Paul Johnson and the Institute of Fiscal Studies have done the numbers and, to nobody’s surprise, have concluded that the long-term cost of public sector pensions in terms of “pensions out” will be about the same under the new regime as the old.
This discounts the impact of the switch from CPI to RPI (huge) and the fact that “money in” will be much higher from the prospective pensioners and lower from the Treasury (eg the general taxpayer). We the tax-payers will be paying less overall, a point the IFS are making (though this is not being widely reported).
What I like about the settlement is that it looks fair and lasting. The switch from final salary to career average pension will redistribute pension from the Sir Humphreys to the ordinary public sector worker. It will also close the loopholes that allowed senior staff to be pensioned off with massive increases in their final salaries in the years preceding retirement. This practice was costing us a small fortune and is thankfully going to be a thing of the past.
The business of Government is about balancing the short-term impact on spending (cashflow) with the long-term impact on liabilities (long-term Government Debt). The public sector pension debate has demonstrated a number of important things
- Established using the same methodology as the private sector use - mark to market accounting using private sector discount rates, public sector pensions looked unaffordable
- Based on the different dynamics of public sector finances, public sector pensions were affordable but deeply divisive (unfair on the private sector)
- By increasing the contribution rate, the Government has made public sector pensions more affordable and more valuable
- By redistributing the benefits of public sector pensions from high earners towards medium earners, public sector pensions are fairer for public sector workers.
All this will seem pretty thin gruel to the likes of Tom McPhail (Pensions Monkey) whose frustration on Radio 5 live was ill-disguised. Many in the private sector will quite rightly point out that there is still a balance in terms of total reward (and employment risk) in favour of the public sector employee and I would agree.
However, the levers to adjust this imbalance are back in the Treasury’s hands. Continued negative rates of real wage inflation in the public sector coupled with a strong recovery in the private sector may lead to a return to a balance within the next ten years. We should remember that back for much of the last thirty years the private sector has generated the wealth and the public sector has lagged. The politics of envy get us nowhere over several economic cycles. If we believe in market forces, they will prevail (even if it is frustrating right now Tom).
Right, that’s enough sermonizing from me for one morning! I remain optimistic, I remain a fan of the coalition’s approach to the public sector problem (despite a few outbursts of irrational exuberance from Danny Alexander). I am also extremely impressed (in the main) by the way the unions are playing their cards on behalf of the members.
At last we are getting a proper debate on public sector pensions and , for the most part, I expect we will get a proper settlement!
Related articles
- Reform of public sector pensions will make ‘little or no difference’ (telegraph.co.uk)
- Public sector pension reforms ‘make no saving’ (independent.co.uk)
- Pension change ‘will save little’ (bbc.co.uk)
- Pension gap increases between private and public sector (moneyexpert.com)
- Squeeze on public pensions is a myth: Reforms will save taxpayer nothing, warn economists (dailymail.co.uk)
- UK | Public sector workers ‘would sacrifice pensions for private sector security’ (skillsinfo.wordpress.com)
- Government gold-plates private pensions while cutting public ones (leftfootforward.org)
- Teaching unions accept pension deal (guardian.co.uk)
- Ed Miliband backs Ed Balls over public-sector pay freeze | Politics | The Guardian (dralfoldman.wordpress.com)
- Government number crunchers rule against pension privatisation (ucuatbsu.wordpress.com)


Full house in St Albans for the Redington/Cardano match-off. Morinho v Ferguson, Ali v Fraser, Cowell v Walsh-we had been promised blood.
Last night I was hussled into taking my 12 year old son to the Hammersmith Apollo to see Ne-Yo (a slick RnB idol).








if you think we are going to bail out your sun-kissed Euro-buddies with one more penny of our hard-earned LSD then meet 





































































