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Pension pain

Nick Robinson | 22:51 UK time, Monday, 14 June 2010

So you knew tax rises, spending cuts, pay freezes and benefit cuts were on their way. Stand by for cuts in pensions for public-sector workers.

The OBR report estimates that the cost of public-sector pensions will increase in real terms by 20% every year - that's equivalent to the cost doubling over five years.

Nick Clegg describes this as unfair and unaffordable.

I'm told that we'll hear soon the name of the person chosen to chair an independent review of public-sector pensions.

Ministers are clearly preparing the way for higher pension contributions and possibly, in the longer term, scheme closures.

Comments

Page 1 of 5

  • Comment number 1.

    Hot spud this one. Will track with interest.

  • Comment number 2.

    Public sector pensions earned over forty years of contributions. Bankers bonuses earned in seconds of trading, irrespective of the often catastrophic long term effects of their decisions. I wonder where the root of our current economic woes lies?

  • Comment number 3.

    You may be surprised to hear it Nick, but outside the rarified intellectual elite that you mix with, public sector pensions have actually been a topic of interest for some time. Of course they're unaffordable, and the sooner they're dealt with the better.

  • Comment number 4.

    Remember the Scott Report . . .

  • Comment number 5.

    "the cost of public sector pensions will increase in real terms by 20% every year - that's equivalent to the cost doubling over 5 years."

    No. That doubles the cost in less than four years. If the cost is, say, £100 today, then:

    - after 1 year: £120
    - after 2 years: £144
    - after 3 years: £172.80
    - after 4 years: £207.36

    Looks unsustainable to me.

  • Comment number 6.

    >So you knew tax rises, spending cuts, pay freezes and benefit cuts were
    >on their way.

    Yes, thanks to the shameful incompetence and extravagance of the previous "government" (using that word in its loosest sense) - not to mention its veniality in swelling the ranks of, and bribing, its perceived future "Client Class".

    >Stand by for cuts in pensions for public sector workers.

    Long overdue too.

    >The OBR report estimates that the cost of public sector pensions will
    >increase in real terms by 20% every year - that's equivalent to the
    >cost doubling over 5 years.

    No. It is equivalent to the cost doubling approximately every 3.8 years. The growth rate is compound, note.
    In 5 years' time, it would be not 200% of its present cost, but about 248% of it.

    >Nick Clegg describes this as unfair and unaffordable.

    Nick Clegg is clearly given to understatement. Additionally, it is outrageous and extortionate, a slap in the face of the productive sector.

    >I'm told that we'll hear soon the name of the person chosen to chair
    >an independent review of public sector pensions.

    I sincerely hope he wields an axe, and deploys it mercilessly. More strength to his arm whilst so doing.

    Myself, I would advocate the tapered reduction of such pensions by up to 90%, and the sacking of about 40% of public sector (construing that term more widely than many will find comfortable) "employees". This will actually improve productivity. And that's only the start.

    Benefits? 80% of disability allowance recipients are faking or exaggerating their symptoms, and have got away with it for decades. What was abuse under the Cons has grown into an epidemic under NuLab. Soup kitchens and dormitory accommodation will restore the natural order.

  • Comment number 7.


    Another nail in the coffin of the pretence that capitalism has anything to offer the working man.

    We sign away our lives to a career with the promise of a living wage and a comofrtable retirement. We accept that our wages in the public sector are not so great, safe in the knowledge that we will be looked after in our old age.

    Then along comes a recession and a cohort of middle class baby boomers who due to good food and modern medicine are living inconviently beyond their years and *bam* the man walks away from his responsibilities with a shrug of his shoulders, it's all to difficult to solve.

    I dont know quite frankly what digusts me more, the attitude of the ruling classes that walking away in this fashion is anything other than morally contemptable or the way we as a nation meekly accept it.

    I pity anyone who is living on low wages in today's britain, likely as not you wont be part of the property owning gravy train, your health will likely be poor due to the fast food culture and hence will die relatively young which will probably come as relief both to yourself and/or your kids as you struggle to pay for your living expenses and social care costs.

    Welcome to bright new world of the big society. Next stop the neo-victorian workhouses.

  • Comment number 8.

    This comment has been referred for further consideration. Explain.

  • Comment number 9.

    Apparently, though, the figures also show that the cost of these schemes in terms of proportion of GDP will remain constant. Choose your interpretation and run with it.

    Yes, there is an argument to be had about pension schemes like mine. I am a Scottish teacher with 25 years service and experience. I would think it not unreasonable to end the scheme for those joining the profession now. I would not think it reasonable to cancel a scheme I have paid into for a quarter of a century. And let me be entirely clear on this - if there is any question of this being the case I will walk from my job and either go on the brew for the remaining decade or so of my working life or get a job somewhere else. Either way my pension will be protected.

    And I won't be the only one

  • Comment number 10.

    About time too. I am reminded of the comments some Germans made about those in Greece striking over austerity measures there. Why should the private sector pull up its sleeves to fund over-generous retirement obligations? And why is the goverment able to conceal the extent of these obligations through off balance sheet accounting?

  • Comment number 11.

    As Ros Altmann the well known pension adviser often says the generous public sector pensions are the equivalent of pension apartheid

  • Comment number 12.

    About time. With poor returns for private pensions it would appear to many that public sector salaries and benefits have shot past private ones. Combine that with job security and flexible hours you have a truly unequal workforce. However this is going to be one tough fight. It will be entertaining to watch Nick Clegg and public sectors unions slug this one out.

  • Comment number 13.

    Public Sector pensions vary from non contributory to 10% of salary. Some are paid from contributions others have multi billion funds.

    This is not a single animal but a genus with many different species within it.

    I tend to go with Saga at 1. above on this one. Not forgetting that if there really are 6.1m public sector workers as claimed in various posts, what govt can upset 6.1m people AND their families?

  • Comment number 14.

    The average public sector pension is about £5000 p.a.....comments anyone.?

    Comments should be based on facts not prejudices please..if any ConLib..(or LibCon) have a serious opinion we should know....based on fact. Should be interesting...

    My opinion in all this is that the LibDems have shown their true colours..'What's in it for me?' seems to sum them at......to me..the next election..and all others...will be genuine two party politics.

  • Comment number 15.

