Public Sector Pensions – The Facts

With 750,000 public sector workers about to take strike action on 30 June, public sector pensions are a hot topic. The government is trying to persuade us that they are unaffordable and unfair to those in the private sector. The reality is that low and middle income earners in the public and private sectors are being treated unfairly:

1. The cost of public sector pensions is falling. As noted in the Hutton Report, public sector pensions cost 1.9% of GDP today, but will fall to 1.4% by 2060.
2. Public sector pensions are affordable and sustainable. Reports by National Audit Office (December 2010) and by the Public Accounts Committee (May 2011) find this to be true.
3. Public sector pensions are not ‘gold-plated’. The average public sector pension is around £5,000 per year. For a woman in local government the average is £2,600.
4. Private sector pensions cost the taxpayer too. Private sector pension schemes received £37.6bn in tax reliefs in 2007/08 – that same year they paid out pensions worth only £35bn, research by Richard Murphy shows.
   
5. Cutting pensions means increased eligibility for means-tested benefits. LEAP estimates the cost of providing council tax benefit, housing benefit and Pension Credit to pensioners will be £13.5bn this year.
6. Private sector pensions are often poor or non-existent. But the blame for that is on private sector executives (many of whom have very good pensions) and shareholders.
7. But some private sector pensions are very generous. In 2009, TUC research showed the average value of a FTSE 100 director's total pension rose to £3.4m
8. There are 2 million pensions living in poverty in the UK. A European Commission report in July 2009 showed that only in Cyprus, Latvia and Estonia was there higher pensioner poverty than in the UK.
9. Life expectancy is rising faster for the wealthy. An average 65 year old man in Kensington and Chelsea can expect to live a further 23 years, while in Glasgow it is only 14 years. Raising the pension age has a disproportionate impact on low and middle income earners.
10. We’re all this together – public and private. Changing pension indexation from RPI to CPI would save the private sector £100 billion over the lifetime of existing schemes, according to Pension Capital Strategies. According to TUC research, an 80 year old pensioner with an average public sector pension would be more than £650 a year worse off.

Update: The latest YouGov/Sunday Times poll (pdf) has revealed the unions edging in front in the battle for public opinion – with an almost equal split on Danny Alexander’s reforms and a small majority against Lord Hutton’s proposals. On Hutton, who proposed public sector workers should contribute more to their pension, retire later and receive a lower pension, 43% oppose his plans against 38% in support. Those in the private sector support him 46%-33%, with public sector workers strongly against, by a margin of 66%-21%.

Update 2: An ITV/ComRes poll shows public believe 'Public-sector workers are right to strike over maintaining their pensions': Agree 48%, Disagree 36%.

Update 3: A new ComRes poll finds 49% of people agreed that public sector workers have a legitimate reason to strike, only 35% didn't. By 46% to 35%, people believe that the Government would be wrong to change public sector pensions if most workers affected oppose them.