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Public-sector pensions lose platinum coat

Robert Peston | 17:58 UK time, Thursday, 10 March 2011

John Hutton's recommendations on reforming public-sector pensions may well look as appealing as a plate of cold sick to many state employees.

But those employees should perhaps count their lucky stars that they don't work in the private sector - because were his recommendations to be adopted by the government, our public servants would continue to have access to pension arrangements massively more attractive than what's on offer in most of the rest of the economy (except for those lucky enough to be running big listed companies, whose pension pots are typically worth well over £10m each).

For public-sector workers earning close to the national average, and with limited opportunities to earn higher salaries, Hutton's proposed move from final salary to career average for determining the quantum of pension should not make an enormous difference to what they actually receive in retirement.

That is clear from the estimate - made by the analyst John Ralfe - that the switch would save just £2bn a year, out of the estimated total annual cost of state pensions (much of which is hidden) of £30bn.

That £30bn is Ralfe's estimate of the annual cost. It is double the official estimate, with the disparity due to a disagreement on the appropriate discount rate for valuing future liabilities.

A reduction in the value of retirement benefits of 1/15th would of course be unpleasant. But compared with what has happened in most of the private sector, which has seen the closure to new members of access to any kind of final salary arrangement, and often the complete closure of final salary schemes, well it doesn't look draconian.

Broadly the norm in the private sector these days is for employees to bear most of the financial risks associated with retirement, such as high and rising inflation rates, low and falling investment returns, and ever increasing longevity (that we die later).

Hutton is proposing however that the taxpayer would continue to underwrite a good chunk of these risks for public-sector workers. So, for example, he explicitly says that the government should continue to provide total protection against inflation for both current pensioners who used to work in the public sector and for future pensioners who still work in the public sector.

This is much more generous than what is on offer almost anywhere in the private sector - and, for example, is significantly more generous than the recent pension reforms imposed here (in a part of the public sector off the main map) at the BBC.

What's more, Hutton suggests that for active savers, accruals should be up-rated in line with the earnings index - which normally rises at a faster rate than either the consumer price index or the retail price index (though that might not be the case in the future) - and there should be no cap on indexation.

At a time when inflation is squeezing most people's living standards, that looks attractive.

Also, unlike what has happened at the BBC (for example), the choice for current public-sector staff won't be between a degraded existing scheme and a switch into a career average scheme that places more inflation risk on the employee or into a defined contribution scheme that heaps the investment risk on the employee. Instead public-sector staff would have all their existing rights totally protected and only new savings would accrue on the career-average basis.

So are there no recommendations that would force a significant sacrifice on employees and therefore save serious money for the taxpayer?

Well the recommended increase in the normal pension age from 60 to the state pension age - so from 60 to 65 and rising - would save around £6bn a year.

But any other savings won't flow from Hutton's report but from other decisions already taken by government, such as that pensions in payment will rise by the CPI inflation index rather than by RPI (which will save £6bn a year) and that employee contributions should increase by three percentage points of salary (for a £3bn saving).

When you put all that together, the aggregate public-sector saving from Hutton and other reforms would be around £17bn a year, so real money.

Even so, public-sector workers would be left with a pension scheme worth around 15% of typical salaries. Which would still make many in the private sector feel just a bit envious.

Comments

Page 1 of 5

  • Comment number 1.

    i've wasted too much of today on this issue already.. and the thing that frustrates me most is those who continually argue that private pensions should be made to be as good as public pensions.

    lord hutton is right to say that there should not be a race to the bottom, and there is a case for improving private pensions. however, people must realise that there is a fundamental difference between the state and any private enterprise - and that is that the state can guarantee it will still be around when the pensions need to be paid, and it can guarantee that it will be able to pay them. it has, after all, almost unlimited power to raise revenue.

    most private businesses can't even guarantee that they'll still be around in two years, let alone 50 years.

    there seems to be a notion amongst those defending public sector pensions that the rest of us are all working for big companies who could provide great pensions if only they wanted to... well we don't.. so before you demand that private companies offer inflation-proof definied benefit schemes to everyone, go and talk it through with the guy who runs your local newsagent.

  • Comment number 2.

    Reform has been overdue for nearly a generation, and it was always going to cause issues.
    Personally I'd like a pvt sector pension to be as generous (I'm on a contract covering maternity leave at the mo in public sector role where salary is the same).
    It was startling to read in the Hutton report the different contributions of E'ee and E'er for various roles, with some at 0% E'ee contributions...

    Although the target of a lot of criticism will be the MP's pensions, which I guarantee escape any such reform

  • Comment number 3.

    What this comparison between private and public leaves out (the BBC being as guilty as our wonderful right-wing media for this), is the fact that Public sector workers earn much less on average than their privately employed counter-parts, usually on the proviso that they will be getting compensation in the form of a reasonable pension.

    Public sector employees are already having to stomach record job-losses, resulting in many have to do much more for much less, without a further attack on their long-term security. How much more do this ideologically driven coalition think the hard working people of this country will take? I for one hope they have severely under-estimated us.

  • Comment number 4.

    Well done Lord Hutton on delivering a well thought out plan for public sector pensions. The move to career average for future service accrual should ensure the majority of public sector employees continue to accrue reasonable pensions.

    As long as public sector pay increases are allowed to keep up with inflation, instead of being capped, a career average scheme should help to keep these people out of the social security safety net when they eventually retire.

    If public sector pay continues to be capped, the changes may result in pensions at a level that does not keep these people out of the social security safety net when they retire. It will then be up to the tax payers of that day to pick up the additional cost of providing income support at that time.

  • Comment number 5.

    Robert funny how you were not so keen when the BBC changed its pension system last June.

    Its always easier to agreed with cuts in someone elses pension setup isent it Robert...

  • Comment number 6.

    I am a serving police officer with 24 pensionable years service, which all have been on the 'front line', working unsociable hours (ie one weekend off a month to be with my family etc).
    This has been a very bad week for me. Not only will I see a cut in my pay, I will now not be able to retire when I intended, also I will have less money.

  • Comment number 7.

    Great article and very balanced. The illusion that public sector pensions in their current form are affordable and sustainable has well and truly been shattered.

    As for increasing private sector pensions to match the public sector. This is quite simply not feasible. UK plc will not be able to compete internationally with the likes of China if it is not able to control its costs within a reasonable degree of certainty.

    Final salary schemes are too risky for companies to bear. Life expectancy for some age groups has improved more in the last 10 years than over the previous 150 years. Who knows how much life expectancy is likely to improve in the future.

  • Comment number 8.

    Before all the private sector workers come in with how unfair public sector pensions are I'd just like to point out that the average life expectancy of a retired teacher is 18 months. Not much time to ask for a decent pension after a lifetime of working to educate your kids is it.

  • Comment number 9.

    Pensions are about the return on investments and savings either directly in the private sector or indirectly in the public sector.

    Unless and until the return on savings (INTEREST RATES) rise the pension crisis will only get worse and worse. Blame Mervyn King and his regulation of the Cty via the setting of interest rates. Basically we've blown it all away in the noughties!!!!

  • Comment number 10.

    Never mind Peter... here you go Paul. Guess where Peter and Paul work....

  • Comment number 11.

    It's been necessary to have this review for over 20 years AND it has nothing to do with the financial crisis/recession. Final salary pensions in their old form are just not affordable. Pension costs have increased dramatically due mostly to improvements in mortality i.e. we are all living longer. No-one anticipated this when final salary schemes were created and most participants have ignored this reality, here and in Europe. Well reality has arrived and I think evreyone has to accept it, tighten their belts and get used to the fact that pensions are going to be much more expensive.

  • Comment number 12.

