You can read an excellent article free here, or mail me for a link – henry@agewage.com
I mentioned in my post on he Church of England’s pension, that today was a noisy day for pensions. Richard Tice is as noisy about unfunded public pensions as John Ralfe is about funded private pensions.
Richard Tice is set against the OBR in a strong report
Brought to the defence of taxpayer sponsored public sector pensions is Glyn Jenkins, an old friend of this blog and surely the longest serving pensions officer ever!
“There’s obviously a lot of political opportunism,”
said Glyn Jenkins, head of pensions at Unison, one of the UK’s largest trade unions.
“When a system changes and advisers are brought in, it can cost a lot of money to bring in an inferior scheme.”
I doubt a more succinct defence of public pensions has yet been made!
The point out why these unfunded schemes are such a political opportunity for Reform
You can also question what would happen if further tinkering was attempted, let alone the kind of changes to what are very much value for money ways for the Treasury to pay deferred pay to our pensioners.
The City would like to fund these pensions but as Glyn Jenkins points out “it can cost a lot of money to bring in an inferior scheme“.
Changing the unfunded public sectors?
Rather than leave Richard Tice to his explosive statement, the article looks at a variety of alternatives that Tice could investigate.
There is a long section given to understanding which sections of the public sector are becoming more expensive to pension and which are getting paid out less in pensions than are accounting for set aside to meet future bills. The article translates difficult sections of OPBR analysis into a readable illustration. This shows just how important funding the NHS section is (and why it is making good reading for the Treasury in terms of money in and out.
To suppose that changes can be made to a system of payments that is so integral to how public sector employees is paid, is naive. Carl Emmerson of the Institute of Fiscal Studies makes it clear that these pensions are deferred pay and cannot be treated like the pensions or savings plans in the private sector.
Most of the thinking on reorganising state pensions along private sector lines completely ignores the fundamental change with which public sector pensions interract with public sector pay
Policy Exchange, a right wing think-tank, has proposed putting those joining the public sector into DC schemes, with a total contribution rate of 15 per cent.
The savings would accrue after 14 years — to the tune of £19bn annually by year 30 according to the think-tank — although the estimates do not consider whether a pay rise for recruits would be needed to make the pension cut palatable.
Other options involve capping the benefits of DB schemes, similar to the Universities Superannuation Scheme, or introducing “notional” DC schemes earning government-set returns rather than market returns, as happens in Italy.
It is inevitable that as Reform increases the noise it can make in political circles, so it will get access to the areas of public sector policy that deals with public sector pensions. We have seen how much can be done quite quickly by a populist party in the USA.
I suspect that, despite the warnings in this article from Glyn Jenkins , Carl Emmerson and others, we have not heard the last of Richard Tice’s populist views on public sector pensions. Thanks to the FT for an excellent article.