Friday, 11 March 2011

Public Sector Pensions

The distress and upset caused by announced changed in pension benefits is something which affects everyone and has an impact nearly as great as redundancy.
It can make people feel cheated and devalued and forces them to rethink their future more carefully. This has been the case for several years now in the PRIVATE SECTOR where only approximately 35 % of the employees have pension provisions as opposed to 85% in the PUBLIC SECTOR. There are almost no “Final Salary Schemes” left and so most employees who had these great schemes are now placed into less advantageous pension funds.
Some had the choice to continue in Final Salary Schemes but this entailed additional contributions up to 15% of salary which in many cases was also met by another 15% from the employer. In order to gain a good final salary pension it is currently necessary to put approximately 32% of earnings into a fund.
The impact of this was enormous and indeed only those close to retirement could contemplate the additional contributions whereas the younger element were naturally forced to join “Money Purchase Schemes” which have an unknown yield at the end of the working life.
The pensions of the PUBLIC SECTOR have generally been much more favourable than those of the PRIVATE SECTOR, with earlier retirement and smaller contributions. Unlike the PRIVATE SECTOR the monies for the pensions were not placed into funds which would increase through investment but the pensions are paid for by TAX PAYERS. That means that the shortfall between an average contribution of 8% and the 32% necessary to produce a good pension is met by tax payers. As there are 4 times as many taxpayers as PUBLIC SECTOR workers this means the average funding is 6% for every worker. That would mean someone still in a final salary scheme contributing 15% to his scheme and an additional 6% to pay PUBLIC SECTOR pensions while their contributions remain at 8%.
The review recently published that recommends pension calculations based over the working life is FAR MORE GENEROUS than necessary and should be welcomed gratefully.
The tax payers are no longer prepared to pay out more to give PUBLIC SECTOR workers more generous conditions than they themselves have for their retirement.
It is obvious and expected that Trades Unions will stir up their members for strike action but this time it MUST BE TO NO AVAIL. The Government and Councils and all tax payers must totally resist the form of blackmail that the PUBLIC SECTOR will place on the rest of us. They have to equalise their conditions to the rest of the country, difficult as it may be.

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