The latest report from the Public Sector Pensions Commissions released last week is neither independent nor factually accurate.
It was sponsored by the usual bunch of rich, pension-smashing thieves at the Institute of Directors (IOD) and Institute of Economic Affairs (IEA).
It is a bosses report designed to divide workers and public opinion by playing on the disgraceful gap between public and private sector pensions.
The figures in the report make for frightening reading and suggest that the country is being bankrupted, not by scurrilous bankers, but by hard working public sector employees. This is a scare tactic deployed with clever financial trickery to sell us this great pensions robbery.
- The massive figures it quotes are a projection of the total pensions bill—the money needed to be paid out in pensions over the lifetime of all public sector workers. Pensions commitments go decades into the future. This is not money needed in advance nor money the government needs to save for or put aside each year.
- The report demands that the government switches to using the arcane special interest rate—known as the discount rate—rather than the rate the Treasury actually uses (AA corporate bonds) to calculate the future cost of pensions in today’s money. Using this method is pointless as it does not tell you anything about how pensions are funded. The National Audit Office (NAO) in fact criticises this method saying it has “no effect on projected pension payments”.
- The NAO and the Office for Budget Responsibility (OBR) have worked out an agreed way of estimating pension costs each year, expressing it as a share of the GDP. So despite all the hype of the report, the current cost of paying public sector pensions is only 1.8 percent of the GDP. It rises slightly to 1.9 percent but is projected as falling back to 1.7 percent by 2050.
- The report is also worthless because the figures were calculated before the impact of the Tory government’s shift to linking pensions increases to CPI rather than RPI. This will hugely reduce the cost of the annual pensions bill—by robbing workers.
- And the figures in the report, and the government’s own projections, leave out the contributions paid into the pensions pot by workers who are in work and paying towards their own retirement. All these contributions are effectively a loan to the government and the taxpayer. If they were put into a standard investment pot—as happens with the local government pension schemes and private schemes—then the government would not have access to this money and would have to raise taxes or borrow money to fill the funding gap.
The failure to provide a decent pension for all
The government is hoping to drive public and private sector pensions down. We should be levelling pensions upwards, not downwards.
And the real scandal is that two out of three private sector workers get no employer support towards a pension.
Workers in the public sector continue to provide the foundation for our society—our health, social and welfare needs.
For the truth about public sector pensions go to The government's lies about public sector pensions