    WTY @ 6
    Your comments are verging on parody. Are you a clever comedian or a reactionary idiot? Perhaps we will never know.

  • Comment number 16.

    We have all got to make cuts. Why should the public sector be any different?

  • Comment number 17.

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

  • Comment number 18.

    About time too.

    I'm getting fed up of subsidising government fatcats with the sweat from my back.

    Ireland has already gone down this route.
    Want a pension? Then make the contributions.
    And put in into the private money markets, not this gilded welfare handout system we're stuck with.

    The alternative is the same "alternative" pension plan millions of Britons are stuck with.

    A state pension.

    We can start with those damn expense quaffing MPs.

  • Comment number 19.

    As a Civil Servant of nearly 32 years can I set the record straight on our 'over' inflated pensions. As mentioned by Geordie we have to work 40 years to gain the full benefit of half our finishing salary as a pension. What the vast majority of the population fail to realise is that over 75% of the Civil Service earns under the national average wage. This means that even with 40 years service the maximum pension would be at best around £12k. Combine this with a salary that is well below the national average leading up to this 40 year point then you can see that we ar not as well-off as some may think. Couple that with inevitable job cuts in the near future and you can only conclude we are far from privileged!

  • Comment number 20.

    Interesting that this lib Con government has managed to parade the fiction that a public service employee on the average public employee salary of about £11000 is on a 'gold plated pension'...


    grow up people...don't contribute to a public debate without demonstrating some degree of intellectual standards.


    Funny that MP's pensions are not mentioned..arguably the very best public pensions available to the chosen few!

  • Comment number 21.

    As far as public pensions being "legally safe" is concerned that's a huge fallacy.
    They can be reduced, frozen, suspended or anything else the government wants to do with them.

    The boyz in soots will get together and, like maggie did with index linking of pensions, put the brakes on.

    Until the cash is in yer mitts...you're at their mercy.

  • Comment number 22.

    Of course pensions have to be reviewed because with an increasing elderly population the current system, including state pension, is unsustainable. However, I am getting sick of the uninformed moaning about my own allegedly "gold plated" public service pension. After I had my children I worked 30 years for a salary that was a third of what I had earned in the private sector doing a similar job, contributing a chunk of my income to a public service pension that I sometimes could not really afford, working beyond 65 and retiring with the princely public sector pension of £300 per month, on which I pay tax. In my experience the snide remarks regarding this expense to taxpayers are frequently made by the half of the population who don't bother to provide for their own retirement but expect to have their every need after 65 provided by the state at MY expense. Contributing to a pension scheme should be compulsory for all on a sliding scale so that everyone, including those on low pay, end up with a superannuated pension, but no one will need to claim additional state benefits.

  • Comment number 23.

    Andrew Morton @ 9

    "the cost of these schemes in terms of proportion of GDP will remain constant."

    Nick Robinson @ 0

    "the cost of public sector pensions will increase in real terms by 20% every year"

    Tizz. But which?

  • Comment number 24.

    Extend cuts to Brussels Mr Cameron - start with the plethora of unelected parasites who seem to be covered in teflon and then move onto cutting the obscene perks and salaries of MEPs - you can see all you need to know about their little scams on youtube if you search. Its a shame that the mainstream media rarely shows the work of independent journalists who are trying their hardest to get the story out. It should save a few bob and nobody would notice the difference without them. This where I would start; about post 262 on this page https://www.bbc.co.uk/blogs/thereporters/gavinhewitt/2010/06/britains_first_clash_in_europe.html

  • Comment number 25.

    Mr. Robinson:

    I have to support the "coaliation" government rationale in the pensions situation..Since, at this rate the cost will be prohibited in the long term.

    (d)

  • Comment number 26.

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

  • Comment number 27.

    #9. Andrew Morton wrote:
    I would not think it reasonable to cancel a scheme I have paid into for a quarter of a century. And let me be entirely clear on this - if there is any question of this being the case I will walk from my job and either go on the brew for the remaining decade or so of my working life or get a job somewhere else.


    Give me one reason why a private sector worker who can only just make ends meet, and has absolutely no spare money for their own pension, should have their taxes massively raised to pay for your totally unaffordable pension?

  • Comment number 28.

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

  • Comment number 29.

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

  • Comment number 30.

    Public sector pensions are not all great and any thought that this Government is going to get away with slashing and burning their way through them is idiotic.Many public sector workers get modestly paid and work in poor conditions which is compensated by retirement at 60 and a basic pension.The fact that private sector companies have been able to simply end their pension schemes is no reason to let public sector workers get shafted as well - that's just sour grapes from those who failed to stand up for themselves.The real danger facing this country is that the public can no longer have any confidence or trust in successive governments and therefore their own futures.Those with the means or abilities to leave the uk will do precisely that and i, sadly, will be among them - there is nothing left to stay for.

  • Comment number 31.

    this link should be of some interest to anyone who is actually interested is serious discussion especially given the inability of the BBC to present a balanced approach.

    https://www.affordable-lgps.org.uk/

    "This site has been created by London Pensions Fund Authority as part of our campaign to promote constructive and informed debate on the future of the Local Government Pension Scheme. It contains information about the scheme, texts of speeches made by LPFA staff and board members, press releases and events designed to promote the debate".

  • Comment number 32.

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

  • Comment number 33.

    The first people this should apply to of course is MP's at least a 30% cut in MP numbers in both Westminster the Eu and the Assemblies we wouldnt even notice they were missing....no further admissions to final salary scheme, all new MP's fund their own as per the private sector.

    They always quote private sector wages when negotiating their own rises, let them have the same conditions.

  • Comment number 34.

    So the cost will double? Banner headline. Shock. Horror. Good job he doesn't have to say the current cost is tuppence - not quite the same story, is it. Anyone know what the cost of pension is as a % of the Civil Service paybill?

    As for the cost increasing, well it would. The PCSPS is unfunded, which means the contributions are not invested, they are paid out as pensions. So it really is actuall a tax on Civil Servants if you make them contribute then refuse to pay the pension.

    I am used to Civil Servants being told that they won't get a pay rise in line with RPI because they have such a generous pension scheme. But now we cannot afford that either.

    MPs have been able to award themselves "only" RPI salary increases because each time they have inflated the allowances to make up for it. The people who work for them cannot even claim for a pen refill.

