Socialist Worker

The government's lies about public sector pensions

As the Tories go on the attack over so-called ‘gold-plated’ pensions, Viv Smith looks at the myths being spread by the right wing press – and digs out the truth behind the headlines

Issue No. 2207

The real levels of public sector pensions  (Source: National Audit Office)

The real levels of public sector pensions (Source: National Audit Office)

David Cameron and Nick Clegg are saying that “gold-plated” public sector pensions are “unaffordable” and “unfair”. The right wing media is pumping out propaganda day after day claiming that the cost of the pensions is soaring.

The Tories and their new-found Lib Dem pals are spreading vicious lies to convince us we have no choice but to “share the pain” of the crisis brought about by their banker friends.

Here Socialist Worker takes on the key pension myths.

Myth: Public sector pensions are hugely generous

Despite the talk of retired public sector workers living the good life, poverty pensions are rife (see graph, below).

The majority of public sector workers get less than £5,000 a year – £100 a week.

A quarter of civil servants get less than £2,000, or £40 per week.

And women working in local government average a shocking £1,600. They are expected to spend their retirement living on a pension from work of less than £5 a day.

Public sector pensions are not going up either. The average NHS pension has not gone up at all over the last decade and the teachers’ pension has fallen by 4 percent.

Myth: People are living longer, busting the pensions budget

Politicians often talk of people “living longer” as though that were a terrible problem! If it was true, we would celebrate it – but unfortunately, for the poorest people in society, it is far from a reality.

For most working people, life expectancy has only risen by less than two years since the 1970s. Life expectancy for the average female hospital cleaner, for example, has not increased by one day since then.

Many people, especially manual workers, are still only predicted to live until the age of 65 – meaning they’re likely to die before they get any pension whatsoever.

Myth: The “wealth-creating” private sector props up the public sector

The truth is the opposite. Despite privatisation, workers in the public sector continue to provide the foundation for our society – our health, social and welfare needs.

Without properly funded public services and workers who are given decent wages and conditions to run them, the quality of care and services we rely on would plummet, as would workers’ standards of living.

In reality private sector pensions are a scandal. Only 40 percent of private sector workers are in any pension scheme at all.

And the poorest private sector workers are hardest hit – only 20 percent of private sector employees who earn between £100 and £200 per week are members of employer-sponsored pension schemes.

But the one thing this doesn’t mean is that public sector pensions are somehow “unfair”.

We should demand private sector pensions are levelled up to at least the same amounts as the public sector pensions we are defending.

Myth: The cost of public sector pensions is spiralling out of control

Nick Clegg claims that the cost of public sector pensions will rise to an “unaffordable” £10 billion a year by 2015.

This is nonsense.

The government’s claims are about so-called “unfunded” pension schemes, which are paid by central government. But these pensions are still based on contributions from workers.

The way unfunded schemes work is that current workers’ contributions pay for today’s pensioners.

Clegg’s projected £10 billion “gap” is nothing but a reflection of the government’s planned cuts – there will be job cuts, and the pay of those who remain will be held down, meaning lower contributions to the scheme.

As BBC economics editor Stephanie Flanders explains, “If [Clegg] wants to bring that figure down dramatically, the best advice to him might be to expand the public sector workforce and massively increase their pay.

“In five years’ time, public sector pensions probably wouldn’t ‘cost’ the government anything at all.”

The figures also leave out the local government pension scheme, which pumps millions into the pensions pot.

The real story is the way both Labour and Tory governments have repeatedly slashed the cost of public sector pensions, most recently cutting £13 billion by raising retirement ages to 65 for new entrants.

Pensions are not a “benefit” – they are workers’ wages that are deferred until retirement. They are a right, not a privilege.

Myth: There is a “funding crisis” in pensions

What “gap” there is has been created by employers taking so-called “pension holidays”. This means they are allowed to stop paying their share into the pension pot for a period of time.

Since 1987, bosses have taken more than £18 billion of pension holidays. This is where the supposed “black holes” in pension schemes came from.

For example, Adam Crozier, the ex head of Royal Mail who has now moved to ITV, left the post workers’ pension fund with a £9 billion deficit.

Yet at the same time £6 billion was paid into a pension scheme open only to himself and a handful of senior managers.

Another drain on the funds is that bankers and investment managers are being paid vast sums to manage and gamble with pensions money.

For example in Clwyd, Wales, where the local government pension scheme is privately managed, a private investment manager is paid £57 for every £100 “earned” by gambling pensions. West Yorkshire, where the scheme is managed in-house, paid just £1 for every £100 earned.

Public sector union Unison says these private leeches cost up to £250 million a year.

Myth: Workers’ pensions are “gold-plated”

The real “gold-plated” pensions are the ones that fat cat company bosses have.

According to the TUC, the biggest director’s pension at oil giant BP is a staggering £21.5 million.

The vast majority of company directors get to retire at 60 or earlier – with “golden goodbyes” that for some are worth millions of pounds tax free.

Former RBS chief executive Fred Goodwin quit the bank when it collapsed, sacking thousands of workers. He walked away with not only a £345,000 a year pension, but also a £2.8 million lump sum – on which RBS paid the tax.

And to add insult to injury, the super-rich then get generous tax relief on their pensions.

The richest 1 percent in society get 60 percent of all pension tax relief – the equivalent of £10 billion a year.

For every pound we spend as taxpayers on public sector pensions, we pay £2.50 subsidising the pensions of this tiny minority.

Why should the workers who keep society running suffer, just so that the rich who caused the financial crisis can continue to make money out of our sweat?

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Tue 22 Jun 2010, 22:49 BST
Issue No. 2207
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