    All superannuations suffer from three chronic problems:
    1. They are NOT deferred earnings: high flyers gain vastly more pension from their career earnings than less exalted folk. TU leaders are typical of those who gain the most from their scheme.
    2. Neither contributors, nor their employers, nor taxpayers or shareholders Know what the pension is going to be. It's as 'transparent' as a block of steel.
    3. Employees who move employment out of the scheme are robbed of the FULL VALUE of their accrued rights.
    Hutton's proposal tries to modify the traditional superannuation, but fails to find an equitable solution to any of them.
    I proposed a scheme that would overcome each of these difficulties and that takes advantage of the ability of IT systems to handle loads of files. But it's not the sort of scheme the Government had asked Hutton to come up with. Nor am I a famous name. Perhaps Hutton's rejection is because Ministers also gain mightily from the distortions of superannuation? Nobody knows.
    It's outrageous that the fat cats at the top still hide behind the low pensions that so many public servants receive to argue that superannuation, that rewards them so highly (but bilks the low paid) in unfair and opaque schemes, should continue.

  • Comment number 13.

    Hmm, there does seem to be a Class War going on.....
    The Americanised Tories versus the Public Sector and Working Class in general.

    Welcome to the 21st Century Classless Society !
    Your Rich (and American) or poor (and British).

  • Comment number 14.

    Hmm! Well Robert, these economists don't agree with you.

    Richard Murphy, Tax Research LLP

    Andrew Fisher, LEAP

    Howard Reed, Landman Economics

    Dr Stephanie Blankenburg, SOAS

    Professor Prem Sikka, University of Essex

    John Christensen, Tax Justice Network

    Professor Gregor Gall, University of Hertfordshire

    Colin Hines, Green New Deal Group

    Bryn Davies, Union Pension Services

    In fact Richard Murphy says, "Public sector pensions are far more efficient than private pensions. The net cost of paying public sector pensions in 2009/10 was a little under £4 billion. The cost of providing tax relief to the one per cent of those earning more than £150,000 is more than twice as much. The total cost of providing tax relief to all higher rate taxpayers, on their private pensions, is more than five times as much". And "Second, pension obligations are the biggest barrier to more privatising and outsourcing of public-sector services.".
    Puts a different complexion on it doesn't it?
    Search out Richard Murphy of the web as I am unsure if I can add external links here.

  • Comment number 15.

    Of course, in the Eighties, the Public Sector had in general lower pay rises than their Private Sector counterparts, with the reasoning that their pension made up for it.
    So, can we expect the Public Sector workers to have their Pay revalued upwards to the private sector equivalents ?
    No.
    Of course the Rich and indolent wish to have Tax cuts so Public Sector spending has to fall !
    They forget how much of Britains culture and way of life depends on tasks carried out by public servants.
    But they'll just move won't they ?

  • Comment number 16.

    This review is well overdue and I agree with all of the recommendations.

    Employees in the public sector need to 'wake up and smell the coffee'. The economy as a whole cannot afford to continue to pay for pensions with unlimited liability.

    The Economist published an article recently which explored the facts of the issue. When all factors are taken into account its just not true anymore that public employees forego pay and benefits for the 'gold plated pension'. Overall it concluded that public sector benefits overall were higher than the private sector for most employees.

    Over the last 10 years salaries in the public sector have gone up massively, which country has the highest paid doctors in the world? oh that will be the UK.

    Facts- Public V Private :-

    Public sector workers are less productive- fact
    Public sector workers have more sick days- fact
    Public sector workers work less hours- fact
    Public sector workers achieve pay raises regardless of productivity-fact

    When the rest of us have suffered the reduction in pension benefits over the last 10 years its about time the playing field was level, its not about fair or unfair, its simple maths. The money has run out!

  • Comment number 17.

    I'm glad Mr P has highlighted the work of John Ralfe. People need to know the real cost of public sector pensions to the taxpayer is much higher than the fictional employer contributions shown on pension statements.

    If I was in the public sector I'd realise that my fanastic deal is only going be slightly less fantastic in future and keep quiet.

    The more the unions protest, the more the rest of country will find out the cost of the perks they are trying to protect. Then the political mood of the country (or at least the private sector part) may turn ugly.

  • Comment number 18.

    Hold on Robert! The move from RPI to CPI was not about saving money. Our "honest" government are adamant on that. It is about using a more accurate measure of pensioner inflation. Of course - that is bunkum! It was all about saving money at the expense of pensioners and handing the cash back in many cases to companies and their shareholders. A legalised type of theft really, I suppose you could call it.

  • Comment number 19.

    While I can see the need for this reform, given the current state of our economy, I do feel sorry for those in the public sector who are having their future income pruned. They are suffering, like the rest of us mere mortals, from the general decline in the financial standing of our nation which seems to be following the US model of capitalism of robbing Peter to pay Paul. With Paul being the bankers and Peter everyone else.

    What astonishes me is how we, the electorate, are so happy to let it happen. How we all seem to be so willing to stand idly by and let our government preside over this massive transfer of wealth from the general population to a select few as if there is no alternative.

    No matter how much better the public sector pension provision is than that which I can obtain for myself I would strongly suggest that it should not be the prime focus in our attempts to balance the nations books. Rather our attempts should be focused on clawing back the billions of pounds that we have 'leant' to the banks. A good first place to start here would be with the £7.7m a year that we are paying to the head of RBS, a bank that we own!

  • Comment number 20.

    If we want good pensions, which we all do, then we need the economy that can generate them.

    For some considerable time now, my estimate is the last thirty years, we have not had the economy to sustain what we want in anything. Talk about Never-Never Land!

    No wonder the country is in so much debt: private and public.

  • Comment number 21.

    The underlying culture of many of the often ill informed comments about public sector pensions is envy and the demand to level down. Right to mention the CPI basis for compensating for inflation which over a retirement period of twenty years will have drastic effects and why has the BBC now just assumed it is the right measure for inflation. Inflation is 5.1% as recorded by RPI - or worse.

    Perhaps Mr Ralfe might like to factor in his calculations the implied liabilities of large sections of the population who will arrive at retirement without an adequate occupational pension and will require state support unless it is the workhouse we will see revived.

    Of course it is not a good week to talk about "the public sector must realise ..." when we have seen obscene bonuses and pay go to those who in no small measure have created the circumstances where reducing deferred pay is seen as inevitable.

  • Comment number 22.

    It is also a shame that the Private Pension Funds, and Stockmarkets in general are so poorly regulated.
    Private Pension performance has been so woeful, because of the incompetence, greed and dishonesty rife in the private capital markets and in private industry.
    But then the Investment Bankers have to Slice off their Bonuses.......

  • Comment number 23.

    Any reasonable analysis of the symptoms of our financial woes - which this attack on pensions is one aspect of - would have to address the elephant in the room: the systemic dependence of Capitalism upon a worker's race to the bottom.

    How else can there continue to be economic 'growth,' with an unrelentingly growing population and dwindling resources, if the standard of living for the working person doesn't continue to deteriorate?

    The only difference between communist elitism and what we are heading towards is the label which the privledged elite pin upon themselves. Stalin the communist or Cameron the capitalist, the end result is still the same.

  • Comment number 24.

    When I applied to be a public sector worker 7 years ago, I factored in the value of the pension benifits when I decided if the low wages on offer were worth it. My hourly rate has just reached £7.69 so I can only feel any change to my pension benifits as a breach of contract and in some way a betrayal.

  • Comment number 25.

    16. At 19:17pm on 10th Mar 2011, e4dmc wrote:
    Facts- Public V Private :-

    Public sector workers are less productive- fact
    Public sector workers have more sick days- fact
    Public sector workers work less hours- fact
    Public sector workers achieve pay raises regardless of productivity-fact

    When the rest of us have suffered the reduction in pension benefits over the last 10 years its about time the playing field was level, its not about fair or unfair, its simple maths. The money has run out!