    So, as Civil Service pensions are low, so are the residual pensions. Either pay it as pension or pay it as benefits - makes no odds to someone retiring below the poverty line who has served their country, whilst everyone else has served themselves.

    If you don't like the Civil Service, vote with your feet. Refuse to let the NHS save your life, or the lives of the ones you love, set up your own police and rescue services, set up your own justice system, set up your own militia, and do your own diplomacy. Oh, and make your own laws - stop relying on the existing laws that protect you from the "me me me" people who work for the pride of Britain and bastion of restraint, private industry.

  • Comment number 35.

    Its obvious that Wiser than you is a troll. All you do by responding is provide him with ammunition. If you ignore him it might be possibgle to have sensible discussion on this issue

  • Comment number 36.

    I agree with the comments that many, like me, in the private sector, feel the pendulum has swung in favour of the public sector and their pensions. Notwithsatnding the years of public service that are given by many hard working public sector staff, the same applies to the private sector. The real fact is that (the public sector) has failed to recognise the fact that pensions and final salary annuities are based on life expectancy, which since 1946 has increased by many many years and is set to increase further. This cost which on a comparative measure has been factored into private schemes on a daily actuarial basis (with decreasing benefits) are never mentioned, but, has skewed public pensions to a place where private sector employees can only dream of, ( DO NOT MENTION BANKERS! the percentage of fat cat bankers in the UK is infinitesimal and the use of this as an argument is offensive and a joke, most private sector employees work hard modestly ) It is a fact of life, or death to put it more succinctly, I know that as a 37 year old I will work into my seventies to fund my retirement. I welcome the debate about pensions and look forward to forward to a future when we all share the costs on an even and equitable basis.

  • Comment number 37.

    "Public sector pensions have faced a barrage of criticism in the media. Tales of unfair, unaffordable and 'gold plated' benefits being paid out to public servants while employees in the private sector face poverty in retirement are rife.
    Informed, thoughtful debate on the real issues, however, is conspicuously absent. My organisation, the London Pensions Fund Authority, is trying hard to generate a proactive and constructive debate on the future of public service pensions and in particular the Local Government Pension Scheme (LGPS). But it's vital that this debate is firmly grounded in fact, not pre-conception.
    For example, some of you may be surprised to learn that the LGPS is a funded scheme, with invested assets of 120 billion, in which benefits payable are roughly equal to member contributions and investment returns.
    And let's not pretend that local authority pensions are 'gold-plated'. The average LGPS pensioner gets less than 4,000 a year. About one third of you'd get if you were earning the minimum wage.
    - Mike Taylor, chief executive, London Pensions Authority 2009

  • Comment number 38.

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

  • Comment number 39.

    I assume that as we are all in it together according to our new wonderful PM, that MP's pensions (as they are public sector workers) will also be cut together with the over generous golden handshake when they leave office.
    Oh well one can dream on!!

  • Comment number 40.

    The largest proportion of public sector workers are probably in LGPS

    They list 8 key points as background

    1. The LGPS is funded with around £120 billion of investments backing the scheme

    2. The average LGPS pensioner receives around £4,000 each year

    3. The LGPS is cash postive - income from contributions and investment in 2008-9 was £10.2 billion whilst benefit payments were £5.6 billion

    4. The number of 'fat cat' pensions is tiny - less than 1% of LPFA's pensioners receive pensions over £50,000 a year

    5. Pensions may not be large but they are received for longer; 10-15 years longer than in the 1950's

    6. Life expectancy is increasing by two years every decade whereas the retirement age has not increased since 1935

    7. The majority of the increased costs of longevity are falling on the employer and therefore ultimately the council tax payer

    8. If the costs of longevity are not addressed deficits are expected to continue to rise

    In other words the system is fine right now, the problem is the future because people are living longer one might add a few are being paid a lot more too.

    Those who simply want to take an axe to public sector schemes should remember that if they do, contributions (£8-10billion per annum) are funding the civil service (non LGPS) schemes payouts, axe the scheme without thinking how to manage it and you cost the economy that much per year as it has to pay the pensions, try to fix that by stopping the current pensions as well and the pensioners all start claiming benefits so the economy still loses just by a smaller figure.

    the Chartered Institute of Public Finance and Accountancy have suggested that public and private schemes should all be reviewed with the aim of securing viable, substainable pensions for everyone.

  • Comment number 41.

    All I can say is that Nick Clegg makes a great Tory !!

  • Comment number 42.

    As a point of interest to the previous comment about average pension payments from Mike Taylor, CEO, London Pensions Authority 2009 I checked what the lump sum payment would cost for a 60 year old male, non smoker, to draw a 4000 GBP pension as an annuity on a median price. It was 75000 GBP. This is what everyone in the private sector would have to save from their basic salary to get just 4K per year, one third of the basic wage. Please all work out the lump sum for those getting a pension of 45K in the private and the public sector?

  • Comment number 43.

    While I am at it can Mike Taylor please tell all of us what the total contribution etc. amounts to the less than 4000 a year pension. I think it would make a useful ballpark for this discussion.

  • Comment number 44.

    Obviously no quick fix here, but something that would help considerably would be the total removal of compulsory retirement age, and also a prohibition on age discrimination in employment.

    The idea that a human being is no longer fit for purpose after the age of 65 is absurd.

  • Comment number 45.

    Pensions are the only worthwhile thing in the public sector - without those, you may as well not bother with a public sector job. Case in point: general admin job in the public sector, in Kent: £12K/year. Same thing in the private sector: £15K. Note that "general admin" also encompasses things like IT support, the likes of which pay even more in the private sector.

  • Comment number 46.

    All these issues may need addressing but they not the fault of the public sector worker in the same way as fat cat bonuses. If politicians continue to this adversarial style, they are surely heading for a period of serious discontent. The survival of both the Conservative and Liberal Democrat party is dependant on how they manage the deficit reduction, which was never going to be easy, and this approach is certainly not the way to take the nation with you.

  • Comment number 47.

