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Public pensions battle far from over

The Government saved the Ministerial statement on public pensions to the very last day of Parliament before Xmas – always a sign that the most contentious and unpopular business is being left to the point where it will get least attention. On this occasion, in the run-up to Xmas the mood is for settling, but in the cold light of January it will look rather different. The Government have wisely conceded that staff with less than 10 years to retirement will keep their existing pension arrangements, but apart from that (which should never have been proposed in the first place) there’s no budge. Look at what’s on the table.

The low-paid will now escape a contribution increase – for one year; but after that what about the next 10 or 20 years? There’s still to be a 50% increase in contribution rates. The average local government worker will still get a pension even less than the present £80 a week, and the average female local government employee even less that the current paltry £56 a week. RPI is still being changed to CPI, not because there’s any rationale behind it, but simply because it’s an underhand way to cut pensions. Final salary schemes are still being changed to career average. And you still have mostly to work 2 years longer to get it at all. Is that the basis for a settlement?

The latest proposals still aim to extract an extra £2.8bn in contributions by 2015. It’s still true that there’s no justification for this because even the Tories’ sidekick Lord Hutton admitted that the cost of public pensions over the next 40 years will go down, not up, from 1.9% of GDP now to 1.4% in 2050. It’s still the case that not one penny of the extra contributions will go towards improving public pensions because it’s still pay more, work longer, get less. It’s still true that whilst the poorest individuals are financially being skinned alive by these proposals, the rich are still creaming off huge tax reliefs on their pensions, paid for by everyone else including the poorest. Some £20bn is still paid out every year in tax breaks on occupational pensions, two thirds of it – around £14bn a year – appropriated by the richest tent, people with annual salaries between £40,000 and £10 million.

The whole pensions fandango remains cruelly unfair. The poor will still end up with a pension below the poverty line and are now expected to pay more for retirement even though still left dependent on means-tested benefits. The rich in this time of austerity get off scot-free, are not required to pay any more for thir pension, and will still (grace of taxpayer subsidies) float off into retirement on a pension of several thousand pounds a week. Anyone for a strike?


  1. Michael Roberts says:

    excellent summeary!

  2. Asdasdasd says:


    A quick observation, as i’m sure you know, the poor die many years before before the rich.

    A pensioner in Kensington can expect to live well into their 80s, whereas a pensioner from Glasgow might expect to live until their early 70s. This week, we learnt that homeless men have a life expectancy of 47 years. The poorest in our society are unlikely to claim a pension.

    Pensions are likely to be regressive, simply because the poor die so much younger.

    So it is either disingenuous or insane to claim that it’s a terrible thing that the poor rely on means tested benefits. Means testing insures that our limited resources are given to pensioners who actually need the state’s help, not to people who don’t. A nice example is the full basic state pension, worth £135,000 at current annuity rates, given to you and millionaires in the house of lords. I’m not convinced this will do much reduce poverty.

    Secondly, given how little Brits are currently saving for their retirements, do you really believe that it is a good idea to reduce the incentives for people to save to support themselves during their retirement?

    Finally, Lord Hutton’s report continued the fine British tradition of making ludicrous assumptions in order to make our public sector pension system appear remotely solvent. Economists and actuaries have been warning about the UKs pensions crisis for at least a decade. Over your long career in politics did you take any steps to insure that our pension schemes (state and public) were sufficiently funded?

    In short, I’m not convinced you are wise opining about this, given your parties achievements in “reforming” the UK’s pensions system over the last 15 years.

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