Before the Proposals:
Hutton’s 2006 pension review proposal shows that the cost of public sector pensions is falling from 1.9% of GDP to 1.4%. It is not unsustainable, as the Prime Minister has claimed.
The government have not carried out a new cost review for the TPS (teacher’s pension scheme) since then, despite being called to do so by the trade unions. Any claims about the costs are not based on any evidence more recent that Hutton.
From last April, the index that contributions are linked to was switched from RPI to CPI. The former is an estimate of average annual cost increases that includes rising property prices, the latter is an estimate that does not. This will represent roughly a 15% drop in the value of our pensions. It is worth repeating that this has already happened – the government proposals against which we are protesting are addition to this.
And finally, since the TPS has been set up, 44 billion pounds more has been paid in to the scheme than has been paid out.
After the Proposals:
So, after the proposals – we will pay on average 3% more a month, representing a loss to monthly income at a time of frozen pay and raising inflation. We will be expected to work longer to get the full pension, and so therefore if retire “early” due to exhaustion or illness – before the age of 68 – will not be entitled to our full deal. And remember the 15% loss to the pot!
Using the NUT pension calculator I can see the difference to me when I retire in quality of life. I had a vague hope that in my retirement I will be able to eat well, be sheltered, be warm, be able to travel occasionally, still support my children in times of emergency, buy presents for children and hopefully grandchildren, go to the theatre, restaurants, holiday occasionally. I understand that I won’t be able to do that all the time, but to be able to do that some of the time I see as a reward for a lifetime of hard work. Really hard work, which I have educated myself to be able to do, and take on all kinds of pressure to constantly improve. Work I do for 10 or 11 hours a day in a job I love. I am exhausted by the end of every week, but I weigh this against the personal satisfaction I gain. My profession has been good to me and I want to be comfortable when I have finished. I don’t want to have to worry about poverty, about food bills, about fuel costs. I wonder if anyone reading thinks I am expecting too much? I look at my peers who work in finance, in IT, in the media, and I know they won’t have these worries. The proposed reforms will mean I not only cannot afford a choice of lifestyle on retirement, but I have 8 less years of it. I just can’t accept that this has to happen. It is a really, really big deal to me, and makes me think very carefully about the balance I have currently chosen to have in my life. Why continue to give everything when your reward has been so drastically and unilaterally reduced? How can you carry on the same when the terms of the deal you started with are just torn up and thrown out?
There is some qualification of our pension deal by comparing it to private sector pensions – this only masks the even bigger crisis that people in the private sector face – 2 thirds of whom do not have pension deals at all, the rest of whom have seen the value of theirs slashed. We have millions of people being carried into old age on a conveyor belt of poverty that is only going to place an even bigger strain on the state. In France twice as much is spent on pensions. In Germany two thirds as much. The only EU countries that currently have higher rates of pensioner poverty than the UK are Estonia and Cyprus. This is the 6th biggest economy in the world – putting millions of elderly people into poverty has been a political choice. This government is choosing to vastly increase this number. These reforms attempt to match the misery of public sector workers to those within the private sector as a solution to this problem.
Ultimately the chancellor has nailed his colours to the mast by pledging to reduce the deficit within one term. The economy hasn’t grown to help him close the gap. He can’t take on the wealthy in society with tax increases, or go after the banks, as these are the forces that propelled his party into government, through voting and funding. So he has to find the money somewhere – and the section of society that works in the public sector, that is a member of a trade union, is the section of society that by and large didn’t and won’t vote for his party. He has nothing to lose by alienating us further. So again there is a self evident political logic to this course of action. There is no question of a fair course of action, only a desperate one.
Taking action is a way of fighting back, and it is effective. They have already scrambled to make concessions to the deal in an attempt to avoid strikes. There are 33 unions in total calling their members out, representing 2.6 million working people. This is a moment of resistance against another manifestation of government that protects the rich and attacks the vulnerable. Across the world people are taking to the streets against this unfairness, and we must take our turn too. I hope those who aren’t striking understand this.
Posted by Ciz on November 26, 2011 at 11:39 am
http://www.teachers.org.uk/node/12872
Is the link to the NUT’s pension loss calculator
Posted by Shiraz on November 26, 2011 at 3:43 pm
This is a really good article.
Public sector workers have already seen up to a 15% reduction in their net income in the last couple of years due to pay freezes, VAT and inflation. They have already seen the long-term value of their pensions reduced due to the shift to CPI.
And in addition they are being asked to serve the coalition’s ridiculous deficit-reduction-in-one-term-without-growth agenda by contributing up to 3% more.
The coalition’s agenda is not about sustainable pensions and building a robust long-term economy, it’s about political preferences and that’s why you and all the strikers will be right on the 30th Nov.
Posted by Shiraz on November 26, 2011 at 3:48 pm
And just to add…
There’s also this horrible divide and rule approach the Tories have.