    -------------------------------------------------------------------------

    Congratulations you've done something nobody else has managed in my years of visiting this blog, you've made me angry.

    I work up to 50 hours a week take hardly any time of sick and haven't had a pay rise for two years. Many of my colleagues have been made redundant so I'm covering more than I can readily cope with and so are all of my colleagues. If you want to come and spout that bile in my office get in touch and I'll gladly show you around, I'll even provide the paramedics but I can't guarantee they'll treat you being lazy overpaid public servants.

  • Comment number 26.

    If Hutton is implemented the result will be social unrest on a massive scale. Public sector workers have been subject to wage freezes, previous changes to their pensions, redundnacies on a massive scale and privatisation throughout the public sector - Cameron and his liberal friends are on a mission to privatise all public services

  • Comment number 27.

    Yes Greed is terminal - that's correct i move to the Public sector from the private sector two years ago and I earn way less than I did 6 years ago!

  • Comment number 28.

    Cue yet more exodus of talent from the public sector if we are not careful. Although Universities are not included in this review (they are fully-funded independent schemes) they have also suffered a recent decrease in pension benefits, which are the subject of forthcoming strike action. The fact is we have a huge shortage of domestic talent entering the university sector, which isn't surprising given the opportunities on offer in the private sector compared to those in the public. If we persist with the view that those in the public sector should have poor pay, and now poor pensions, the brightest and best will either work in the private sector or overseas. Of course, one can argue that in the short term this might encourage entrepreneurial activity, which is all anyone seems to care about in this country these days. But some thought should be given to the long term future. Just where do you think the best doctors, lecturers, teachers and even civil servants (yes, you do need them, and just think of the policy decisions that they get to advise on) are going to come from in the future? It really is time to move on from this view of private sector good, public sector bad.

  • Comment number 29.

    This is a hugely important issue and I think that the public debate would be better informed if there was greater understanding of how much a guaranteed pension at retirement is actually worth - a lot more than most people would guess, I would expect.

    Robert looks at it one way - what percentage of salary would be required.

    I prefer the approach that Ros Altmann takes in this piece...http://www.sagazone.co.uk/blogs/detail/31009/

    She reckons that even a pension of £4,000 a years is worth £100,000 at retirement. To accumulate that amount of retirement savings is a big ask for most in the private sector.

    Robert, maybe you can encourage more of your media chums to use this measure to improve the understanding of their viewers, listeners and readers.

  • Comment number 30.

    E4dmc,

    You might actually be wise to check your facts before you spout them.....doctors in the Uk are NOT the highest paid in the world, in fact many particularly the junior doctors are poorly paid in comparison to USA, Australia and Ireland. Why do you think so many juniors leave the NHS to go to other countries? For less hours and more pay! As a junior doctor a tube driver and a dustbin man get paid more than we do and many people have two undergraduates degrees and a postgraduate degree. I have a relative who is a lawyer, she has trained in half the time I did, had two gap years and now earns far more than me. Oh and she works less hours a week!! When the government gets its wish and privatises the NHS doctors will begin to charge what they are worth or think they are worth like lawyers and medicine will become the luxury of the rich. Only at this point will the 'it's my right to treatment' whingers realise what a great deal the NHS is for everyone.

  • Comment number 31.

    North Sea Halibut is really full of old Codswallop isn't he/she.

    I have had one sick day in two years and I usually find I have worked getting on for an extra week each working month.

    A Public Servant

  • Comment number 32.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 33.

    If only people restricted themselves to knowledge and facts rather than headlines!?

    How many people commenting here actually know how these pensions work and what the real cost of each of them is (they're not the same you know!) - not many!

    So when someone can tell me more than just 'whah, its not fair that you pay for one of those and I don't!', then maybe I'd enter a debate. Let's also look though at the amount of benefits/credits our private sector colleagues end up taking after they didn't bother paying into any scheme and what that costs the taxpayer! And then lets look at the cost of tax breaks to those that can afford it.... and there's probably no point anymore at looking at the real cost we're suffering from bailing out banks, housebuilders, carmakers etc......... but oh yeah, I remember, it'll be ok when they peg back my pension!

    And incidentally will the imposition of longer working years apply to those with the big private pensions? I really don't know so you'll notice I'm not berating them without knowing the facts...

  • Comment number 34.

    As a civil servant you know you're up against it when the local evening news gives an example quoting a secondary school teacher on £86,000 currently getting a final salary pension of £43,000 being reduced to £31,000 on the career average scheme.

    Considering I can count on one hand the number of people in my department earning anywhere near HALF that amount you can see the dice is loaded against us in the public opinion stakes. And I work for a large central government department not an obscure agency so were on standard contract rates.

    The fact our pensions are good and private ones are less rewarding is who's fault, ours for getting good arrangements or the private sector mentality of wanting more cash now worry about the pension later. In the public sector the pension has been part of the annual bargaining round, when I worked in the private sector it never was, all the talk was of pay rises hoping the rise would effect a net contribution increase and provide an adequate pension via market investment - mugs!!

  • Comment number 35.

    Doesn't seem very sensible to me. I know of only one part of the public sector which has cost the country billions of pounds and caused an economic crisis, and they have been on the receiving end of massive bonuses. Go figure.

  • Comment number 36.

    The value of annuity that I can purchase with my lifetime of private sector money purchase pnsion schemes has dropped massively over recent years... ...and is still dropping with last week's 'equal pension for both sexes' legal ruling looking to knock a further 5% or so off my future pension.

    After a lifetime of full pension contributions I now look to be lucky to get around 20% of my salary as my future pension. I accept this is a result of longer life expectancy and the declining performance of share schemes in which my various pensions have been invested. What I do not accept is that I (and my children) should continue to pay for pension schemes three times as generous as this for many in the public sector who look to have an unfunded taxpayer guarantee of 60% of their final earnings. Public sector employees need to 'get real' and accept that they do not have a god-given right to a lengthy retirement funded generously by everyone else.

  • Comment number 37.

    I have no pension whatever as a private sector worker , I am 50 years old and see no way that I can make any provision even though I have understood the issues and importance for decades, How can civil servants reasonably expect their pensions to remain unchanged when life expectancy grows every year?.....The part that is really unfair is that we will end up with a two tier set of retirees, the retired state workers living on pensions partly funded by millions of older people forced to continue to work (in B&Q??) until they drop to pay the taxes to fund them. Sorry Civil servants, it is not affordable, even these proposals if adopted still leave you with a far better deal than the private sector....just as an illustration, if I wanted to retire at 60 on a pension of £10,000pa (considered peanuts by many public sector workers), I would need a pension pot of well over £200,000.....thats how much a public sector pension is worth....I can only dream of such a thing, but I will be paying taxes into my 70s to fund others

  • Comment number 38.

    I have just retired as a teacher and know that my pension was based on 80ths Your calculation seems to be based on 60ths When did this improvement in conditions come in and why not just reverse it if money is so short?

  • Comment number 39.

    It is a fallacy to say that public sector pay increases exceed those in the private sector. Public sector pay increases are capped at 2% by HM Treasury and have been for a number of years. In times when inflation has exceeded 2% the result is a real pay cut.

    It may be true that the total wage bill for the public sector has increased by more than 2% per annum on average. I suggest the reason for this is that some parts of the public sector try to get around the Treasury pay rise cap by creating new roles and getting rid of old roles. However, it is only the lucky few who get moved into the new higher paying roles - effectively the public sector's equivalent of the "fat cat". Those well paid professionals in the public sector who miss out on new roles will tend to get fed up with 2% rises and move into the private sector.

