There has been widespread misrepresentation of the Local Government Pension Scheme (LGPS) in today's newspapers, writes Naomi Cooke, National Pensions Officer for the GMB trade union.
Naomi Cooke is the GMB National Pensions Officer
A couple of weeks ago I wrote on this blog about the tax on members of the Local Government Pension Scheme that the Chancellor announced in his Comprehensive Spending Review. Since then others involved in the scheme have joined in including representatives from the 101 funds that hold the £150 billion assets of the scheme and last week the employers’ organisation, the Local Government Association, joined in to support GMB’s campaign to make the Treasury think again.
This hasn’t stopped the misrepresentation of the Local Government Pension Scheme (LGPS) by the press, however; here are a few of the choicest remarks and the truth that I’m sure they would have taken account of had they been better informed.
“…the total taxpayer liability for these schemes is a staggering £1.18 trillion” – Daily Mail
The figure from the Centre for Policy Studies explicitly did not relate to the LGPS which is a funded scheme that is not paid out from monies held by Treasury.
“So a government proposal that state workers pay an extra 3 per cent of salary toward their pension seems a modest and sensible start to the process of reform.” – Daily Mail
The extra 3% is not going towards their pensions, it is passing through the LGPS and going to the Treasury.
“Public sector employees will have to pay more” – The Independent
The Indy doesn’t explain why this is, save to say this is necessary to avoid pensions becoming more “socially divisive”. On this logic everyone should be paid the minimum wage and exist only on state benefits in retirement. As Lord Hutton states in his Interim Report, a race to the bottom is not in anyone’s interest.
“Public sector employees have been well served by their pension scheme, which provides higher benefits for lower contributions than most private-sector schemes” – The Independent
The average member contribution to a defined benefit scheme across the public and private sectors is 6.3%, in the LGPS it is 6.6%. (Aon Hewitt 2011).
“The case has to be made that, even with higher contributions, public-sector pensions will remain excellent value and more secure than many private schemes.” – The Independent
It is precisely the LGA’s point that the security of the scheme is under threat through this policy. The scheme is underwritten by the taxpayer so undermining it by causing a collapse in participation rates among current employees is foolish. The knock on effects to the economy of the change in investment approach this will necessitate will be felt by the private sector for many years to come.
“…Lord Hutton had already said the current arrangements were ‘unsatisfactory’.” – The Daily Telegraph
The Telegraph is quoting a government source who clearly hasn’t read Hutton’s Interim Report. He does not describe the LGPS as unsatisfactory. He said that the most effective way of achieving short term savings from public sector pensions was by increasing employee contribution rates. This isn’t the case for the LGPS because it is a funded scheme where benefit changes such as those already in place can generate immediate savings.
“LGA employees have never had it so good” – Daily Mail
I’m not sure this even warrants a response; they might as well claim the Earth is flat.
27 Responses to “The papers get it wrong on pensions; here are the facts”
Mr. Sensible
naomi if the Daily Mail claimed that the earth was flat that would very much be a backward step given what they said on the subject in the summer…
But on the substance of the article i agree. I note the comments of the chair of the LGA. If people start deserting the scheme that won’t exactly be in the interest of taxpayers…
And as both you and Hutton say a ‘race to the bottom’ is not in anyone’s interest.
Nathalie Baur
RT @leftfootfwd The papers get it wrong on pensions; here are the facts: http://bit.ly/eSX1PK >> V Interesting.
Daniel Pitt
The REAL facts on pensions not shown in the media http://bit.ly/eSX1PK #ConDemNation
jane lloyd
RT @leftfootfwd: The papers get it wrong on pensions; here are the facts http://bit.ly/hX75A5
Jon Purdom
Sadly both governments and companies see pensions as an easy target to get their liabilities down. In the private sector this is –
1. To save money
2. To increase the asset value of the business by reducing its liabilities
Defined benefits schemes have been a particular target because despite the huge amount of evidence to the contrary, the government chose to recomend using life exopctancy figures that were calculated in the 1960’s. Companies did not challenge these figures because it made their liabilities look smaller, inflated the value of the business and increased share price, thus allowing them to borrow at lowers rates (as supposedly lower risk).
The public sector situation is similar, but not identical. The drive to cut costs is of course part of it, but in this case it seems pretty clear that the Tories are hell bent on destroying the public sector by any means possible. Far better to be able to give out lucrative contracts to your friends from Eton and Oxbridge than to have a group of public workers with decades of experience carrying out their functions.
Many people stay in a job because of their pension. Take that away and they put up far less of a fight. Some may actually want to go before the changes take place. This is an attack on morale, an attack on the civil service institution and an attack on the welfare state as much as anything else.