Danny Alexander’s main argument is that lower and middle earners will be better off in retirement as a result of the Government’s improved proposals announced on 2nd November. But this is a sleight of hand. What he has done is calculate that if such an earner worked longer and retired later, he or she would get more under the Government’s revised scheme at age 68 than under the current local goverment pension scheme (LGPS) at age 65 – but not more, in fact considerably less, than under the current GLPS taken at 68.
Take a 45 year old school dinner lady with 5 years’ service working part-time earning £8,000 (£154 a week). Under the current LGPS taken at age 65 she would get £64 a week, while under the Government’s proposal taken at 65 she would get £56 a week. Under the Government’s proposal taken at 68, she would get £74.50 a week, which is certainly £10 more than the £64 under the LGPS at 65. But the key point, which Danny Alexander dishonestly ignores, is that (comparing like with like) she would get under the current LPGS taken at 68 no less than £87.50 a week.
So the true comparison is that if the school dinner lady took her pension at age 65, she would be £7.70 better off under the current LGPS than under the Government’s revised proposals, and if she took her pension at age 68 she would be £13 a week better off under the current LGPS than under Alexander’s proposals. Even that is only half the story. If she took her retirement at age 68 – if she was able to work that long – she would under the Government’s proposals have had to pay an additional £5,500 in extra contributions.
There are several other relevant factors behind this strike which explain why it has such widespread support. In June 2010, one month after coming into office, the Government changed indexation for public sector pensions from RPI to CPI without warning which reduced benefits by 15% (in exactly the same way that Thatcher immediately in 1979 changed the uprating of pensions from the increase in earnings to the increase in prices). Then in October 2010 Osborne announced that contribution rates would go up by an extra 3.2% (a 50% increase). As a result many union members are striking who have never or rarely done so before – headteachers, education psychologists, radiographers, senior civil servants – not the usual suspects. New members are joining unions in order to join the strike. Yesterday’s BBC poll shows that 61% of the public support the strike.
The CPI change means every public sector worker (6 million people) and former worker (another 6 million) will be forced to take a big cut in their pension – a pension that is already below the poverty line. The average public sector pension today is £107.50 a week, which compares with the average occupational pension today in the UK which is £168. Even that conceals the real pension scandal which is that 14 million people are not saving for retirement at all, and if the present meagre LGPS pension is drastically cut back further as the Government intends, then thousands will opt out of the scheme and the number of non-savers who will rely on benefits instead will enlarge substantially.
