Is Cameron going to crack down on public sector pensions?

dont like rich wingers

Another Tory mess in the making.

A man who has a huge unearned income wants to punish public sector workers for the failures of his chums in the City whose activities who does not wish to regulate.

GJTory

Will this generate any savings? Public sector pensions are largely unfunded - so nothing is put aside or saved for them now. Replacing them with a DC scheme will cost money upfront rather than money later.

I'm in favour of this move as it will reduce the burden on the state in the future. But to the extent that public sector pensions are unfunded I don't see how it will save money now. Rather the reverse.

Laughing Larry

DLRW,

The buck stops with our Dear Leader the Teuchter.

joe

Watch him backtrack with ungainly haste...

luke

Gaff or bold new strategy?

My money is on gaff.

Trumpeter Lanfried

Grasping nettles. Exactly what's needed. But you have to grasp them firmly, otherwise they sting.

dont like rich wingers

A Teuchter is a highlander, Larry.

Brown is from Fife, born Glasgow.Calling him a teuchter is a bit like calling Cameron( highland name, please note) a Geordie.

GeoffH

DLRW.

Unfunded state-employee pensions paid out of taxation, are by definition, nothing to do with the City.

oldtimer

@dont like rich wingers
This is a much needed reform. It is not "fair" to me, a retired pensioner, that my pension fund is taxed to provide index linked, unfunded public sector pensions. So far, along with many thousands of other pensioners, my pension fund has so far had to pay over £110 million in unjust taxes resulting in a deficit. That deficit is made worse by the decline in the stock market since 1997. And remember the justification for the tax was the growth in the stock market up to that time.

The public sector are pension parasites.

Wilhelm

Meglomaniac Gordon Broon drones

'' I'd like to say on behalf of the world.''

The presumptuous old sod has gone mad.

enor mouse

How can you all be so negative and still call yourselves Conservative! Perhaps you are all trolls. This is the best news from CHQ for ages.

Hatstand

For god's sake learn to spell 'whinger' you dozy trot. Or do you really have something against premiership footballers?

Jim

Maybe we need to see the detail of this before we start to throw rocks. To my knowledge, and a close family member is a civil servant, those final salary schemes are contributed to by the employee - the one I know about pays 6% of their salary for that pension.

Now, as far as I, and she, is concerned, that pension forms part of her contract of employment. She will have paid her side of the contract when she retires and resonably expects to draw the pension which was promised.

I was lucky to be one of the last private sector workers to retire with a final salary pension - again, I paid into the pot for 30 years to earn that right.

Even ignoring the fact that those public sector workers make up a large slice of the voting public, I'd hesitate to commit to take away a pension which will be part of the terms of employment under which most will have taken up their jobs.

By all means draw a line and give all new hires defined benefit schemes, but lets be cautious about taking away pensions that many will have paid into for years and which will have formed the bulk of their retirement planning.

Is that an action which passes the "decency, integrity, honesty, fairness and morality" test?

Again, it may very well be that Cameron is talking about Ts & Cs for future new hires, which would simply bring the civil service into line with the private sector.

David Smith

Brilliant "Pie Shop" Saga see http://therantingkingpenguin.blogspot.com/

dont like rich wingers

Well that will be why there is a public pension, then, won't it Geoff.

Oldtimer

It's news to me that public sector pensions are not taxed. Moreover when the stockmarket was on the rise I do not remember pension beneficiaries of that complaining about how unfair that was for public sector pensions who could not benefit thereby, do you?

Finally are public sector pensions non contributory? I think not.Non pension fund does not mean there is no pension deduction from salary.

Forlornehope

This simply highlights one of the really fundamental divides in British politics. The reality of the Labour Party is that it is a special interest group for public sector professionals. Attend any local Labour Party meeting if you are in any doubt. However, it would be very difficult for the Conservatives to win an election without a significant vote from members of this group so they cannot attack them directly. Cameron's position on this may be honest but it's not a good political move.

A more relevant move on pensions could be to ditch Brown's means test, which makes it insane for 60% of people to save for retirement. A reasonable state pension could be funded in two ways. Firstly index the value to earnings and the pension age to life expectancy. The second step is to guarantee this government funded pension to all citizens who are not in receipt of another government funded pension. Everyone gets one state pension. These numbers could be made to add up and would address giving reasonable pensions, encouraging saving (you get to keep what you save) and funding of public sector pensions.