    The big problem with most public sector pensions is that they are "unfunded" or "pay as you go". Even a modest pension of say £10,000 P.A would cost hundreds of thousands of pounds to buy as an anuiity at age 65 for somebody aged 65 in good health
    I am a private sector worker on a very modest wage and cant afford any form of pension whatever, I will probably end up funding my retirement by working in B&Q until I drop, and paying tax to fund the pensions of those that are fortunate enough to have public sector pensions which will be funded directly by my taxation as there is no accumulated pot of cash to meet the expense
    It is now a myth that private sector salaries are generally higher than the public sector, I blame the whole way that public sector pensions have been allowed to be funded over decades, it was obviously unsustainable, I could see that 30 years ago when I first realised how the system works
    My view is simple....No future generation (ie my kids) should be saddled with the responsibility of funding the index linked gold plated pensions of public servants, public sector pension contributions should be invested like everybody elses and if the schemes fail, so be it, thats what the rest of us have to run with.
    The system is totally unsustainable and if this government have the guts to reform the system....I will be truly impressed

  • Comment number 48.


    First, and most importantly, Nick Robinson seems to have bought the Governments deliberate misrepresentation that all "Public sector" pensions are alike. There are ones like the Civil Service and Armed forces where the costs mainly come from the Public Purse. There are others like Local Government workers where they are mostly like ordinary company pensions where the majority of the contributions come from salary deductions. In just taking the Government line he is misleading the readers.

    Second, as with the blindness of the media over the banks (and others) causing the "credit crunch", the media keep trying to blame the wrong people over pensions. The Pension Crisis has been going on for over ten years and of course was tied in to the huge stock exchange rises in the 90s and the "dot.com" disaster around 2000. Added to that financial disaster affecting the way pensions were financed and capitalised, the profession whose real reason for exisistance (Actuaries) also failed to keep pension funds up to date with the improvement in people's longevivity. Much like the Credit Ratings Agencies in the recent "credit crunch" the Acturaries had a huge section of the blame but seem to have crept along below the radar.

    So, please, try to make proper statements, not just parrott Government spin.

    Why doesn't he ask some Actuaries why they didn't get life expectancy rates right (much like why aren't Credit Rating Agencies being dragged in front of the spot-light) ?

    .

  • Comment number 49.

    The pensionable age in the public sector was raised just a few years ago from 60 to 65 (for all).

    The standard contribution rate is 6%, and pensions are inflation-linked, with a 2x highest annual salary lump sum on retirement. It's an '80th' scheme, incidentally, so most retire with 50% of final salary (widows get 50% of that pension for life)

    No private-sector pension can remotely compete with that - it's absurdly generous, with 25% of Council tax going to fund pension liabilities.

    The solutions are obvious:
    Raise contribution rate to 10%
    Raise retirement age to 70 almost immediately, with tapered retirement from 70-75 as the norm from 2025.

    State retirement age to rise to 70 within 5 years - again, tapered from 65 to begin with and from 70-75 by 2015.
    'Tapered retirement' means a gradual reduction in working hours and a corresponding proportion of your pension paid as a supplement.

    Working full-time on a Friday and being fully retired on the Monday is a nonsense and should be changed immediately - it's hardly difficult to do!

    The idea that you cannot work effectively at 75 is an insult to my late father, who was Chard's full-time Town Clerk at that age and to my 82 yo mother who still works part-time in a shop and to my aunt who still works full-time as a farm secretary at 73.

  • Comment number 50.

    On the TV, someone said to Nick Robinson that working in the public sector is vocational and implicit in that comment is that they need not be paid the going rate. I suspect that the private sector is targeting the public sector in order to protect themselves and the private sector has the ear of politicians. It appears amazing that politicians are being so fierce in their criticism of the remuneration of the very people that must manage and engineer the deficit reduction. I would recommend against using such a heavy axe on the lifeboats while the ship is sinking.

  • Comment number 51.

    Why have we become so binary in our thinking and politics? Everything has to be black or white - we are beginning to sound like our American cousans...
    - yes, some public pensions are unaffordable - especially those that are un-funded where employees make no contribution
    - in other cases, local government for example, employees have paid contributions all their working lives
    - yes, some public sector employees could be more efficient and more productive, but so too could many private organisations' staff
    - some public pensions seem excessive but pension is only really deferred pay - many public employees are paid much less that their private sector counterparts
    The real issue in both the public and private sectors in proper performance management - undrstanding what employees are supposed to be doing or achieving, managing against that and doing something about it if employees don't perform... not putting up with mediocre performance.
    Please can we have some balance in these comments rather than the one-sided, often ill-considered rhetoric? As we all know, there's usually a very simple solution to every problem - and that's usually the wrong one!

  • Comment number 52.

    pg55555
    I agree wholeheartedly that it is a problem that has been allowed to develop over decades, I remember doing O' level economics (33 years ago) and being told about the public sector pension schemes are funded (or not) and even then my economics teacher was discussing the potential pitfalls as life expectancy increased etc, so it is successive governments that have failed to tackle this, it is bound to end in tears, perhaps the public sector unions were just too powerful to confront.
    I have no problem with the individual pensioners...good luck to them, but the system desperately needs a radical overhaul as apart from anything else, it is grossly unfair on the rest of us and will lead to a two tier society of private sector workers who are forced to work on and pay taxes to fund the pensions of the public sector retirees, I dont think many public servants really understand what even a modest pension for life would cost as an anuity, often many hundreds of thousands of pounds, something which most private sector employees can only dream of

  • Comment number 53.

    Thats funny.My pension from the council was frozen last year.Who is getting these big increases?

  • Comment number 54.

    Well Ady you must get your facts rights. Like all 'normal' public sector employees I do contribute a % of my monthly salary to my pension. I am not in receipt of any freebies.

    I teach in Post-16 education which is no 'easy' job, am constantly assailed with one peice of government legislation or another, and observed, moderated, checked like no other private sector job you can name.

  • Comment number 55.

    A further point. The current retirement age was set in 1919, when it was the average life-expectancy and most people worked in hard, physically-demanding manual jobs.

    You thus worked for 50 years for a pension of 5 years (at most) - a ratio of 10:1

    Today, life expectancy is 79 for men and 84 for women (and rising - a new-born today has a greater than 50% chance of reaching 100) and nearly everyone is in demonstrably safer, mainly-indoor, office-based jobs.

    Yet we start work at 22+ (post-uni) and retire at anything after 55 (with 60 being the norm until recently). That gives a 40 year working life for a 20 year pension, a ratio of 2:1

    My suggestion (retirement at 70/75) would give a 50 year working life for a 10 year pension, a ratio of 5:1.

