Public service pensions
November 30th, 2011 – Day of Action
Unite, along with the unions across public services, is balloting its membership to take part in a day of action on November 30th , 2011 to defend decent public service pensions.
Unite, the TUC and other trade unions are committed to continuing talks with the government and relevant employers in each of the major public service pension schemes. The government has so far failed to properly engage in negotiations with the trade unions.
The government has refused to budge from plans that would mean public service workers would have to work longer, pay 50% more now and get 50% less as a pension in the future. This is unjust. It is also unnecessary. The government is urged to bring new proposals to the table to make progress in negotiations possible.
The facts about public sector pension schemes:
Despite government claims, public service pensions are not ‘gold plated’; the median pension is currently £5,600 and for women it is just under £4,000, with 65% receiving less than £6,000.
In July 2010, the government unilaterally announced it was changing the indexation from RPI to the lower CPI measure. This has reduced pension benefits by an estimated 15%.
The government proposals risk creating more pensioner poverty, not just through reducing the value of pensions, but also increasing the numbers who have no occupational pension at all. The government wants to increase the contributions members make now by a further 3.2%. An increase in contributions means that many members will opt out of pension schemes they can no longer afford. This will put the future of the schemes in doubt by reducing contribution income overall – a danger that even other ministers, such as Secretary of State for Health, Andrew Lansley, have pointed out in leaked correspondence.
Are these proposals necessary to make pensions affordable?
No. The government’s proposals are unnecessary. In 2005, significant changes were negotiated to public service pension arrangements. This included raising the normal retirement age to 65 for the NHS, Teacher and Civil Service schemes, where the normal retirement age was already 65, it was agreed to end the ability to retire after 25 years service. In the Local Government Pensions scheme the retirement age after 25 years was 60. Contributions of the highest paid were increased. Under cost-sharing and ‘cap and share’ future employer contributions are capped at 14% and the increase cost of, for example, longer life expectancy, falls on the active members of the pension schemes, and not on the government or the employer.
Are these pensions a public drain?
No. Analysis by Government Actuary Department for the Hutton Review found that public service pension benefit expenditure from unfunded schemes is expected to reach 1.9% of GDP in 2010-11, and remain close to this level for the next decade before decreasing to 1.4% of GDP by 2060. Even this measure of public service pensions ignores the inflow of contribution income, and suggests that all of this is a straight drain on the taxpayer, which is not the case.
Are these schemes in deficit?
The so-called ‘unfunded’ schemes have a planned correlation between contribution and benefit expenditure over the long term, rather than at any particular time. This means, at times, the schemes are in surplus, for example this is currently the case with the NHS scheme– the largest scheme. In 2008-09, it actually made a profit of £2bn for the Government. The government uses that money for other purposes, and in effect promises a fixed investment return for using it.
November 30th, 2011 – Day of Action