Damon

That would be a very sensible policy to introduce, and is frankly long overdue. Most private sector employers made such a switch over a decade ago.

DavefromLuton

I have a local authority pension - index linked and based on final 3 years' salary. My initial contributions were based on a salary of £750. My retirement salary was well in excess of £50,000
My aim when I retired was to get out of the scheme more than I paid in. I achieved that within 5 years. And we pensioners don't have to pay NI contributions on it. Where is the logic in that?
Absolute nonsense and most of you are paying for it - thank you.

GeoffH

DLRW.

You obviously haven't a clue.

There is no Civil Service Pension Fund into which contributions from employer and employee are fed. No fund, no trustees, no investments. Just a continuing liability that taxpayers have to fund.

And Oldtimer wasn't saying that public sector pensions are untaxed. Just that his Pension Fund was taxed in the Brown raid.

Since there is no Civil Service Pension Fund, no tax raid.

If you can't grasp the difference between taxes that fall on the Funds and taxes that fall on the pensioners when they receive their pensions, then you don't have anything useful to add.

As for 6% deductions mentioned by Jim, they just cut the current salary bill for the government and do nothing to build up a Pension Fund to meet pension liabilities when they come due. I agree there's a contract but there's no Fund to meet that contract. Just us and future taxpayers.

The Bellman

DLRW: Public sector pensions might not be non-contributory in a technical sense. However the money 'deducted' from public sector salaries as pension contributions is simply the transfer of a notional sum from one government account to another - as indeed are the taxes, NIC etc. These salaries are paid by the taxes of the many workers whose contribution to wealth creation is more - shall we say? - direct.

That's hardly the same as for a private pension, where you must make a decision about the scale of contribution and evaluate the risks involved, and, as you say, are personally liable for the decisions you make (and quite right too) - whether or not the Treasury plans a raid on them partly to subsidise the sustainment of the enormous liabilities of public sector pensions.

James J

The first thing to do is stop added years and early retirement. How many police/local government/nurses/NHS Admin/Firemen work past 55?
We also need to distinguish between two types of public pension schemes. The first is in use in the NHS and Local Government which is part funded by the employee and a fund identified to pay liabilities. The second is for civil servants etc where there is no fund and is paid from current tax revenue.

Laughing Larry

DLRW,

Teuchter is also a term meaning 'ignorant northerner.'

I'm fram Glasgie.

To me he's a Teuchter.

I now live in England.

Stepney

Private-sector workers pay way more in tax every year – £21bn – than they save in pensions, and those taxes are used to prop up the comfy pension schemes of the huge army of public sector workers. The average public sector worker retires with a pension pot of £427,000, which produces an income of more than £17,000 a year. Private workers end up with a pitiful £25,100 on average, yielding just £1,700 annually.

10,500 NHS managers have retired with pension pots of more than £1m - so that's 10.5 billion which hasn't been spent on patients.

Delia

If he even thought of suggesting such a thing he might as well resign now. He would have no political future at all if he started messing with public sector pensions - unless he's talking about MPs pensions. In that case carry on.

GJTory

I agree with Jim - you cannot take away someone's accrued pension rights. On the other hand replacing further accrual of DB pension rights with a DC scheme is very sensible.

If public sector workers are making contributions but these are not going into a fund, then presumably this is a ready source of funding for a DC scheme.

But if these contributions are not going into a fund then presumably the government is spending them on its current expenditure. This is both unfair and profligate. But it would require further govt spending cuts to allow public sector workers' contributions to be diverted to fund the DC scheme.

DLRW - if a private sector worker has a funded private pension and he pays tax on the income he derives from it then he is contributing to the general govt spend, including public sector pensions.

If a public sector worker derives income from an unfunded public sector pension and pays tax on it then he is simply receiving less money (through tax) from the govt and not contributing anything at all. There is no funded pension pot and therefore nothing to contribute from.

Pat

As far as public sector pensions are concerned, the problem appears to me to be that successive governments have not paid into a fund themselves, nor have they paid the employees contributions into a fund. When Maxwell did something similar it was regarded as fraud. Ok so we imprison every politician we can find- but what is the best we can actually afford to do for the contributors?

