Nigel Stanley lays out the details on the difference between public and private sector pensions, and shows that like for like, they aren’t that different.
Everyone attacking Wednesday’s TUC day of action on public sector pensions will try to get in a reference to poor private sector pensions.
And of course they are right. Pensions in the private sector have collapsed.
Yet cutting a nurse’s pension will do nothing to boost the pension of a shop-worker, and we should challenge these critics to set out exactly what they mean when they say that public sector pension provision should be more like that in the private sector.
The key facts are:
• Two in three private sector workers are not members of a workplace pension scheme;
• Private sector pension provision increases sharply with pay, while in the public sector it is much more evenly distributed;
• Two in three public sector staff earning between £100 and £200 a week are in a pension while only one in seven private sector employees in the same wage band are in a pension;
• Pension provision in the private sector varies hugely between sectors, with four in five workers in the energy sector having a pension, but only one in 16 in the hospitality sector having one;
• While senior public sector staff are in the same schemes as the rest of the employees in their sector and often pay bigger percentage contributions, top directors in the private sector (FTSE 100 directors) have pensions worth nearly £4 million on average.
To make public sector pension provision like that in the private sector we would first have to take pensions away from two in three public sector workers, concentrating on the low paid. Next we would have to take the public sector’s top earners and give them much bigger pension pots.
Making public sector pensions as unfair as those in the private sector does nothing to increase fairness.
If we compare like with like, the two sectors look very similar. Private and public sector defined benefit (DB) pension both have average employer contributions of about 15 per cent. Nearly three in ten (28.2 per cent) private sector DB schemes have employer contributions of more than 20 per cent of salary, compared to 17.9 per cent in the public sector.
Private sector defined benefit pensions have been in steep decline, but defined contribution (DC) provision has not filled the gap as the critics claim. Since 1999 DC pension coverage has only increased by just 2.5 per cent of private workers, while DB coverage has fallen by 19.1 per cent of the workforce. DC at 18 per cent of the workforce is now ahead of DB (11 per cent) but the big switch is to the unpensioned – a collapse from 48 per cent to 29 per cent.
Private sector workers should be angry not at public sector workers but at their employers and successive governments who have allowed private sector pension coverage to decline so sharply.
See also:
• Raab’s attacks on workers’ rights are – surprise – based on no evidence – Sarah Veale, November 16th 2011
• Enough is Enough: Why young people deserve a decent pension – Adele Reynolds, November 11th 2011
• Hutton repeats his big fat lie on public sector pensions – Alex Hern, November 4th 2011
• Cameron continues Gideon’s race to the bottom – Alex Hern, October 26th 2011
• Osborne dreaming of a race to the bottom – Alex Hern, October 3rd 2011
119 Responses to “Public sector pensions no more gold-plated than those in private sector”
Blarg1987
I am sorry when I say this but what do you mean, the above policy would help improve private sector pensions.
But are you advocating that only CEO’s in the private sector should have good pensions and everyone else should have a really bad pension?
Anonymous
No. The basic rate tax payer will still get a pound in the fund for every one they put it.
They then pay the going rate of taxation when retired. [Probably higher because someone is going to be forced to fund the public sector fat cats]
For someone on, say 45K, they are going to pay a pound to get 80p in the fund. They sill get taxed in retirement. There effective tax rate (don’t forget, they are in the basic rate level in retirement) will be 36%.
Nice one. Lets increase the taxation on pensioners, so they foot the bill for the public sector. No wonder MPs and the PS like it, they are exempt. They don’t have a fund, so can’t be taxed on it.
Stephen Darlington
Is this not a terrible argument in favour of the strikes? Argument is basically that private sector pensions are bad. http://t.co/pcWg9bFZ
Anonymous
Here is one example of Public sector pensions.
http://www.nipsa.org.uk/Docs/Conference/2011/Financial-Statements-(1)
Link for those that want to look it up themselves.
The most recent valuation was at 31st
December 2009. The actuary assessed a shortfall in the
Pension Scheme funding against liabilities of some £1.910m. NIPSA accepted the actuary’s
recommendation that the employer contribution rate should be 39.3% plus an employer contribution
of £210,000 per annum to recover the funding shortfall. These revised contributions will be
implemented during 2011 and will be reflected in the annual financial statements.
Not bad is it? Nearly 40% contributions by the public, on top of your salary, what could possibly be wrong.
Fat cats. Nothing to do with being Fair. Just taking other people’s money, and not providing services in return.
Stephen
Public sector pensions no more gold-plated than private sector, writes @NigelStanley: http://t.co/zAbj2geQ #N30