Knowing they get a relatively low turnout from the public sector unionised workers, they are pitting the private sector middle classes – most of whom (especially outside the South East) have been shat on by neo-liberal economic policies over the last few decades – against public sector workers.
This must be resisted and it starts with stopping the pension race-to-the-bottom and should continue with arguing for better pensions for all.
Posted by matt on November 27, 2011 at 9:23 am
A really good blog, the argument is so strong, it’s just a shame that the media seem to see it as an opportunity to pit frothing at the mouth essex boy thatcherite white van types versus flat cap wearing union hardliners as if it’s some kind of public v private dispute. Actually, the action is nothing of the sort, but depressingly, it gets painted like this, devalued and turned into a cartoon. I will certainly share this in the hope it redresses some of the imbalance.
Posted by How to make the point « threescore on November 27, 2011 at 10:11 pm
[...] blogger with a fairly good understanding of it all has written here on why teachers should [...]
Posted by Tom Troughton (@Trought4TheDay) on November 29, 2011 at 7:11 pm
Well said. You guys deserve so much more. The Tories are ruining everything I love about this country.
Posted by Mark Ellis on December 1, 2011 at 8:38 am
This statement is another example of people who are totally ignorant of the state of the country and how collecting together a collection of half truths seems to becomes fact. I know that people with a basic lack of financial education will believe this rubbish however there is one simple and overriding fact here. The country can not afford to pay overgenerous public sector pensions.
People are living longer and the public sector pensions are therefore becoming a time bomb. Not doing something now will mean far more pain later. Once qualifications are taken into account, a teacher earns around 8% more than an equivalent person in the private sector, when you then take pensions into account this figure grows to over 25%. As the public sector does not have the ability to earn the country out of recession, it falls on the private sector to do the task. Teachers may be amazed to find out that pay freezes and pay cuts are common in the private sector because every company knows that if it pay out more than it earns one day the crunch will happen and the company will go bankrupt and all the employees will be out of a job.
I object to hard working people in the Private sector having to subsidise public sector pensions to the level they are today, when they will not be provided with a decent pension in there own names.
This person compares Germany and France, however, the German economy is a lot stronger than ours and they are also struggling with the same issues and as for France they are on the verge of entering the hole dug by Greece and Italy.
Although a huge amount of this problem has been caused by age demographics, the main mistakes has been caused by the Structural deficit created by Gordon Brown. There was a huge increase in the public section from 1997 to 2009 and therefore resultant problems in both short term costs and long term pension liabilities. This accounts in part for the 44 billion surplus as stated by the TPS (when people pay into the public sector scheme).
Gordon Brown was relying on an overheated economy to continue to grow in order to pay for the massive public sector expansion. He also at the same time removed the teeth of the financial market regulators to enforce governance on what I agree are greedy investment bankers.
I will say this now, I have never been a fan of George Osbourne, however I can see he has little choice in pushing for a reduction on public sector pensions.
I will therefore now lay down this challenge, if someone can come up with a reliable method of paying for the maintenance of Public Sector Pensions at the current levels, please let us all know.
By the way, wrong responses are, Taxing Bankers and the Rich because this will not raise the massive amounts needed to fund the shortfall and you are liable to create another 1970′s style brain drain. Taxing corporations, because they are always one step ahead of the revenue, large corporations can move countries quickly and taxing normal companies more stunts growth.
Posted by Mark Ellis on December 1, 2011 at 8:51 am
One thing I missed, this is taken directly from the Hutton Report, just to prove that you can interpret paragraphs on any government report in any way you wish.
“The Commission outlined the case for long-term structural reform
of public service pension schemes and concluded that the final salary structure of most
current schemes can be unfair to employees and taxpayers. In the context of uncertain
and increasing longevity, the Commission also felt that current scheme designs are not
sufficiently robust to ensure the sustainability of public service pensions.”
Posted by slowlyburning on December 1, 2011 at 7:14 pm
Wow thanks! Great reply.
Just to clarify that I am not totally opposed to pension reform, just this pension reform, and the manner in which it is being carried out – so many of us have taken industrial action on this specific issue.
The government’s proposals do go beyond Hutton, I think that’s why the report is quoted by both sides of the argument.
Just wondering if you object to your taxes paying the salaries of public sector workers too?
Posted by CD on December 1, 2011 at 6:30 pm
This is the usual self indulgent twaddle from people who live in a bubble. My pension, which I have been paying into for over 15 years at between 5 and 10% is worthless. It’s worthless because if you do the sums it is clear why. I don’t pay enough in and we are living longer.
Oh and I work in IT and I have had a pay cut for the last 3 years due to inflation and I accept that is the case for the good times gone by.
Quote 1
“There is some qualification of our pension deal by comparing it to private sector pensions – this only masks the even bigger crisis that people in the private sector face – 2 thirds of whom do not have pension deals at all, the rest of whom have seen the value of theirs slashed.”