    For the generality of public sector employees there are no new roles and no clever tricks to get around the 2% pay increase limit. These are the people who will suffer most by moving to a career average scheme in times of high inflation. With rising oil prices the country now seems to be facing a prolonged period of high inflation. It seems to me this will hit the career average pensions of these workers particularly hard.

  • Comment number 40.

    31. At 19:55pm on 10th Mar 2011, Christine wrote:
    North Sea Halibut is really full of old Codswallop isn't he/she.

    I have had one sick day in two years and I usually find I have worked getting on for an extra week each working month.

    A Public Servant
    -----------------------------------------------------------------------------

    Eh!

    That's what I was saying wasn't it?

    A Civil Servant!

  • Comment number 41.

    As a Doctor I continue to see low moral amongst NHS staff certainly where I work its becoming increasing difficult to retain staff. The already drastic health cuts have made quite an impact on quality of care and will take some recovering from. Furthermore a pay freeze enforcing again who's paying for such a fraudulant City financial cock up has not made things any easier. Lets face it for many years a good pension was pretty much the only perk to a career in the NHS and I fail to see why this should be tampered with. Fundamental public sector services will only worsen as it becomes less and less attractive to work and more attractive to be out of work. Talk about bad timing - the cost of living is going up and the chance of living is going down.

  • Comment number 42.

    State pensions protect some of the most hard-working, important people in our society. The police, fire service, teachers, nurses etc. without whom the rest of the workforce would be unable to function. Surely they should be protected from yet another government attempt at fixing a financial crisis that was not of their making.

  • Comment number 43.

    re: NorthSeaHalibut

    And yet, the private sector is so competent that it is the only place where you can work, make a complete hash through incompetence. Beg hands-on-knees to be bailed out from the public purse. Continue to make billions in losses and STILL get huge bonuses. Doesn't seem to bad in some parts of the private sector to me?

  • Comment number 44.

    8. At 18:57pm on 10th Mar 2011, errrrrrrrrrm wrote:
    Before all the private sector workers come in with how unfair public sector pensions are I'd just like to point out that the average life expectancy of a retired teacher is 18 months. Not much time to ask for a decent pension after a lifetime of working to educate your kids is it.

    On what do you base this data? Average life expectancy for a teacher is not 18 months. But that does not suit your case does it? BTW. The standard of maths in school is appalling -1 year has 30 days in it for average calculations. Shocking misinformation. You should be ashamed of yourself.

  • Comment number 45.

    I am going to say something that will be considered as heretic:

    Why should anyone believe they have the right to retire? Isn't this an outdated concept? I see lots of very fit retired people in our country quite able to continue to contribute to society. Granted, some can't.

    Maybe we should do away with the concept of a retirement altogether and accept we should all contribute to society for as long as we possibly can. If you want to stop working, that's ok but don't expect others behind you to pay for it. Invest in a private or personal scheme to pay for this and take your chances.

    Hutton is being very brave but he could have been braver.

  • Comment number 46.

    geoff hughes

    Perhaps you should have started your pension earlier then and maybe encouraged your kids into the public sector!

  • Comment number 47.

    Before I started work in the Civil Service in 2002, all the pensions I contributed to, were final salaried in which the employer was supposed to contribute as part of my package. In all cases the employers took contribution holidays as the schemes were overflowing and they said we would suffer sanctions from the Inland Revenue. When I started in the Civil Service, I took a drop in salary of about 30%. Initially, I was on a scale which should have seen me back up in 5 years. In any event, when I retired 6 years later, I had not even made up the shortfall.

    Job security was non-existant as four times, I had to re-apply for my job. Yearly aapraisals were a battlefield as senior managers tried to prevent us getting an annual bonus of about £150 per annum. Even adding this to the salary still gave low wages. Conditions looked good on paper but senior managers were continually putting undue pressure to squeeze whatever theycould out of the staff. As one who rarely took time off through sickness, the paraphanalia we had to go through was rediculous. The last straw being when we had to phone our senior manager to report sick on each and every day we were absent. In many cases the senior manager did not know us from Adam. A scenario which would not have been tolerated in a private company.

    The average Public sector pension is only £4,000 p.a. A public sector worker retiring on that pension along with the state pension would probably still be eligible for pension credit to top up his pension the statutory minimum. Hardly a fortune!

  • Comment number 48.

    I wonder if this debate has lost historical context. As someone who worked in the public sector for over ten years, I can remember the contribution holiday local government experienced for several years around the turn of the decade. I remember the last government removing tax benefits to all pension contributions. I recall being surprised (when joining a third sector advice organisation as a director) that employees had no pension provision. A year later I joined a private sector organisation that decided its pension fund was overprovided and reduced it's contribution to nothing.
    In truth our pensions have been abused by all.

  • Comment number 49.

    36. At 20:04pm on 10th Mar 2011, geoff hughes wrote:

    Public sector employees need to 'get real' and accept that they do not have a god-given right to a lengthy retirement funded generously by everyone else.

    ----------------------------------------------------------------------------

    But we have a right to a pension on the terms we signed when taking the job.

    The "unaffordable" funding issue is particularly worrying as people have been taken in by this. Local authorites and several other public bodies have different schemes which in many cases are more than adequately funded whereas central government pensions come out of annual purse and are part of the spending per annum. This is a known quantity and is forecast within budget, in fact it's part of the TEN YEAR forecast so provision has already been made for cost. Only variable factors cause disruption to annual spend, now I wonder what that could have been.

  • Comment number 50.

    Another factor not recognised by many in the public sector pension debate is the fact that not only are we all living longer, but that the public sector workforce as a proportion of the national total has massively increased over the last few decades. Diminishing private sector taxpayers, some of whom have no pension provision at all are having to increasingly support this now unrealistic government approved financial black hole, or Ponzi scheme by another name. Like the private sector does all the time, the public sector has to get real and realise it must cut it's cloth to fit the current new body shape!

  • Comment number 51.

    I haven't often found myself agreeing completely with northseahalibut on this blog but I do on this occasion in relation to the extraordinary rant by e4dmc earlier on.

    I'm not always a massive fan of the public sector but I have no idea where e4dmc draws his 'facts' from to justify what seems to me a very foolish set of generalisations.

    I work in the private sector. But I haven't a clue how I would compare my productivity with my next door neighbour who heads up the intensive care unit in my local hospital. But I know he attends work as regularly as me, works generally longer and less social hours and is paid about the same. His skills and value to society are streets ahead of mine.

    I think this stone throwing by either public sector towards private sector or back again is trivial and tiresome. There is valuable inter-dependence and we might all be happier if we spent less time looking over our shoulders to see who might be doing slightly better and more time doing what we can for a better future.

    Iris Murdoch once said that everybody has an obligation to be the best person they can possibly be. Very wise words. You don't have to be the best, you don't have to be perfect, but you have a real obligation to be as good as you can be.

  • Comment number 52.

    and..... if its such a crack hot deal being in the public sector then how come the whingers haven't just joined us? After all, its apparently a really easy time, as well paid as anyone and you get set up for life at everyone else's expense!!

    come and get a piece of this guys.......beware though, you won't get away with bringing the country to its knees over here, people watch what you do and hold you accountable - second thoughts better stay where you are, its safer.

  • Comment number 53.

    It's absolute rot that improved pensions for public sector workers are offset by lower wages in comparison to those received by private sector workers. Only last year data from the Office for National Statistics (ONS) showed that the average public sector worker was paid £23,660 a year, compared with private sector workers who were paid £21,528 a year. A record £2000 gap.

    I work in the private sector, get paid less than the average public sector worker and stand to receive a pretty diabolical pension. But you pays your money, you makes your choice. Suffice to say I have little sympathy with those complaining about Hutton's eminently sensible proposals.

  • Comment number 54.