Mischievously, Steve Bee has deemed 32 contributors to his website “

This weekend two Ferrari drivers were ordered to swap positions rather than race against each other – in the interest of the Ferrari Team. The decision to put the Team first, rather than the spectators or the sport (this behaviour is outlawed) has created an outcry as has the limp response of the sports governing body in handing Ferrari a token fine.
Brand”,opined my former CEO, “is what we aspire to be, or at least to be seen as being”. I guess this is the actuarial equivalent of “corporate identity” which is the accounting version and refers to what companies actually are.
Here’s a question for anyone interested in pensions in this country
It now seems unavoidable that structural change will be introduced to the various 
When I came back from Iceland in 1984 I met an IFA and asked him what his job was about.
Well that’s how it is isn’t it. You do your admin report which is tickiteeboo, have a discussion about how few or your members are using the OMO and then do the bit about investments noting that for another quarter no-one has joined the expensively researched
I went to a pensions conference on Wednesday and couldn’t believe what I was hearing - a replay of a debate that I’ve heard for the past fifteen years – pensions experts wringing their hands about why people didn’t want to save for their retirement.
BUT NOT TILL THEN. 
We’ve been puzzled at how the Treasury think they can extract £3.5bn pa of tax savings from the 100,000 people likely to be impacted by the new Annual Allowance and why they consider the changes to the LTA will only bring in £0.5bn pa. That’s until we read GAD’s paper on reducing the Annual Allowance.
Since it was revealed that Fred the Shred’s pension was worth north of £17m, the issue of senior executive 
Victoria Derbyshire

On a day when the
In my earlier
NEST is due to launch in April 2011 and it’s high time that we got some answers on a key question
NEST
Thinking on this, I’ve written an article on “Scheme 
Peter died in his kitchen from a heart attack at the age of 76. It was just before Christmas.
There are two certainties in life - death and taxes to which most older people would add the payment of their pension. But not if you live in Prichard Alabama. In the words of the 






Bretnall and Alexander




They have earned their place in the hall of fame.





Thanks to the Aussie Telegraph of this excellent analysis of why
Crisis – what crisis?







The Pensions Regulator



In a BBC 
Thanks to Simon McLean and 
Driving home from cricket with Olly last night – we turned on the radio -”what’s that crazy music” I mumbled to myself
I went to a
I hadn’t realised that a lot of IFAs read let alone like my blog . A fellow called IFAblogger (twittername) asked me yesterday to a web-seminar he was giving on blogging. To my surprise he gave 

I’ve not read anything so silly as this 

Lawrence Churchill of 

With this phrase Tim Jones, NEST’s CEO and presiding genius thanked his six principal suppliers for funding the drinks reception that concluded proceedings at NEST’s big bash. Freudian slip, deliberate tease or simply a slip of the tongue it initiated unmuted hilarity from his audience.

It’s been a week of protests, bewildered
To those who consider 50 a distant memory, I salute your sagacity, for those for whom 50 is a way away, I applaud your vivacity but from where I am sitting, overlooking the
Most people who read articles about pensions earn their living from pensions – managing the benefits or the investments, setting the things up or closing the things down.
Sometimes someone challenges a “received” idea in a way that quite unsettles your equilibrium. That’s what happened when Debora Price spoke with a group of us at the Pensions Network meeting yesterday.
If there’s one area of consensus among the politicians this morning, it’s that the national pensions strike called for today (30th November) is unnecessary and something this country can ill afford. I disagree – this is a necessary strike, not because the unions are right, or
Until my friend
“
This from 

Did anyone hear the full interview on
s very dramatic,” Rose said.














The Government has announced that it wants 









The issue of fatigue is high on my agenda this morning - especially Regulatory Fatigue. Yesterday the DWP published a host of documents that can be accessed through this link
Each year we (the Pension Play Pen) organise a week down in the 

……………………



The public outcry ( more exactly the media outcry) over Stephen Hester’s bonus is as distasteful as it is wrong-headed. It is distasteful as it is no more than what was agreed in 2008 when Hester took over the job of CEO of RBS - we are going back on a promise we (arguably) shouldn’t have made but a promise is a promise. It is wrong-headed because it misses the bigger issue with RBS pay. The 2011 share award is about 5% of Hester’s five year package.
If you’ve
I came across this on mallowstreet and thought it relevent to many of the discussions on this blog.