The Bellman

The Armed Forces changed their pension scheme a few years ago. It was phased in, so all people joining after a certain date, well in the future when the change was implemented, would be on the new T&C. Anyone who joined under the old T&C could elect to change to the new scheme - it suited many to do so - or to remain. It was a source of very little friction.

Mind you, even the new version still a generous scheme.

I suspect Cameron's plans would be phased in in a similar fashion.

TGF UKIP

"My vision over time is to move increasingly towards defined contribution." In short all you public sector jobsworths, fear not. This is just the sort of sop that I have to throw in the direction of Pete Hoskin and his ilk from time to time to try to persuade them that I really am some sort of conservative.

Remember better that I am the Dave who promised to respect and defer to the working practices and customs of the public sector.

Your pensions are safe for a long long time to come.

liz Brownl

GJTroy
gordo took away nearly everyone's accrued pension rights - with his pension grab - or were you asleep at the time
DC should also be calling for a 20% drop in Civil servants' salaries - Ireland's Civil Servants have given up 10% and Singapore 19% 0 and Civil Servants includes the MPs -

THX1138

James J Totally agree.

The public sector isn't just social workers reading the Guardian it's Daily Wail reading coppers & prison officers too

What are the old Bill going to if they can't leave on a full final salary pension at 55 with a duff back.

I tell you the old bill see is as their god given right.

My mother in law's boyfriend has just gone the dodgy back route to spend more time with the golf and the BNP meetings. I kid you not.

GJTory

lizB - I was not asleep at the time! I think you misunderstood me (probably my fault).

I agree with you, in the sense that you shouldn't take away people's pension rights. Removing with people's acrrued pension rights is basically theft imho. Obviously its pssible to do it - gb did it.

Although playing with the state pension is different - there is no contractual obligation for it to be paid, unlike a DB scheme.

I agree with you on the civil servant point as well. Although I think singapore has reduced its civil servants' pay by reducing their GDP related bonus.

James J

THX1138
Yes our political class never seem to let the facts get in the way of a good sound bite.
The public needs to understand the different public sector pensions and realise there is not just one and how certain practices can be stopped without a revolution.
In the end the gap between the provisions in the private and public sector and the demographics and lack of homogeneity in our society means these pensions won’t be paid beyond another generation.
Not that our political class understands the concept of strategic planning.

Vince

The way to end so called pension apartheid is to restore decent private sector pensions, not to destroy the remaining final salary schemes. Reversing Brown's disgraceful 1997 tax raid would help, but I doubt it will happen now. Bringing everyone down to a low retirement income seems a bizarre way to achieve fairness!

It’s interesting to note that most of the remaining final salary schemes (other than directors, executives and MPs) are amongst unionised workers mainly in the public but also private sector. This is not a coincidence and shows that unions can often defend pension benefits – it’s a line in the sand the TUC has drawn, and rightly so.

A few years ago, MP's voted themselves a 20 percent increase in their own pension benefits just as peoples’ schemes were starting to close. I wonder if Cameron has any plans to axe politicians’ final salary pensions, I doubt it somehow!

Ultimately, this sort of thing is simply divide and rule politics designed to pit one section of workers against the other - meanwhile the ruling elite still are guaranteed a decent retirement.

oldtimer

@DLRW As other have pointed out, you obviously do not understand that the basis of a private sector pension is a fund invested in shares, gilts, property and other investments over a working life to pay a pension in retirement. From c1920 to 1997 it was the explicit agreement with the Inland Revenue that current income set aside for a pension was not taxed until it was drawn as a pension - otherwise there was double taxation. Brown changed all that with his pension tax. The effect was to charge UK pension funds with c£5bn tax per annum. The trustees of such funds had a choice - try to persuade the company to make up the shortfall or see the long term death of the fund - and the pensions paid. If your business went under - tough, you had to hope that the pension fund held out. If your proprietor was a crook - eg Robert Maxwell (former Labour MP) - you were screwed. Ask a Daily Mirror pensioner, or should that be ex Daily Mirror pensioner?

The fund I referred to has many thousands of pensioners. The average annual pension paid is the princely sum of £2713. Yet these pensioners are being taxed to provide index linked unfunded pensions to the public sector. This is a disgrace.