    I'd still consider that generous (particularly as I'd also raise the pension to 50% of average earnings, or £13k now and make it entirely tax-free) and I see no reason why people would not react by looking after themselves rather better, if it was the only way you could be fairly sure of having much retirement at all.

    Your pensionable age should be set at birth as average life expectancy -5 or -10 years, with your pension contracted be a (very high) percentage of average earnings at that time, ie you get a short, decent, pension, rather than a lengthy pittance, as now.

    In exchange, you pay NI (possibly to a fund of your choice) and avoid any criminal offences. Any that you do incur will impact on your total State pension. The State would also guarantee your care-home costs after retirement, in exchange for 85% of your pension.

  • Comment number 56.

    Nick this blog completely misses the point. The OBR report yesterday clearly shows that the structural deficit is is much less than thought. Even Fraser Nelson is admitting that this is an embarrassing inconvenience for Osborne.

    But still George Osborne and his puppet Nick Clegg are banging the drum for cuts. At what point does spin become outright lies?

    The massive cuts they have already introduced in year - will have a destabilising affect on the economy - pretty soon the OBR will show that only the decisions of this government have caused a long and unnecessary recession.

    This government is showing itself to be even more full of spin than Gordon Brown.

  • Comment number 57.

    I was working in Local Governement when a previous government allowed Local Authoroities 'Pension Holidays'. The employees kept paying their contributions whilst the employers did not have to.
    I presume these monies together with the monies from the sale of council houses are still held either by the Local Authorities or within the coffers of Whitehall.
    It's strange that what comes around goes around.

  • Comment number 58.

    53. At 07:04am on 15 Jun 2010, lassies2 wrote:
    >>>>>>>>>
    That's because RPI was negative then (Sept 2009). Normally, your pension would have fallen - so you did better than you 'should' have done, since your pension is RPI-linked.!

  • Comment number 59.

    #56. At 07:13am on 15 Jun 2010, balancedthought wrote
    >>>>>>>>>

    WHAT 'massive cuts'? £6.5 billion from Govt spending over £700 billion is neither here nor there.

    Now, the £200 billion they NEED to make every year for a decade or more WILL have an impact - we'll see economic growth above, rather than below trend (as it was for almost the whole of Labour's period in office)

    All that 'spend, spend, spend' and it DEPRESSED growth. So why do you suggest that some modest tripping will ALSO cause growth to decline?

    Not credible at all - you MUST be a Socialist!

  • Comment number 60.

    Hi Nick
    With the the NHS going down the pan and at the point of no return. Threats of social enterprise and business redesign with out ballot of staff and public users what else could they strip us of.

    23 years pension contribution in and if it wasnt for the reassurance of a secure affordable future I'd be out of there.

    Maybe that is now a bit nearer to reality. Loook out private sector (virgin cares)there's a load of experienced registered nurses coming your way.

  • Comment number 61.

    Re: cobra1961 comment.
    A typical public sector employee may work for forty years and then receive a pension of half salary equating to £12k but if you had worked in the private sector like me also on approx £25k salary before retirement you would now be in receipt of £3.5k pension, fixed for life. Also bear in mind your salary and now your pension are paid by people like me paying taxes through our working lives. Tell us why I and others like me should fund a better pension for you than we can afford for ourselves? During my 42 year working life the highest employer contributation to my pension was 3%. One employer contributed 1% and for most of my working life the employer contributed zero to my pension fund.
    Are you still envious of life in the private sector cobra1961?

  • Comment number 62.

    I am not a local government employee, but when I was over 11 years ago, yes I was in a good pension scheme, but mt wages went up by at least 2 % below inflation every year between 1987 and 1999, except one! At that time private sector pay went up (on average) by more. Add to that the bonuses that are / were available in the private sector that are not avaialable to the average public sector worker and you can start to see why the pension was a long term reward for sticking with the lower pay rises.

    Now, pensions are going to cost this country 9 billion in 4 years time ... how much did we tax payers pay to bail out the greedy / foolish / careless bankersw? £250+ billion, and add to that the administrative costs involved of government and the losses that the bankers have piled onto British industry and you can see who is costing this country money ... not the workers.

  • Comment number 63.

    There is something that I need to get straight, it is common to read commenst such as "my salary in the public sector is lower than an equivalent in the private sector and so my pension is a defered payment" or similar such sentiments.
    I have worked in the IT industry all of my life, things were moderately OK up untill about 12 years ago, I have now lost my pension....completely, I now earn £19,000 p.a, £10,000 p.a less than I was earning a decade ago and I am a skilled man of 48 years old and I have no hope of ever paying in to a pension, I just cant afford it, but my taxes will have to fund the public sector retirees
    I have been made redundant twice and salaries are still falling, overtime is no longer paid but I still have to do it
    I have not yet heard of any public sector worker earning less than they did 10 years ago, the fuss from the civil service at even the suggestion that there may be a 1 year pay freeze is just laughable....its tough in the private sector these days, and we are the people that are paying your pensions....so get real

  • Comment number 64.

    The unfunded public pensions are the biggest Ponzi schemes on the planet. Their current liabilities are estimated as over £1 Trillion and cost the taxpayer 15Bn a year which is expected to at least treble in the next 20 years. What right have we to have benefits today ( ie not putting money now into a fund for pensions for every new public sector employee) and dumping the bill on people who aren't even born yet? Its like going to a restaurant for a meal and saying my grandchildren will pay, when they are born that is. Every child that is born for the next two decades will have an immediate (and rising) £20,000 liability for paying public sector pensions for previous generations. They have absolutely no say in it, they are just forced to inherit the liability from previous generations. Ponzi schemes are immoral and illegal for good reason, these must be stopped!

  • Comment number 65.

    10% of the UK people own 60% of our nation's wealth. This should be a mantra stated as a precursor to any discussion on economics. That means (for those with Nick Robinson's grasp of compound interest) the other 90% of us have to survive on just 40% between us.

    Among the 10% are, of course, the investment bankers who caused the current crisis. Yet, as Will Hutton showed on tv last night, the rules for banks are being reviewed by just bankers, and nothing will change there.

    So it is left to taxpayers like my wife, aged 56, earning £14,000 in the NHS, and already having to wait another four years for her state pension after Labour's revision, to pay even more towards these bankers' other-planet lifestyles.