Some qualification, the state pensions are being subsidised by the private sector – some qualification! So let’s keep the status quo and make it worse by keeping public sector pensions as is. What a great idea.
Quote 2
“Really hard work, which I have educated myself to be able to do, and take on all kinds of pressure to constantly improve. Work I do for 10 or 11 hours a day in a job I love. I am exhausted by the end of every week”
I think public sector employees really are the only ones who work hard. No really they are. I’m glad there are people like this who actually write this stuff down.
Quote 3
“The government have not carried out a new cost review for the TPS (teachers pension scheme) since then”
Perhaps slowlyburning should work a little harder and add an apostrophe after ‘teachers’ since he’s so possessive about his lovely state, sorry, UK tax payer funded pension.
Posted by slowlyburning on December 1, 2011 at 7:11 pm
Sorry to hear about your pay cut. I have changed the mistake with the apostrophe above.
Thanks for the reply – just to clarify, though, I don’t think I work harder than everyone in the private sector.
And I don’t think you are right about teacher’s salaries when compared to the private sector, taking education into account. Have a look at Income Data Services, I think they have carried out studies on the above, though I could be wrong. Also the public sector can be a wealth creator too, particular to stimulate demand.
Posted by CD on December 1, 2011 at 7:25 pm
I’m genuinely not sorry about my pay cut as it’s a small price to pay.
Here’s a link to public v private sector pay differences. Of course stats can muddle everything.
http://www.thisismoney.co.uk/money/news/article-2068467/IFS-Private-sector-staff-paid-7-5-LESS-public-sector-counterparts.html?ito=feeds-newsxml
I recently asked some local private school primary teachers what their pay was and compared it to their public counterparts. It was around 10% less and two of them said they would probably have to apply for public sector posts to get a good pension.
They were working yesterday as was I.
Posted by slowlyburning on December 1, 2011 at 7:51 pm
Here’s that report on pay differences broken down:
http://idseye.com/2011/07/05/key-differences-in-public-and-private-sector-pay/
Key stat: those with a degree in the public sector earn on average 5.7% less than those in the private sector.
I don’t have figures on private school pay compared to state, but certainly that is the only example I have heard where the salary is lower in a private school. When you see jobs advertised for private schools, they make a point of advertising their salaries as being greater than the state sector.
Posted by CD on December 1, 2011 at 8:03 pm
Interesting, but does 5.7% (who knows if it is accurate) equate to the pension rights you are requesting when compared to a typical private sector pension?
Posted by slowlyburning on December 1, 2011 at 8:58 pm
The figures came from the same ONS study the article your article came from.
As for the difference, do you mean are you asking if our lesser pay is offset by a greater pension? For many it is, though the comparison is not absolute. In many people’s minds there was an implicit deal about greater pensions.
And I will clarify, the only demand is that there is less of a change made and some real negotiation.
Posted by CD on December 1, 2011 at 9:18 pm
I realise they are from the same source, I accept your point.
Quote 1:
For many it is, though the comparison is not absolute. In many people’s minds there was an implicit deal about greater pensions……
But the world changes
Quote 2:
And I will clarify, the only demand is that there is less of a change made and some real negotiation.
Genuine question, what negotiation do you want?
Posted by slowlyburning on December 1, 2011 at 10:07 pm
Personally – to have a cost analysis of the scheme, taking into account the switch to CPI, which Hutton did not account for in his review, before any reform. Which could have been well underway by now if started when he made the switch. And an understanding that I will have to work longer.
Posted by CD on December 1, 2011 at 10:42 pm
Okay,
Hypothetically, if the conclusion was that the overall package was equivalent to the private sector would you accept the changes?
Posted by CD on December 1, 2011 at 11:20 pm
p.s. it’s teachers’ not teacher’s….
Posted by gtr on December 3, 2011 at 3:49 pm
Surely part of the issue here is that any changes should not have retrospective impact. If it is the case that there is not enough money in the pot and so more contributions must be paid in going forward, fair enough. Commercial decisions then need to be made (with a valuation!) as to what levels of contribution are needed to fund what level of pension, and individuals then either accept that or, if they do not, they do not continue to work for that employer on those terms. They have that choice. (In practice of course many will not have much choice, due to family circumstances etc, but the principle still stands that they choose to work, or not, for that emplyer under those terms).
However, the idea that the Government can unilaterally change entitlements for work that has already been done, and benefits that have already accrued, is entirely unjust. I understand that there is ‘not enough money in the pot’ and so the scheme needs to be adjusted – but how can they include money that people have already earned in that ‘pot’?
It is not sufficient to say that people within ten years of retirement will be safe from the changes – everyone who has already completed work, for any period, under a given set of terms is entitled to the reward that they were contractually promised when they agreed to do that work.