    I had been full of comments about the privilged few but it seems it has all been said, I work for a private company and have now lost my final year pension because they can no longer afford to sustain it. Why after Gordon Brown raided my funds should I and other private workers be expected to maintain public sector employees gold plated pensions from our taxes. Just a thought

  • Comment number 55.

    51. At 20:29pm on 10th Mar 2011, Slessac wrote:

    I think this stone throwing by either public sector towards private sector or back again is trivial and tiresome. There is valuable inter-dependence and we might all be happier if we spent less time looking over our shoulders to see who might be doing slightly better and more time doing what we can for a better future.

    ---------------------------------------------------------------------------

    Sound advice, I'll take it and refrain from chucking rocks further. I was somewhat angered so the red mist got the better of me.


  • Comment number 56.

    Its about time the public sector realsied we all in this together.
    I am in a forgotten industry when it comes to public v's private.
    I work for a national bus company in South Wales, where we provide a front line "public service" yet we are part of the "private" sector and have been since 1986 when thatcher privatised us.

    5 years ago we lost our "final salary" pension scheme to new worthless "contribution based" one. The unions didnt bat a eyelid and we had to accept it no matter what and also agreed with management when we give up 25% of our sick paye for a paye rise.
    We are also not very well paid, a misley £16,000 to get spat at, abused on a daily basis, unsocialble shifts, etc.

    As for the unions, they are making my blood boil latley.
    This might come as shock to you all as i am the chairman of our local branch for the unite union.
    All this threat over strikes yet they couldn't give a dam about their private sector members. Our members have no faith in them at all at the moment and feel like we are the forgotten workers within the public services,(hence the latter word).

    If you notice the Labour party are keeping quiet over this as they know the majority of their supporters in wales work in the private sector and with an election coming in May, and of cousre Lord Hutton is a former Labour minister.

    I've feel i am airing my voice for all those private sector workers out there who provide publice services with pure professionalism, i salute you.

    Goodnight all. x

  • Comment number 57.

    I have worked in the civil service for 28 years and the statement made today by the Government that public sector pay is now higher than private sector pay is a good example of a statistic that is factually true but misleading. Public sector pay appears to have risen in recent years because we have (a) outsourced all of the low-paid posts such as security, catering, cleaning etc into the private sector and (b) recruited senior people from the private sector (usually useless) on much higher wages than existing staff. As a consequence the average pay figure has risen substantially although no-one in practice has received anything like RPI within living memory. There are lots of studies around which show that when comparing like-for-like skills, public sector staff are paid much less well than those in the private sector. You have to see the pension cuts in this context. When the Government puts us on a pay freeze for two years; cuts the value of our pensions by 20%; cuts staff numbers by about 30% (in my Dept) and then cuts our pay by a further 3% to pay for the new reduced pensions, its no surprise that morale is somewhere miles below zero. We are having to bear all of the same pain as everyone else - VAT raises, tax increases, rail fares - plus all of this on top.

  • Comment number 58.

    As someone who has just retired from the public sector after forty years service and in all that time have contributed to my particular scheme unlike my employers who had a number of contribution holidays and reduced contributions to the pension scheme in the same time period. I have noted in any of the interviews I have seen of Lord Hutton today that he has failed to comment on contribution holidays and the raids by governments in the past of the various schemes' funds!

    I also noted that he failed to comment on the MP's and MEP's pension schemes as these schemes are platinum plated. Perhaps a review of these schemes would indicate to the rest of the populace that are so called elected representatives are public servants and that we are indeed all in this together!

    JHovis

  • Comment number 59.

    As a proffesional in the pensions industry Robert should be congratulated in his assessment of Lord Hutton report.

    Those in Public Sector pensions should be very glad that they get.

    The next mess that Lord Hutton needs to address is how people can save for their retirement and how ALL employee pension contributions need to come from a wages reduction and then they save National Insurance and Tax. My employer wrote to me the other day inviting me to make extra payments. A £50 additional contribution to the scheme would cost me only £34.80 of take home pay, whereas if I made this payment myself to a personal pension the £50 contribution would cost me £40, so I make a saving of £5.20 through reduced National Insurance as well as tax relief. The employer also volunteered to make the £50 up to £53.50 as they also make savings. These savings can only be made with approved salary sacrefice methods and if they were encouraged people would get bigger pensions for less input and no need to take high investment risks. Its the system thats at fault!

  • Comment number 60.

    Here we go again,the multi-national,globalisation market knows best spin that we
    have been listening to since 1979.Back then it was curtail the power of the unions,
    doing so would be good for the nation and hence for the ordinary working people.
    We were told to take pay cuts,pay freezes and to accept job losses as this is good
    for the nation.
    The C.B.I,The institute of directors,politicians and of course representatives of the
    financial services all told us to do what they recommended.
    The politicians, were found to be abusing their expenses to the point of criminality,
    the financial services have awarded themselves bonus,s that are so inflated and
    greedy it beggars belief;Captains of industry, expect, job losses due to outsourcing
    to third world countries,the longest working hours in Europe,pay freezes and pay
    cuts, loss of pensions(Robert Maxwell Mirror Group) and they are merrily voting themselves huge salary increases and so on.The gap between the rich and the poor
    is at its widest for 150yrs,social mobility in UK plc is the worst in the industrial west
    but the politicians and market advocates are still peddling more of the same!Their
    language never mentions fairness for ordinary people just sacrifice,its the ordinary
    people that are having to take the knocks but we are all in this together!?!

  • Comment number 61.

    nice one Robert - how about trying to live on a Public sector salary and pension yourself? ..we arent all on massive salaries and dont have publicly funded jobs such as yours...why not propose cutting your inflated salary ? whats the minimum salary you have earned Robert after your Oxbridge education? come and work in a jobcentre on a 3 year pay freeze and then comment

  • Comment number 62.

    I have a lot of sympathy for public sector employees who work very hard and don't get the cushy lifestyle many people imagine (I worked as support staff in a school and it was harder than any private sector job).

    That doesn't mean I think the public sector isn't in need of reform.

    People in the private sector don't see the kind of accountability we live with. A small pay increase isn't so bad when you consider plenty in the private sector have had zero. I took a 10% cut when I needed to change jobs and I know people whose companies have asked them to take a 10% cut or be made redundant.

    I also have to point out that there are quite a few dubious 'factual' statements in the comments above. Everyone is entitled to an opinion, no one needs to make up facts as justification: apparently "the average life expectancy of a retired teacher is 18 months". A this is the average when they are retired it suggests they live approximately 36 months (on average being 18 months away from death). I think someone may be mistaking "retirement" for "major heart attack"...

  • Comment number 63.

    A number of public sector pensions already operate along the lines of the report. For example all new entrants to the NHS scheme will be on an average salary scheme and all employees pay a graduated contribution rate linked to their salary. It is very few who actually get significant value as most public sector workers do not achieve large increases in salary over time. It is the minority who are able to rise through the ranks and reach salary levels that achieve the headline rates that create so much ranting on this site. However exactly the same issue applies in the private sector and we have seen numerous examples where Directors have walked off with astounding levels of pension. I think one of them used to be employed by a bank.

  • Comment number 64.

    Strangely enough, Huttons plans for Public Sector pension reform can be measured against Beeching's plans to reform the railways. Beeching’s plan seemed to be emminently sensible to those who thought, at the time, that there wasn't a better way to deal with the problem facing them. Yet, as we now know; Beeching’s plan devastated our railways and left us with a woefully inadequate rail network, which the tax payers of today are still burdended with.

    Hutton’s plan will not resolve the economic problem of pensions, it will simply move it. Those who cannot afford to pay for a good pension will not and they will become, in thier old age, the responsibilty of the ‘Social benefits system’ (as many are now).