    Beware, Clegg & Co, there is a great simmering resentment building among the proles.

  • Comment number 66.

    People need to look at facts not emotive percentage figures. What do the huge percentage increases represent? Certainly not what the public service pensioners receive. As a retired police officer my pension increase this year was 0% - yes that's right nothing. Over the 12 years since retiral it has cumulatively risen 40% - what has been the overall inflation rate over that period? And in common with other officers I contributed 11% of my salary to fund it. I was horrified when I found out as a serving officer that the short-sighted authorities spent our contributions instead of investing itin a healthy fund.

  • Comment number 67.

    Local Government pensions receive more income from employees and employers than they are paying out. Most of the employers contributions are paying for allowing staff (usually senior managers!) to retire early. This practice is now, rightly, far less common. Pension was also reviewed and changed recently - most staff pay higher contributions.

    When politicians talk about private sector pensions I guess that they mainly refer to the workers - the directors mainly, as I understand, have huge pension funds and won't be going poor in their retirement!

  • Comment number 68.

    "increase ... by 20% every year - that's equivalent to the cost doubling over 5 years"

    No it's not Nick, 20% annual increase will double in less than 4 years.

  • Comment number 69.

    This suggestion is long overdue, highly inefficient organisationally, well paid safe employment & then a pension above all others funded by others the cuts should be deep & far reaching (as in all public servants from the top to the bottom)

  • Comment number 70.

    Of course you have to remember that Public Sector Pensions are not all simple and straightforward:
    1) Harold Wilson 'sold' the Teachers' Pension Fund ~ so serving teachers pay a pension amount that directly equates to the number of retired teachers drawing a pension.
    2) The teachers' pension contribution is much higher than most business employees pay. Teachers pay a lot each month ~ more than most employees ~ and, after all, it was set-up by the State to pay for point 1 (above).
    3) The pay, outside of teaching, for an equivalent job has been proven to be higher in the private sector. One of the reasons teachers 'put-up' with the difficulties in schools (behaviour, constant change, demands, etc.) is because they know that the pension makies it all worthwhile!
    Please remember, though, that we do pay for this ~ we don't get it 'cheap' or 'free'.

  • Comment number 71.

    Balanced thought @56.

    Agree. Osbourne got it wrong during the financial crisis and he's getting it wrong now.

    The amount of vitriol poured on public sector workers in these posts is appalling. Most are low paid and will receive modest pensions doing jobs at a salary below the private sector rate in exchange for those modest pensions.

    Now Clegg the great centre-left progressive politician wants to break the deal. Whatever the outcome of this coalition government one thing is certain...Clegg and the Lib-Dems will be toast.

  • Comment number 72.

    This comment has been referred for further consideration. Explain.

  • Comment number 73.

    Ministers (and the media generally) refer to 'Golden' pensions, but rarely mention that Police Officers, for example, pay 11% of their salary into their pension fund. Over an entire career, that is a huge amount and for many years after retirement, you are just getting your own investment back out again. It seems Nick Clegg would have us believe that it's all handed on a plate at the expense of the tax payer.

  • Comment number 74.

    i am interested in what the new government plans for recipients of what final salary pension schemes remain-in particular are they likely to impose tax on lump sums taken from such schemes

  • Comment number 75.

    When the private sector was booming and the big bonuses where coming in and people where raking in the money the lower end of the public sector where being paid the same , the pay rises at the lower end of the scale where below inflation with no bonuses , now the bubble has burst the public sector/civil servants at the lower end of the scale will be the scape goats, that is fair isn't it!!!!!!!!!!!!!
    Everyone is responsible for the bust, don't just crucify the public sector , they did not run the "private sector" banks with great big fat bonuses, they did not demand lower interest rates etc......

  • Comment number 76.

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

  • Comment number 77.

    66. At 07:39am on 15 Jun 2010, Devonian64 wrote:
    >>>>>>>>>>>>>>>

    If your pension has risen by 40% then the RPI has risen by 40% over that time, since your pension is indexed to that.

    In my earlier post, I pointed out that since RPI was negative last September, your pension should have FALLEN, but was frozen for political purposes.

    The average wage, over that same period, though, HAS risen - which is why you have EXACTLY the same standard of living as you did when you retired - whilst the rest of us, who are in work, have generally seen our standard of living rise.

    Being provocative, if you are retired and of no useful economic use to Society, why on Earth *should* your standard of living (ie cost to the rest of us) RISE over time? If, like my father, you continue to do other work whilst drawing your full pension (50%) post retirement-age, then you WILL be better off.

    I'd also add that the entire pension industry and second-home boom is a direct consequence of Brown's 'smash and grab' raid on pension funds back in 1997.

    The poor man was not a biologist (or he would understand evolution and natural selection, both of which apply to human behaviour and economic decisions just as much as to life-forms and DNA) and clearly had no grasp of economics, either - just a grossly over-inflated ego.

  • Comment number 78.

    Yes, this is controversial. In my family, one of us is at the mercy of private pension arrangements, and one has (due to the ineptitude of a public sector HR department) some frozen benefits (despite currently working in the public sector).

    Nobody is disputing the rights of good public servants to a pension "after their forty years of work for the public benefit". But let's not be too precious about this. What about the private sector employees who work longer, unprotected hours, with less secure employment, more expensive pension schemes, but whose taxes are needed to pay for the public sector pensions? It's easy for people to spin their individual story in such a way that other people can see the justice of their position. The job of the government is to take all those individual stories, and attempt to balance in a fair and objective way the different priorities.

    For myself, regardless of how good a public servant a person is, I find it hard to believe that it is reasonable for them to expect to fund 30+ years of retirement at two thirds of their final salary when they have paid into a pension for only 33 years - which is in effect what a 2% Final Salary Scheme is. Not without somebody else having to foot a very large bill.

  • Comment number 79.

    Well done to the ConDems. Just keep raising the retirement age in the Public Sector and hey presto the more cash in the coffers all round.

    Why not shoot people over a certain age so that when they pass the Pearly Gates they collect nothing and their pension rights die with them.

  • Comment number 80.

    Having worked in the public sector a few years back, the pension issue is the tip of the iceberg.

    My main bugbear is the wanton waste of public resource on non jobs, absenteeism, and having 4 people to carry out a job which in the private sector would be carried out effectively by 1 employee.