Brown, who will be a principal recipient of such a pension, is a parasite. It is disgusting to hear his sanctimonious claptrap week in and week out.

CS

***Private-sector workers pay way more in tax every year – £21bn – than they save in pensions, and those taxes are used to prop up the comfy pension schemes of the huge army of public sector workers. The average public sector worker retires with a pension pot of £427,000, which produces an income of more than £17,000 a year.***

That's nonsense. Even working on a 50% of final salary scheme which no longer exist for the vast majority of public sector workers, that'd mean that the average public sector worker is on £34K a year which is plainly ridiculous.

And would those of you claiming to be the nation's wealth generators mind telling us what line of work you're in so that we can judge for ourselves exactly how bravely entrepreneurial you really are?

MD

I am a retired oil company employee. I was made redundant at 55 after 30 years service. Having rewritten the pension fund rules following Brown's raid on pension funds, the bastards discounted my pension by 2% per year of retirement before age 65. Yes, a reduction of 20% on a pension already reduced by 25% from the level which would have been my entitlement had I been allowed to work until full pension entitlement after 40yrs service at 65. And public 'servants' get full pensions at 55; that just ain't fair.

Hereford

THX1138: The problem is dealing with and talking about the public sector as if it were a homogeneous, single group.

We need to change this and segment the sector into Operational Delivery and Administrative.

That way we can legitimise discussions about changes to terms and conditions which might affect Administrative employees negatively, whilst not contaminating the dialogue with inflamatory headlines of "Cuts to Nurses Pay!"

HJ

Many public sector workers have, indeed, made contributions towards their pension 'funds' (although civil service pensions have traditionally been contribution-free and even now most only pay 3% to extend benefits to their families). The point, however, is not whether they have made contributions, but how much the taxpayer has to fund. In practice, the employees' contribution is just a tiny fraction of the cost. On an actuarial basis, their pensions cost many times what even the most generous private sector employer contributes.

Someone above also said that it would be unfair if existing public sector accrued pension rights weren't honoured. I have some sympathy with this (except for the fact that I have a friend who is my age - 48 - who has just retired from the police on a very generous index linked pension that most likely will be paid for rather longer than he worked). However, I contributed for many years to a defined contribution (money purchase) pension. I contributed on the understanding that the growth of the pension fund (including re-invested dividends) would be untaxed and I would only pay tax when I received the pension. However, Gordon Brown arbitrarily then decided to tax my pension fund (the famous £5bn+ per year raid), thereby reducing the value of the pension I will receive. I have no escape from this as the money is 'trapped' in the fund until I retire, being taxed every year. Brown effectively chose to reduce my already accrued rights in order to fund his public sector spending (including pensions). So if it's wrong to do this for the public sector, why is it right to do it for the private sector?

MD

Just so, HJ, My private pension is NOT index linked but discretionary; it falls behind the index by about 1 - 1.5% each year. The comparison with the police is salutary: my neighbour, a retired Met constable the same age as me, buys a new car every two years while I drive an eight year old car!

Naomi Sajeri

Brown should have tackled this: he has more or less destroyed pension provision in the private sector, so why did he wimp out on the public pensions? This should NOT be taxpayer funded.

David

Don't believe any of the above. Our current economic situation is so dire that in the near future the Government (any Government) will be forced to change public sector pensions to avoid state bankruptcy. Look back to the 1930s when teachers' pay was cut at a stroke. David Cameron is very sensible to raise this now before the election. By putting down his marker now, no-one will be able to accuse him of deceit if he implements this after the election. Also, he cleverly boxes in Gordon Brown who will be forced to declare his hand or lie.

joe craig

Teachers pay may have been `cut at a stroke' in the 1930's but when the government tried the same thing with HM Forces the Royal Navy muntinued at Invergordon and the stock market feel so hard that this country had to abandon the Gold Standard.
Don't think Public Sector workers will sit idly by and accept the blame for a financial situation not of their making. The present financial debacle has its roots firmly in the private sector(banking).
People are more aware now and will not let governments treat them unujustly. I see that even the Police (also Public sector)recently asked to be given back the right to strike.If they ever withdrewe their labout the Country would fall into disarray very quickly.

Pension Release

The retired individual is also allowed the liberty to reside in his or her own house, in lieu of which he or she is receiving the money.