    This plan, sadly, is as proposterous as Beeching’s was but I suspect it won’t stop our government from following it. Lets face it, it's politicians who decided to follow Beechings plan and that worked really well; we went from having the best railway network of any country, to that of a railway of a 3rd world country.

    This plan comes on the back of poor thinking; just like those in government who think that lowering of imposing lower speed limits on roads will stop drivers from speeding.

    What is more worrying, is that many people across the country want to align public sector services with the private sector. In the field of nursing this would create a mammoth problem. Wages for nurses, in this country, are held lower than those of thier counterparts in the USA; because the NHS sets the rate of wages for nurses (as the biggest employer) and not the private sector. If we switch this, then nurses wages would rise significantly as the public and private sector compete with each other to get the best staff.

  • Comment number 65.

    tried to post 5 times and after two hours still not been posted. shum cheet heeer .

  • Comment number 66.

    #14 I do not know the reputations of most of the people you are quoting but Professor Prem Sikka contributes a lot to research on insolvency - and most of the insolvency professionals I know have very few good words to say about its quality. Richard Murphy writes a very interesting blog on tax but has a habit of getting some basic facts wrong which does lead me to wonder about whether the rhetoric overtakes logic from time to time.

    Pensions are a very emotive subject but I think it is reasonable for govt to use the tax system to encourage people to make provision for their own retirement rather than relying on the state. Very simplistically govt could either give tax relief on pension contributions now but tax pensions as income when drawn - a sort of deferring of income tax scheme rather than a real waiving of tax - or not give tax relief on contributions but allows pensions to be tax free.

    To be fair I have not done any calculations on this but I suspect that allowing pension drawings to be tax free is even more beneficial or biased in favour of the rich than giving tax relief on contributions as it is unlikely that most people will save enough into a pension scheme to be subject to tax.

    So if Richard Murphy wants to compare like with like what he should be taking off the cost to govt of tax releif on pension contributions the increased tax that govt receives when the pension is drawn.

    No matter how you cut and slice the numbers the simple fact is that for many public sector pension schemes (not all) the promised benefits are massively in excess of the employee contributions. For the promised benefits to be delivered it would imply that the employer (ie govt or local govt) should be providing emplouer contributions of 20%+ of salary.

    There will be very very few private sector schemes where that happens.

    The net result is that some public sector schemes are in massive deficit (not all I think people have pointed out the NHS scheme is in surplus) and I remember one calculation was the pension deficit in public sector schemes was several hundreds of billions of pounds. The problem is of course that some of these "schemes" are nothing of the sort as there is no fund to pay out the pension it is provided from general govt revenue.

    Public sector pensions are a problem where the solution is equivalent to the old joke of the person when asked for directions starting by saying "I wouldnt start from here.."

    Long term ALL of the public sector pensions need to be put onto the same basis as private schemes where there are real funds which are subject to proper regulation and regular solvency tests - maybe these could become the UK sovereign investment fund of the future.

  • Comment number 67.

    # 38. At 20:08pm on 10th Mar 2011, KJackson1 wrote:

    I have just retired as a teacher and know that my pension was based on 80ths Your calculation seems to be based on 60ths When did this improvement in conditions come in and why not just reverse it if money is so short?

    --------------------------------------------------------------------------

    I'm guessing you also got a lump sum in addition to your 80ths pension of 3 * pension? If so then an 80ths pension with a lump sum is approximately equal to a 60th pension.

    Either that or the blog is comparing a pension from a different civil service scheme - they're not all the same.

  • Comment number 68.

    Northseahalibut wrote "But we have a right to a pension on the terms we signed when taking the job"
    ------------------------------------------------------------------------------
    errrrrrr, why exactly is that then ??. There is no "right" to anything when it comes to pensions, economic conditions change, demographics change, life expectancy changes, the overall wealth of the nation changes. Most Private sector workers have had their pension conditions changed or even had schemse totally wound up ....and there is nothing we have been able to do about it, why should you guys be immune to these things. I dont suppose many public sector workers even noticed the fact that private sector schemes were closing left right and centre, final salary schemes were overnight converted into money purchase deals, annuity rates slashed... Its not like you wont get a pension, its just going to be altered a little to be more in line with current economic realities....and its still a good deal....its not like I am suffering from jealousy, I just can not see how on earth the country is supposed to fund these pensions if we dont reform the system.....I dont think these reforms go far enough to be honest, and I wouldnt be suprised to see another review in a few more years.....you guys may not even get anything if the decline of UK PLC continues as is

  • Comment number 69.

    PS It was Mrs Thatcher and the conservatives that allowed PLC,s to raid their
    employees pension funds to prop up the PLC.s cash flow and no doubt executive
    salaries.

  • Comment number 70.

    A quick reality check.

    I'm a public servant worker and I pay, as part of my salary, a percentage towards my pension. I also pay as many additional years as HMRC allow. I'm also a middle grade manager with 16 years of central government experience. My pension under the current rules will be less than £8000.00pa. I'm one of the lucky ones as most of my immediate colleagues are not in as healthy a position as me. As a point of interest, I worked in the private sector until I was 48 then moved to the public sector as the salary was worse but the pension was better. If you look at the comment concerning how long I have been public centre worker you may note that I am still working 60+ as I cannot afford to retire even with my "gold plated" pension

  • Comment number 71.

    Focus...the last governments new tax rules on pensions affected all of us! JHovis I agree...both your employer and others in the other sectors saved money by reducing employer contributions in the boom times. Now working people are arguing over the levels of pensions they receive rather than seeking a long term agreement of contributions now (in the bad) and in the future (hopefully better!) for all.

  • Comment number 72.

    16. At 19:17pm on 10th Mar 2011, e4dmc wrote:
    The Economist published an article recently which explored the facts of the issue. When all factors are taken into account its just not true anymore that public employees forego pay and benefits for the 'gold plated pension'. Overall it concluded that public sector benefits overall were higher than the private sector for most employees.

    ---------------------
    This is a misleading argument: OVERALL public sector pay compared with OVERALL private sector pay is irrelevant. Averages do not consider like for like comparisons. If you must have the argument, you need to consider like for like comparisons of jobs with comparable required qualifications/skills/experience. The private sector employs proportionately more low skilled workers and the public sector proportionately more highly skilled workers. Does a nurse in a BUPA hospital get paid more than an NHS nurse? Does a chartered engineer working in BAE Systems get more than one working in the MOD? I think you will find they do not.

  • Comment number 73.

    Up until now MPs seem to be be behaving like the worst Employer. The directors get all the benefits and give their employees the smallest amount they can get away with. They have the best Public Sector Pension Scheme and therefore the most expensive. If MPs adopt the proposals for pension changes they should set an example by being top of the list for adopting the changes.

    Following pay freezes in the past many people will view this as another con trick. My pay was based on comparison with similar jobs in the private sector. Our pension including RPI was taken into account in determining wages. If these proposals go ahead we sacrificed years of reduced pay for nothing. Meanwhile every time civil service pay was repressed MPs linked their pay to a higher civil service grade and then severed the link altogether. It seems MPs aren't part of the the Big Society and are the (greedy) pigs in Animal Farm.

  • Comment number 74.

    49. At 20:26pm on 10th Mar 2011, NorthSeaHalibut wrote:
    But we have a right to a pension on the terms we signed when taking the job.


    I think your comment is probably the best summary that is the crux of the problem.

    You were given a fraudulent contract, that promised you returns that could only be obtained by taking crazy levels of extra tax off me and my children.

    Why don't you come to my house, look me in the eyes, and tell me that I should pay significantly more taxes to fund your promised pension, when I cannot afford ANY pension contributions of my own, let alone what I'm already contributing to yours.

    Already 1/3 of many council tax bills are supplementing underfunded pensions. How much more council tax and other taxes do you think are fair to make up your fraudulent contract?

