Wednesday, 7 July 2010

Public sector pensions

There are a few inequities within the public sector schemes as well as between the public sector schemes and private sector ones. In order of decreasing generosity, the schemes are roughly as follows;
  • Police (unfunded)
  • Firefighters (unfunded)
  • Armed forces (unfunded)
  • NHS (unfunded)
  • Teachers (unfunded)
  • Civil Service / Agencies (unfunded)
  • Local councils (funded)
The old argument for high police and fire pensions, with early retirement dates, was that these are physically demanding and risky jobs in which there was limited usefulness after 55 or so. Exactly the same can be said of construction workers - indeed, their occupational risk is substantially greater than police and firemen - but it's never been suggested that builders get generous State provision.

And although councils' funded schemes don't pose the future liability that the unfunded schemes do, they still cost a substantial percentage of tax in employer's contributions. But perhaps the greatest inequality within the schemes is that there is almost without exception no cap to the upper limits.

Thus a 'fat cat' on £150k can retire after 10 years service with a pension of £25k, whilst a cleaner on £13k with 30 years service will get only £6.5k a year. This anomaly has I'm quite sure been behind the explosion in top salaries in the public sector - and the only way to restrain 'fat cat' public service pay is to cap pension contributions and benefits at say £80k. The pressure would then be off these massive salaries, and we will see them start to return to normal levels.


Anonymous said...

Since the implementation of the Military Salary in 1970, annual pay awards have been reduced by 11% to allow for the "unfunded" Armed Forces Pension Scheme. So it isn't really unfunded is it?

talwin said...

I can't speak for the rest but the police used to pay eleven & a half per cent of their salary towards their pension. That's a bloody big wodge every month of every year. And as there's no pension pot as such, it's they who are contributing to the pensions of those who are retired.

Who else pays that level of contributions, I wonder? And I suspect that such a level of salary, paid into a private plan, might otherwise accrue a decent pension at the end of the day.

If local authorities (or whosoever) choose to nick the contributions to pay for lesbian outreach coordinators, so be it but don't whinge now.

And the fact that the police pay indirectly a lot of money towards their own pensions is just one reason why it's usually bollocks when a cop steps out of line to say that his/her pension should be forfeit.

Anonymous said...

I get the armed services and police / fire bit - anyone who can get shot at or trapped in a burning building deserves to be looked after. I don't get the fat-cat bit. Teachers...don't get that either (and my wife is one and she doesn't get it either).

Raise retirement to 65 in line with private sector and make the calculation of final pension one connected to an average of lifetime earnings, not the best of the last 3 years. Then do as Radders suggests, put a low cap on this. Lower than £80k I would suggest. Retiring on £40k plus a lump sum of £60k is more than generous.

The public sector has got to be stopped from riding on our backs whilst stealing what little we have scraped to save.

Coney Island

Anonymous said...

I retired as a senior officer in the RAF and I can assure everyone that I don't get 40K! If only......

The retirement age for the military is 55 and, I believe, 50 for the police. This is based on the physical demands of the jobs. Maybe this needs to be re-evaluated.

talwin said...

Anonymous RAF officer (retd) is right; also in respect of the level of senior cops' pensions (although they do fine).

He's also right that the retirement age for the police might be re-evaluated (although not everyone retires at 50: that's just the earliest, pensionable retirement age).

There was a time when the police service was a 'working-class' job and most joined it expecting to spend a long, long time (if not their whole service) walking (sic) the streets in all kinds of weather and conditions. Chasing (God knows over what obstacles)or struggling with drunken/violent/trouble-making criminals, or putting themselves at risk (often) to help or rescue other people, was not seen as being best-effected by older men or women.

Not saying their current duties are more or less difficult than they were in yesteryear(I'm not in a position to judge), but for sure they're different. Hence that re-evaluation.

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