    Managers who are generally promoted on legth of service and not ability, are paid salaries which in no way match their responsibilities.

    When it comes to retiring, usually in their mid fifties, the collect full pension and then a few weeks later, they reappear as "consultants" doing the same job on the same pay. I find this to be the most shocking state of affairs.

    The much maligned Bankers may get large bonuses, but the stress of the job deserves some kind of reward. If they are not performing, they get sacked.

    Although there are many in the public sector doing a great job, it would appear that mediocrity is richly rewarded.

  • Comment number 81.

    The great irony of this, is that as I understand it, final salary pension schemes were agreed by the last Tory government. They are unaffordable, but their own people agreed to it as a means of short term cost saving, save on the wage bill now and worry about the pensions later, same old Tory short term thinking.

  • Comment number 82.

    As a 'public sector' pensioner I would like to raise a few points. First that when I started work joining the pension scheme was obligatory. Second that all my working life I was told that the pension scheme was compensation for lower pay and few, if any, perks. Third that my late father, who worked for ICI all his life, had a pension scheme very similar to mine. Fourth that this mess was caused in large part by the conservative government capping the amount which trustees could hold in funds thus allowing employers to take pension holidays during times of market boom; but not employees of course. Fifth that the previous labour government then took out some 5bn a year through changes in the tax regime on pension schemes.
    I sympathise with workers in the private sector and I sincerely hope that we never again see the sort of hyperinflation that we had in the 1970s which reduced all private pensioners to penury in just a few years. Oh sorry, I forgot, Gordon Brown abolished boom and bust, didn't he.

  • Comment number 83.

    58 is only partially right: as part of Labour's cut's.. remember them... public sector pensions payment were frozen for 2010-11 but since RPI was negative it did not matter! Labour's cuts are still coming through... ask Universities about student numbers and what treatments your local NHS Primary Care Trust is not funding now.

    But there is a much bigger issue about all pensions. The notion that we can just add 5 million to the working labour force (by raising retirement age ten years) is possible but only at th expense of the rest of workers. Even in their wildest dreams Labour only expected to have 32 Million in employmentof the 40 million between 16 and 65. What does G&A expect?

    The issue is how those not in work from the 50+ million adults be funded publically or privately for an acceptable standard of life. Maybe people would like Huxley's "Brave New World" solution... euthanasia at 60 for all...... or charity... begging on the street.

  • Comment number 84.

    Yes, there may be a need for review of public service pensions but please make this a level playing field and also announce a inquiry into MP's pensions. After all they are public servants as well!

  • Comment number 85.

    13. At 00:12am on 15 Jun 2010, xTunbridge wrote:
    "....Not forgetting that if there really are 6.1m public sector workers as claimed in various posts, what govt can upset 6.1m people AND their families? "

    But they will be making the 20+ million private sector workers & their families who have to pay for it mighty pleased. There's more of us than there are of them. So bring it on.

  • Comment number 86.

    Keith and others write as if public service pensioners don't also pay tax. I also paid tax throughout my working life and still pay tax as a pensioner.
    There are also many false assumptions made about who has paid, and is paying, for the pensions now received.
    I took a 60% salary cut for the privilege of serving my community as a police officer. When I joined up I brought with me a lump sum (from a healthy pension fund) big enough to pay my entire, then, police salary for more than four years - only to discover later that the police authority spent the money I transferred as extra income for them that year!
    I consider that lump sum, plus the year by year 11% contributions I made, to be a fair contribution to what I now receive (after tax!).
    Unfairness will only come into the picture if public sector pension like mine, and many others, are cut on the basis of ill-informed (and sometimes jealous) opinions.

  • Comment number 87.

    I do hope that MP's gold plated pensions are the first to be reviewed and changed but if going by the expenses review any changes won't affect them, they will just moan about the unfairness to their pockets

  • Comment number 88.

    It's clear from Clegg's speech and some of these postings that the government has declared war on the public sector. He's almost got to the point of accusing public sector workers of defrauding the public purse. Although I can see the need for reform I think the macho stance adopted by Clegg, Osborne, and Cameron is stoking up anger and class hostility on both sides of the debate. To hear his pension described as "gold-plated" must come as a surprise to someone like a law court clerk on £16,000 a year. It's very aggressive stuff and for all the ignorant garbage about the productive (ie private)sector, it is obvious to everyone that any economy needs doctors, teachers, refuse collectors etc to function properly - and also fairly. There has been much talk about sharing the burden but actions and the accompanying rhetoric show that the two C's and boy George are revealing their origins - as millionaires who see their function as keeping the lower orders in their place.

  • Comment number 89.

    Unfunded pensions (a fair proportion of public sector pensions) are just a ponzi scheme waiting to fail. Nothing more, nothing less and totally unsustainable in the long run.

    However, before MPs throw stones, they need to get out of the glasshouse. MPs basic salary has risen 50% since Tony Blair came to power (£43k - £64k), and they have a 40ths Defined Benefit pension.

    Personally speaking I lost my (private sector) retirement at 60, 80ths scale defined benefits pension about 5 years ago, so can't see why the public sector shouldn't too. I'm not bitter, I chose to leave the company and join one with more interesting work. If I can do it, anyone can.

  • Comment number 90.

    Who remebers the Royal Ordnance Factories? They were a semi comercial organisation who provived the best quality arms for our forces and also exported to our allies. They were staffed by Civil Servants. Margret Thatcher sold them to British Aerospace who prompty closed them all and sold the land to make a quick profit. they would have helped pay the public pension bill. And who got us in a position wher we are strapped for cash? The Bankers and particularly the US Bankers. But they do not appear to have to bear any pain. they still get their obscenely high bonuses.

  • Comment number 91.

    One of the reasons for the anger about public service pensions is that they enjoy a pension system which the Lab govt destroyed for the private sector by a combination of ill thought out legislation and grabbing £5bn a year from them.

    It is simply not tenable to have a system where there is one law for the private worker and a different law for the public sector.

    Of course public sector workers should have a decent pension but going forward it cannot be a final salary scheme. They will have to go on the stock market linked defined contribution system like virtually everyone in the private sector has to.

    What is badly thought through is that moving the public sector onto a contribution based system has a cost. It will no doubt cost more in the short term (say 5-10 years which is short for pensions) before savings kick in, one reason being that the level of contributions which the public sector employer makes may well have to increase

  • Comment number 92.