    Is it fair if I come around and take stuff from you to make up my lack of pension, because my expected income has been defrauded off me by others?

  • Comment number 75.

    70 wrote "My pension under the current rules will be less than £8000.00pa. I'm one of the lucky ones as most of my immediate colleagues are not in as healthy a position as me. As a point of interest, I worked in the private sector until I was 48"
    ---------------------------------------------------------------------------------
    OK....you try a reality check, an £8000pa index linked pension would cost £167,000 to buy (retiring at 65), you will be paid out £80,000 per decade (index linked), if you live for 30 years as a retiree thet is close on £1/4 million, if inflation tops 10% ....you have no worries because your pension will track the RPI.....,Ha Ha Ha , and you dont think that pension is worth much LOL...typical, and you didnt even start contributing until you were 48!!!, that is pretty typical of the complete lack of understanding that many public sector workers suffer from

  • Comment number 76.

    70. At 21:06pm on 10th Mar 2011, Adrian Swall wrote:

    A quick reality check.

    I'm a public servant worker and I pay, as part of my salary, a percentage towards my pension. I also pay as many additional years as HMRC allow. I'm also a middle grade manager with 16 years of central government experience. My pension under the current rules will be less than £8000.00pa. I'm one of the lucky ones as most of my immediate colleagues are not in as healthy a position as me. As a point of interest, I worked in the private sector until I was 48 then moved to the public sector as the salary was worse but the pension was better. If you look at the comment concerning how long I have been public centre worker you may note that I am still working 60+ as I cannot afford to retire even with my "gold plated" pension

    ------------------------------------------------------------------------------

    But presumably you have a pension from your years in the private sector to supplement your £8k public sector pension? 16 years is an unrealistic time-span to accrue a "gold-plated" pension.

    A pension of £8,000 equates to a pension pot of approximately £200,000 at current rates. To build up a pot like this in a typical private sector DC arrangement would require contributions of around £10k pa over 16 years - out of the reach of most people.

  • Comment number 77.

    Leaving aside the specifics of this issue how can it be fair to retrospectively change the rules? It's like paying your mortgage for 25 years and in the last couple of years the mortgage company saying: We've changed our mind you'll only own 60% of your home. It's irrelevant whether the mortgage was a good rate or otherwise the important thing is that it was a long standing agreement which is being unilaterally changed by one party. Absolutely outrageous.

  • Comment number 78.

    36. At 20:04pm on 10th Mar 2011, geoff hughes wrote:

    Public sector employees need to 'get real' and accept that they do not have a god-given right to a lengthy retirement funded generously by everyone else.

    ----------------------------------------------------------------------------------------------
    This is true but the changes need to be done fairly. Many of us in the private sector started our careers on final salary schemes that looked better than our lower salaried public sector friends. Sure they had more job security but we were better paid and the way the stock market was rising our pensions were going to be more valuable than theirs. Then our employers won the lottery, the Tory government allowed them to take pension holidays, then there were falls in stocks (who would have thought it) and then Brown tinkered even more. Now many of us hate all public sector staff.

    But they made choices like us that have turned out fairly well. All they did was take jobs that had certain terms and conditions. Alright, these reforms are now overdue, but its not the fault of the nurses or civil servants or teachers that they made these choices. Changes should be made for the future but public sector workers are entitled to what they have gained up till now and should not be blamed.

  • Comment number 79.

    Call me cynical but I strongly suspect that Mr Cameron will be a deal more committed to, and effective in, stealing public sector pensions than he was in curbing excessive banking bonuses!

  • Comment number 80.

    @77 I agree...and when the other contracted party reduces it's contributions. On top of this the government of the day changes the tax rules without notice. Contract Lawyer required!

  • Comment number 81.

    The unions are hypocrites. When my old company in the private sector stopped the final salary scheme over 6 years ago, the union (now called Unite) told us to accept it and join a money purchase scheme, where the company would match our contributions upto 7%.

    Now the public sector are getting hit the unions are threatening strikes. It's about time they started to live in the real world. Final salary schemes started to become unaffordable after Gordon Brown's tax raid on dividends over ten years ago. Why should the public sector get final salary pension schemes that hardly no-one in the private sector now longer gets?

  • Comment number 82.

    77. At 21:28pm on 10th Mar 2011, seankellybbc wrote:

    Leaving aside the specifics of this issue how can it be fair to retrospectively change the rules? It's like paying your mortgage for 25 years and in the last couple of years the mortgage company saying: We've changed our mind you'll only own 60% of your home. It's irrelevant whether the mortgage was a good rate or otherwise the important thing is that it was a long standing agreement which is being unilaterally changed by one party. Absolutely outrageous.

    ---------------------------------------------------------------------------

    A better analogy would be the mortgage company increasing the mortgage rate in the last couple of years because the current one is completely unaffordable! The changes proposed are in relation to future pension benefits only - the terms on which any past pension was earned are not changing.

    If you don't agree with the mortgage rate going up you are free to move banks for the last couple of years! But even then I don't think you would find a better deal elsewhere!

  • Comment number 83.

    Mr Peston, In absolutely guarantee you that 99.999% of Public Sector workers would gladly accept an average salary pension scheme.. . . . . . .on your salary!

  • Comment number 84.

    I have worked in both the public and private sector. I think what people are missing here is that Hutton's recommendations are for FUTURE earnings, not to dishonour the benefits built up to date. I agree it would be immoral to take away benefits accrued to date.

    As I understand it most public sector workers only have to give 2 or 3 months notice to leave their jobs - these proposals will take many months (more likely years) to come into force - giving public sector workers time to leave and (if the grass is supposedly greener) secure a position in the private sector. They would however see how it is virtually impossible to secure an average earnings let alone final salary pension scheme - there is not a single FTSE 100 company offering new employees a final salary pension scheme.

    I'm not saying life is a bed of roses in the public sector (where I am currently employed) but people need to wake up and realise things cannot continue as they have been.

  • Comment number 85.

    What has Robert got against public sector workers - in fact what has the Government, public got against them. They comprise, the Police, Health Workers, low paid civil servants on front line duties, fire brigade etc. etc. What is so wonderful about the private sector then? I heard that the fellow in charge of RBS was going to get a whacking big bonus - yet bailed out by Governement. You know what Robert, if all the public sector workers downed tools tomorrow, this country would come to a standstill! And where would the private sector be then - most of them rely on Government contracts to keep going - This public/private debate is totally irrelevant - BOTH are needed. Come on Robert!

  • Comment number 86.

    68. At 21:04pm on 10th Mar 2011, mangizmo wrote:
    Northseahalibut wrote "But we have a right to a pension on the terms we signed when taking the job"
    ------------------------------------------------------------------------------
    errrrrrr, why exactly is that then ??. There is no "right" to anything when it comes to pensions, economic conditions change, demographics change, life expectancy changes, the overall wealth of the nation changes.
    ------------------------------------------------------------------------
    ------------------------------------------------------------------------

    My terms and conditions of employment are aligned to an act of parliament, said act also includes pension provision, I am a crown employee. This act will need to be changed to implement new terms and conditions, this is a formality seeing as they've just rushed through temporary compensation scheme conditions to facilitate mass redundancies on the cheap, in breach of the act I hasten to add by using the annual finance bill as passage. So you see my contract provided me with pension terms, in affect a "right" of employment not an annexed scheme like private schemes. Only five years ago the scheme was improved so whats changed since 2006, well let me guess.

  • Comment number 87.

    82. That's not a valid analogy! The government are doing both!

  • Comment number 88.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 89.

