'Gold-plated'

Put the term ‘gold-plated’ into the search box on the Daily Mail website and you get 601 results, the vast majority of which of results of course concern pensions, public sector pensions. For example, stories like this: ‘Taxpayers must foot MASSIVE gold-plated pensions bill as Darling’s report reveals ‘ultimate stealth tax” which contain statements like this:

Shocking new figures reveal the ‘rocketing’ cost, which must be paid in full by taxpayers, of paying the gold-plated pensions of Britain’s 5.8million public sector workers.

But are the 5.8million public sector workers really going to get ‘gold-plated’ pensions? Lord Hutton, leading the independent commission conducting the public pensions review, according to the BBC has made it clear that the term is not appropriate:

Lord Hutton rejected the frequently made claim that public sector pensions are gold-plated.

He pointed out that the average pension in payment was currently £7,800 a year, which he described as modest, not excessive.

The BBC report also has some interesting figures for the Daily Mail to consider given how much hatred they throw at civil servants: the average current pension payment for civil servants is just £6,200, whilst local government employees languish at the bottom, averaging just £4,044. Police officers fare best, averaging £14,000 whilst fire-fighters aren’t far behind at £12,000. Teachers on the other hand who must work longer than both only manage to average £10,000.

The Daily Mail obsession with ‘gold-plated’ pensions in the public sector is only ever evidenced with the salaries of MPs or leaders within the civil service and is simply not applicable to the vast majority of workers in the public sector. It is rather like looking at what CEOs retire on and using that as evidence to suggest that all of the workers in the company must also be receiving massive pensions. It is, in short, complete nonsense.

I look forward to seeing how the Daily Mail covers this report. The BBC point out that the commission is considering the following long-term changes:

  • changing the public service schemes from a final-salary to a career-average structure
  • copying the Swedish and Dutch examples of defined-contribution schemes
  • raising normal pension ages beyond their current levels – typically 65 – as longevity increases.

The BBC also point out that George Osborne said that public sector pensions as they stand are ‘unsustainable’. However, they also point out the following:

The interim report points out that the long-term cost of funding public service schemes has already been drastically reduced.

The recent decision to uprate pensions in line with the consumer prices index (CPI) rather than the retail prices index (RPI) has shaved 15% from the cost of the schemes.

Taken together with other changes in the past few years, such as raising the pension age to 65 for newer recruits, the schemes now cost 25% less to fund than they did a few years ago.

“All these past reforms, the current pay freeze and planned workforce reductions will reduce the future cost of pensions,” the report said.

“The gross cost of paying unfunded public sector pensions is expected to fall from 1.9% of GDP in 2010-11 to 1.4% of GDP by 2060.

It will be interesting (and rather too easy to predict I fear) what parts the Daily Mail will choose to include and what to leave out. One final point that I think is extremely important to mention is this comment from Lord Hutton:

he rejected the idea put forward by employers’ organisations that because private sector pension provision was poor by comparison, public sector pensions should be dragged down to the same level.

“I have rejected a race for the bottom,” he said.

It is the ‘race to the bottom’ that the Daily Mail fully supports every time it tries to ensure public sector workers suffer the miserable retirement that so many in the private sector do. What this interim report suggests, if anything, is that a lot of public sector pensions are already there.

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