    '2. At 11:23pm on 14 Jun 2010, Geordiebern wrote:
    Public sector pensions earned over forty years of contributions. Bankers bonuses earned in seconds of trading, irrespective of the often catastrophic long term effects of their decisions. I wonder where the root of our current economic woes lies?'

    Correct. Let's just hammer the Public sector and the workers who serve us because the Private sector and Business in general have failed. This CON-DEM Alliance is undoubtedly in full spin mode to convince all of us this is necessary. 'We are all in this together' is the rallying cry, what a weak and spineless approach but undoubtedly many people will fall for this Alliance nonsense. All the while Osborne and his Boss are still talking down this economy. The result of this careless approach is that it is leading us inevitably towards a double dip recession, and that is something they cannot claim to have inherited from the previous Government. The wrong people in the wrong jobs at the wrong time.

  • Comment number 93.

    I have one of these so-called wonderful public sector pensions. I have been working for 25 years & my pension at the moment stands at £4000 per year! Now people such as the blogger here called 'wiser than you' who are lucky enough to be in the private sector & are screaming that public sector pensions must be attacked with an axe are hypcrites and a disgrace. Private sector pensions average about £10-£15,000 more than public sector pensions. How about we start by taking an axe to your bloated pension 'Mr Wiser than you'? Oh and by the way your stupid comments about sacking 40% of all public sector workers & that is just the start shows just how infantile you really are. Have you even bothered to stop to consider just how many services that would affect even YOU? No bin service, no motorways, no hospitals, etc etc. Next time think before you rant like an out-of-control fool!

  • Comment number 94.

    How does the government intend to avoid fraud charges?

    Public employees have been paying their contributions into their pension schemes throughout their employment under the expectation that their pension will be paid AS AGREED upon retirement. It's contractural: they've signed an agreement to pay into the scheme under certain terms. Given that it's a respectable pension, most will not have made other provision via a private pension/savings scheme which they might otherwise have done.

    The government, however much it pleads poverty now, cannot evade its obligations.

    Is it the pensioners' fault that successive governments have frittered away pension contributions on today's spending instead of ensuring that they can meet their obligations when people retire?

  • Comment number 95.

    Interesting isn't it.

    When we had bankers loose millions for their bank, then cost billions for the taxpayer to bail them out, we were told that there was no lawful mechanism by which the taxpayer could prevent these parasites running for cover with a million pound a year pension. We were told it was a legally binding contractual obligation.

    Now we are talking about (example) a nurse who has worked for 30 years giving up money every month in response to a contractual obligation to pay her a pension when she is too old to work in a physically demanding job.

    Suddenly, it appears, the ConDem public schoolboys don't understand contractual obligation any more.

    The nurse may be interested to hear that Fred Goodwin has just bought himself a £3.5m house, presumably using his £500k pa taxpayer supported pension.

  • Comment number 96.

    If the public sector had actually contributed towards making the private sector more efficient and profitable this situation would never have arisen in the first place.

    This pension deficit has arisen because successive governments and local authorities have helped to slowly kill off British industry with more and more regulations, regulators and red tape until there's hardly a private profit making enterprise left in the very country which was the cradle of the industrial revolution.

    You've killed the golden goose off guys, and that's who was laying all those golden eggs for yer wee gold plated pensions.

    Employment regulations, health and safety regulations, tax, vat, NI, PAYE, maternity stuff, paperwork paperwork paperwork, regulators regulators regulators, taxes taxes taxes, rules rules rules, regulations regulations regulations.

    Well the party's over guys.

    You've regulated and taxed yourselves right out of a job and a pension.

  • Comment number 97.

    As many others have already stated there are a wide range of different public sector pensions. I am a police officer. I contribute 11% of my gross earnings to my pension fund ( the legal maximum permitted is 15%). For me that equates to over £4500 p.a in contributions to a pension 'fund' that does not actually exist. Successive governments have failed to create an investment fund that would generate profit from these huge contributions. They merely re-direct my contribution to existing police pensioners and now have to top up the deficit from public funds as retired officers now have the temerity to live more than a few years after retirement. Perhaps government will throw there hands up to there collective incompetance over many decades. They can follow this up with a campaign to get public sector workers to drink more alcohol, smoke to gargantuan levels and adopt an unhealthy, artery clogging diet and lifestyle. Not only will they reap the benefit of the added taxes but public sector pensioners will die off in a timely fashion soon after retirement!

  • Comment number 98.

    Where does this idea that Public Sector workers don't pay into their pension schems come from. On my pay slip every month is a deduction to the Civil service Pension Scheme. I pay in more now than i did years ago to get increase benefits when i retire after wrking for the service for at least 40 years.

    Oh and as for being some kind of fat cat I work in IT support on £27k a year. even taking into account flexible working and pensions that comes to around £32k a year. the Average private sector version of my job starts - note that comment - starts at £50k pa. So how is it that i am somehow paid more than the private sector.

    We have been living with pay restraint off and on for 20 years. Last year we had a 1.5% pay rise part of which was non-consolidated - a one off. with inflation as high as it is, rising fuel prices and VAt rises on the way this is a pay cut not a rise.

    So why is it that the CONDEMS and the looney right fringe on here are atatcking the very people that have to carry out their cuts. simple - revenge for the fact that Public sector workers voted with their feet in 1997 and kicked the CONS out of power and hevae never supported the DEMS.

  • Comment number 99.

    Public sector pensions are an integral part of the overall pay package of public sector workers. By separating the pension from the salary Clegg is likening the pension to a bankers bonus, something that is an extra, rather than something that people have paid for throughout their working life. As a pubic sector worker I would welcome an investigation into how overall pay (pay and pension) compares to the private sector, or to how public sector pension schemes are managed. Most public sector workers would have to live longer than the average lifespan to get back what, according to their payslips, has been been paid into their pension.

  • Comment number 100.

    Can anyone in the private sector explain why they do not have jobs in the public sector where they obviously believe the terms and conditions of employment, including pension arrangements, are vastly superior.
    I recall that in 1950 I was able to get a job in the public sector because large numbers of people were leaving to join the private sector.
    After 40 years on a low salary I now get a low (but inflation proofed - NIL this year) pension.

 

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