    86. At 21:43pm on 10th Mar 2011, NorthSeaHalibut wrote:

    68. At 21:04pm on 10th Mar 2011, mangizmo wrote:
    Northseahalibut wrote "But we have a right to a pension on the terms we signed when taking the job"
    ------------------------------------------------------------------------------
    errrrrrr, why exactly is that then ??. There is no "right" to anything when it comes to pensions, economic conditions change, demographics change, life expectancy changes, the overall wealth of the nation changes.
    ------------------------------------------------------------------------
    ------------------------------------------------------------------------

    My terms and conditions of employment are aligned to an act of parliament, said act also includes pension provision, I am a crown employee. This act will need to be changed to implement new terms and conditions, this is a formality seeing as they've just rushed through temporary compensation scheme conditions to facilitate mass redundancies on the cheap, in breach of the act I hasten to add by using the annual finance bill as passage. So you see my contract provided me with pension terms, in affect a "right" of employment not an annexed scheme like private schemes. Only five years ago the scheme was improved so whats changed since 2006, well let me guess.

    ------------------------------------------------------------------------------

    Things are little different in the private sector - when I started my current job my contract explicitly entitled me to a final salary pension. My employers decided to change the terms when they changed the pension provisions - we had to sign a new contract or our company had the right to dismiss us (as they did with a few individuals, who challenged the decision in court and lost).

  • Comment number 90.

    Now Lord Hutton's finished his work I wonder if he would like a retrospective reduction in his fee of 40%?

  • Comment number 91.

    I have become increasingly annoyed over the past few days reading and listening to the media bias and government peddled misinformation regarding public sector perks, salaries and pensions (Nick Robinson, please research your facts before blurting them out on national news). The government must be rubbing their hands with glee as it appears that the divide and conquer spin regarding the supposed inequities between private and public sectors is working. I currently work for the public sector, having taken a large drop in salary when I left the private sector. I did this because I wanted to contribute something to society, but comforted by the stability of the terms and conditions that were offered. As a result of recent reports I am now looking at working longer for significantly less money. I will carry on as I love my job, but I suspect it will be a summer of mass discontent.

  • Comment number 92.

    "But those employees should perhaps count their lucky stars that they don't work in the private sector ..."

    Why is that Mr Peston, I made a choice as did every other person who when it comes to employment, when I joined the police in 1991 I was on a salary of less than £20,00o I left thE electrical trade when people where on super-tax within 6 months of the tax year, If they have wasted the money they were earning on luxurys then more fool them.

    Maybe you should speak to your colleague Nick Robinson and swap ideas on how to broadcast blatant lies... and given I pay your wages in my licence fee would you like to divulge what your salary is ?


  • Comment number 93.

    Public sector workers make a choice to work in a job that has an average pay and make a difference. Not all of us, but many of us have worked for years in the private sector and realise that life is different there. However, I believe that if you work your socks off at a job that takes courage, energy and that you get little or no thanks for, a solid pension that is not eroded is and should remain part of the job. I have no issues with paying/ contributing more per month, nor have I a great issue with a later retirement age, but a good pension attracts good people that will continue to do a good job. The deficit is a problem, but lets not ruin supply-side economics for the future with short-term 'slash and burn' economics.

  • Comment number 94.

    90. At 21:50pm on 10th Mar 2011, seankellybbc wrote:
    Now Lord Hutton's finished his work I wonder if he would like a retrospective reduction in his fee of 40%?


    This is frankly silly.

    Public sector workers have a right to expect that the pension earned to date is paid on the same basis that they agreed when they started their jobs. Its not fraudulent as one person has said, just a legal contract between an employer and an employee). But if the government wants to change these terms in the future it can do so and you are entitled to accept the new terms or leave.

    Lord Hutton is entitled to his agreed fee. If he was asked to do a further report and told that he would be paid half the fee, he could take it or leave it. All Hutton is proposing is that pensions earned to date are honoured and those earned in the future by existing staff are earned on reduced terms.

  • Comment number 95.

    There is good reason to fear that this report may have a further impact on pension saving, and not just for the public sector. After all, how can be sure that what you sign on for is what you are going to get? It really pitches expectations at an even lower level than they are currently. But of course, our munificent government want to make it compulsory for nearly all workers to contribute to a pension in future. So we have a new Morton's Fork. You'll be damned if you do save and damned if you don't.
    And maybe private pensions would be better if there weren't so many parasitic fund managers earning a healthy living off them.

  • Comment number 96.

    A cynic might say that Robert's recommendation that I (as a public sector employee) should "thank my lucky stars" is based on his own sour grapes as a result of the changes to his BBC pension. From A. Sinick

  • Comment number 97.

    About all that can be done now to deride public sector employees is to suggest that we should be put down when we are reaching retirement, after all we don't seem to be of any value even at work never mind retirement, forget second class we seem to be described as some sort of lower life form. Thirty years totally wasted in the fire service! those rescued by my colleagues and their lives were worthless my service pointless, obvious now, at the time it seemed worthwhile.

    I believe that at some point even in this pathetic country many will at some point rebel at the greedy selfish arrogant wealthy who have tens of millions invested in their pension pots to the detriment of their employees, Lord hutton speaks of fairness, no matter if you are employed in the public or private sector people should have dignity in their old age. If as dave says we are all in this together just when will the ftse directors take anything like the pain those on lower incomes have had to face, public or private sector. The rich richer the poor poorer is the only addage this country recognises!

  • Comment number 98.

    re 53. about the average wage of public sector workers being £23,000, dream on.. I am a manager work evenings & weekends & still don't earn this, I had a job in private sector earned more, no responsibility & worked 9 - 5, Mon to Fri. All this name calling, pension envy is childish, pension provision in all sectors needs reforming including political figures.

  • Comment number 99.

    The middle to well paid in the public sector have been treated very leniently in this review. I have more sympathy with the less well paid.

    However some pertinent points:

    1) The much quoted average public sector pension pension is entirely misleading - I have seen it quoted between £4K - £8K per annum. That average is a function of many part time employees and many that have had a short working life in the public sector. It is a much manipulated and obfuscated fact.

    An equivalent individual in the private sector earning that little money would have a private pension of precisely £nil.

    2) For a private pension to fund an index linked pension at retirement would require a multiple of around 30 times of the desired pension - thus if you want an index linked pension of £8K per annum, you will need a pot of around £240K.

    3) Private sector pensions transfer all the risk onto the individual, the risk of investment performance and having to deal in the stockmarket, beyond the skills of an average person. Look at the performance of the UK stockmarket over the last 13-14 years - it has moved precisely nowhere. A public sector pension has no risk, over those 14 years an annual entitlement would have been accrued which bears absolutely no relation to the performance of the investments and indeed it is the UK taxpayer who picks up the tab for underperformance. It is akin to having to gamble one's future for the average private sector person who has no experience in investments. For the public sector person it is a one way guaranteed no lose bet.

    4) if a private sector person wanted to achieve the same index linked salary as someone in the public sector, then on average they would need to contribute 40% of their salary - and even then that assumes investment growth cf nil investment growth over the last 14 years

    5) I have no gripe with the low paid pensions in the public sector, however they should appreciate the positions of equivalently salaried individuals in the private sector, who are unlikely to have any pension at all.

    6) For middle to senior civil servants, public sector managers, judges, MPs, teachers etc and others on index linked pensions ranging from £15K to £60K, they should be extremely lucky they are only having to contribute another 3%, the reality being they should have to contribute an awful lot more, if they actually worked out how much it costs to pay their pension. So few of them actually do understand this.

    7) Finally, who has the most to lose from any meaningful reform? MPs and Civil servants who are in charge of this review - does that make any sense ?

  • Comment number 100.

    Some years ago data was published which showed how a person's life expectancy was reduced by extending their working life - the later you retire the earlier you die.

    It seems odd that the Government is not making this information clear as one of the reasons for raising the retirement age - I'm sure it won't have escaped their notice.

    Basically the aim seems to be to save money by working us to death.

 

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