Play Pen on Public Sector Pensions

Following robust debate over pie ale and an October Pimms, the 16 members of the Pension PlayPen split 8/8 on the motion  “the pensions paid to the public sector are unfair”. However there was a healthy majority of 13 to 3 that public sector pensions were affordable.

When considering the most desirable solution to the current deadlock, it was generally agreed that while a strike was bad news, it was inevitable and would probably be the only way for sufficient engagement to be had for an outcome to be forthcoming. It was also generally agreed that the Government had neither the space not the inclination to be interested in negotiation while perception in the private sector was that public sector workers were pension freeloaders. The feeling was also that whatever the union position was, it was not clearly defined.

In moving on to think of potential solutions , a further vote was taken

1 diner supported the current system and saw no need for any change in the scale or shape of benefits

7 diners saw the solution in the scaling back of benefits  and/or a movement to a career average benefits formula

6 diners saw the answer in a risk sharing structure such as “cap and share” where the sponsor agreed a defined level of contribution and  the members agreed a distribution of the balance of costs and ultimately the ownership of benefits

1 diner saw the solution in conventional DC

There were an number of notable contributions.

Con Keating argued forcefully that public sector pensions were affordable and that they were, but for unwanted regulation, efficient, especially in their unfunded variety. He claimed that funding was merely an expensive  way of protecting council tax payers from nasty surprises

Con stated that “cap and share” was a meaningful solution being effectively an “employee mutual”. He was however concerned of the divisiveness of not having a common benefit structure and he was adamant that DC’s wildly differing outcomes were bound to lead to social problems over time.

He also argued against the inefficiencies of the current DC system and was supportive of any move towards a collective DC solution along the lines of the Dutch model – a solution he considered aligned to cap and share (reference was made to the States of Jersey DC hybrid model of an example of how this might operate).

A powerful statement of the current dynamics driving the political debate was put forward by Leandro Carrera who confirmed Hutton’s assessment that the cost of public sector pensions was going to fall from 1.9 to 1.4% of GDP and stated the basis of popular prejudice outline above. He has kindly sent us a link to the PPI report on public sector pensions:http://tinyurl.com/3hezk3s    

 

Notable contributions were made by Bill Whitehead and Peter Weiner of Pentrus who broadly supported the  idea  that public sector pensions needed trimming and not uprooting.  Judith Donnelly argued pertinently that while pensions were not the only areas where social inequality could be found (she cited the impact of tuition fees). Her argument was that pensions should not be used to redressing social inequality.

An impassioned argument to create a greater transparency through a DC approach was put forward by Steve Barker who argued that DC put members in control of  how and when benefits were taken and fairly awarded pension on the basis of personal mortality. 

 Rowan Thompson incisively remarked on how  private sector perception had turned against the public sector on this matter and that this perception was now “the reality”.

Martin Freeman was eloquent and Tony Woodward made a number of salient points with regards the political aspects of the debate while Simone Boucher wisely kept her and S & P’s council on whether failing to tackle the matter might have led to a downgrade of Britain’s sovereign debt.

Yusuf Samad and Mark Benfold spoke with rigour as did Michael Clark who reminded us that the issue of “fairness” could only be judged on an evaluation of total reward in the public and private sectors.

Strong arguments were put forward throughout that it was the mismanagement of liabilities through a failure of the public to hold those taking decisions to account.

In conclusion, the meeting concluded that it was not the public sector pension structure that was broken but the governance structure that had permitted so many unwarranted pension awards to have been made. While the group stopped short of pointing fingers ,it demanded better transparency in the governance of pensions , better information on the pension promises made – especially to the higher earners and a higher degree of accountability by those governing the public sector pension plans.

Finally, it was noted that for the first time our meeting was held in the presence of a racoon – albeit a racoon pelt which charmingly adorned the neck of Katie Morley and complimented the fine hairdo of Charles Tatham.

About henry tapper

Founder of the Pension PlayPen, Director of First Actuarial, partner of Stella, father of Olly . I am the Pension Plowman
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3 Responses to Play Pen on Public Sector Pensions

  1. Steve Barker says:

    I love the racoon-based humour, Henry.

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