, while I was researching this I came across this fact: that the median level of full-time earnings in the public sector (£476 a week in April 2005) is £64 higher than in the private sector (£412 a week), and the gap is widening. That is an extra £3,328 a year, along with generous pensions. I didn’t know that. Bear it in mind when you hear the moans of public-sector workers next week over their pay rises."
I understand the 'keep your hands off our pensions' mantra. I said the same thing myself when I was told 'sorry you can't receive your state pension at 60 it's gone up to 65' and now we're being told 'make that 69'. Then my pension company wrote to me to say that even though I've been regularly putting money in from the age of 16, the pension returns (they originally told me would be there) are much lower than ten years ago and if I want to receive half of my wage I need to quadruple my savings and for a longer term (49 years +) because of the reduction in value of my pension savings which have halved - and i've never taken a pension holiday either.
Then you've got to think how many public servants who retire early aren't contributing to the NHS anymore. So someone starting work at 17 that can retire at 51 is no longer contributing to the running of the health service (as is the case with the privileged few in the private sector I know - usually the ex-nationalised industries, because most other Engineering companies etc who used to offer this unaffordable perk have closed down and shipped out!)
To add to the problem a lot of this money isn't being spent in the UK economy, more and more recipients have partially retired abroad to retire in the sunshine, with a caravan in the UK for the summer months. I agree it's their money to do what they want with, but I'm sure it wasn't anticipated that it would go to France and Spain at the rate it has.
This was really bad planning by successive governments. Exacerbated in the past decade with pension raids and businesses providing lower returns to their pension company investors and paying less corporation tax because they're propping up their own pension commitments.
HJ, you are using bad statistics.
Whatever you want to prove you can find stats to prove it.
In this case you are comparing apples with pears.
A public sector job is not the same as a private sector job. Most minimum wage jobs are no longer employed by councils - cleaners, etc. will all be outsourced to the private sector.
Equally many jobs do not exist in the private sector (five a day coordinator, etc.).
But on a like for like basis, a solicitor in private practice will earn more, auditors.
Regardless of this, even if the wages are higher, these people have a contractual right to their pensions. That is the government's fault, but it does not become right to simply take their rights away. Private sector schemes are closing final salary - they are not ripping off those people already on them.
"A public sector job is not the same as a private sector job. Most minimum wage jobs are no longer employed by councils - cleaners etc. will all be outsourced to the private sector"
Matthew the BBC reported that the: "Workers supporting the walkout included leisure centre workers, school staff - such as caretakers, cooks, cleaners and office workers - refuse collectors, housing officers, nursery nurses, youth and community staff and tourism officials
Workers supporting the strike include leisure centre workers, school staff including caretakers, cooks, cleaners and office workers, refuse collectors, housing officers, nursery nurses, youth and community staff and tourism officials.
The strike has also affected traffic wardens, housing associations, the Probation Service, the Meat Hygiene Service, street sweeping, home care, occupational therapy and other social services.
Transport has also been hit as some workers formerly employed by local councils, such as bus and subway drivers, remain members of the pension scheme."
When you say auditors are paid more in private practice -v- public are you including all the perks and benefits e.g. public sector jobs often attract enhanced holiday allowances increasing with service length (10 bank holidays), life assurance, duvet days, paid time off for emergencies, full sick pay, extra maternity/paternity benefits over the SMP/SPP allowance, subsidised canteens, free parking, private medical insurance and free leisure centre use.
I know a private sector nursery nurse who moved into the public sector who can't believe how much better it is.
Matthew,
No you are using bad examples. What sort of job would a 5-a-day coordinator get in the private sector?
Many public sector jobs would pay minimum wage were they in the private sector.
For example, the average nurse is now paid £28k. It takes just 5 A-C GCSEs to train to become a nurse and it pays during training. The typical nurse would not get as much in the private sector. Auditors may get less in the public sector but they also don't have to look for work and lose their jobs if they don't find it.
As for private sector pension final salary schemes - you are simply misinformed. Many ARE being closed to existing employees (members just get rights so far accumulated and further contributons have to be paid into money purchase schemes. In those that are being maintained (most often just for existing members) they have agreed higher employee contributions and later retirement ages.
If you think that contractual obligations are sacrosanct, here's my suggestion. Make all those currently on final salary pension schemes redundant on the basis of cost. They will then have their scheme contractual benefits preserved (but will build up no further entitlement). Happy now?
Matthew: "Equally many jobs do not exist in the private sector (five a day coordinator, etc.)."
Ok, please would someone kindly enlighten me, WTF is a 5 a day coordinator?
Matthew- as a contemporary of his, I have every sympathy with your 55 year old Dad. Although on average public servants do now get paid more than private sector workers (see my blog here http://burningourmoney.blogspot....n-
vineyard.html ), there are clearly cases where you can get a lot more in the private sector- auditing may well be one of them. Clearly he had the choice of moving across (as I myself did), but it may be he decided to stay because of that pension promise.
So no, it isn't "fair" to change the terms of pension entitlements halfway through "the game".
But the problem is that almost all of us are now facing some knockback on what we were originally expecting, simply because we're all living too damned long. Which is why so many company schemes have closed not just to new members, but also to further accruals for existing members, and are renegotiating entitlements (as HJ says). And why BA is a pension deficit with an airline attached to it.
There are no magic bullets. But any workabel solution has to include an increse in pension ages for everyone. Including maybe your Dad.
(PS There is of course one very important distinction that's not always remembered. You can RETIRE at pretty well any age, and nobody's going to legislate to stop that. But going forwrd, you shouldn't expect to draw your PENSION until your late 60s. If you want to retire earlier, you'll need to fund yourself).
APL- a five a day coordinator is someone who coordinates...umm, activities to...er, facilitate the consumption of 5 portions of fruit and veg a day. (see the Taxpayers' Alliance Book of Non-Jobs for similar)
WT: "a five a day coordinator is someone who coordinates...umm, activities to...er,..."
Matthew: "Equally many jobs do not exist in the private sector (five a day coordinator, etc.)."
Well, whadayouknow!
At the stroke of a pen, we know why such 'jobs' do not exist in the private sector.
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