Threats to public sector pensions could mean that your retirement
is at stake - make sure you can tell fact from fiction
MYTH - People are living longer which means they're claiming their pensions for longer - this needs to be addressed. The schemes were revised to take account of this three years ago - 
so scheme benefits and costs are now 25% lower. In addition, life expectancy has increased, but less so for manual workers and the low paid.
MYTH - There's a big public sector pensions deficit that has to be repaid. There is no funding gap - the public sector schemes were assessed for long term risk and adjusted accordingly three years ago and are now very secure. Both the local government pension scheme and NHS pension scheme are currently cash rich with income far exceeding outgoings - some £2 billion in the case of the NHS pension scheme.
MYTH - The proposals mean that those earning over £15,000 pay around 3% more each month - that's not very much is it? 3% of your pay is a significant chunk of income. Pension scheme members currently pay around 6% of their salary into their pensions - adding another 3% to this means increasing the payments by around half again. The Local Government Association is even worried that this would lead public sector workers to opt out of pension schemes and threaten their affordability.
MYTH - Public services and public service pensions are causing the financial crisis. It was the banking sector's reckless risk taking and excessive greed that caused this global recession.
MYTH - We're all in it together. Everyone has to make sacrifices right now - why not public sector workers? We are all facing cuts to our public services - on top of this public service workers are facing unprecedented job cuts and a pay freeze. Is it fair to ask them to pay an average 3% more from their salaries on top of all that in return for a pension with worse benefits? We will all end up paying more tax if people drop out of the scheme to end up relying on the state in their old age.
Ten key facts about pensions 1. Without a single penny more in contributions, the local government pension scheme could pay all its liabilities for twenty years. 2. The NHS pension scheme gets £2bn more in contributions than it pays out in benefits every year. This additional money is not stored up for future pensions payments but goes straight to the Treasury to help pay for the bankers’ crisis. 3. Changes negotiated with the previous government have already reduced the value of public sector pensions by 10%. In particular, under the so-called “cap and share” arrangement, the cost of pension contributions for public sector employers was capped, so that future increases in pension costs above a set level would be paid entirely by employees. 4. Research by independent experts such as the Institute for Fiscal Studies (IFS) and the Chartered Institute of Public Finance and Accountancy (CIPFA) has already proved that both pension schemes are affordable and sustainable for the long-term, and that the cost to the taxpayer of public sector pensions has already fallen. 5. The relevant ministers want to increase public sector pensions contributions by 50% for those earning over £15,000. This additional money won’t be used to improve pension schemes for the future – it will go to the Treasury. So, in effect, it will be a tax on those that can ill-afford it. 6. The number of people contributing towards a company pension scheme in the private sector has almost halved since 1991. Two-thirds of private sector employers do not pay a single penny towards their workers’ pensions. This will force millions of workers into poverty in their retirement and the taxpayer will have to pick up the multi- billion pound benefits bill. 7. The average pension for local government workers is around £4,000 a year and £7,000 a year for NHS workers. For most women it’s even less. 8. The bosses of FTSE 100 firms – Britain’s largest companies – have, on average, a final salary pension scheme worth £3.91m. This would result in a pension of £224,121 a year: 23 times bigger than the average occupational pension (£9,568) and 34 times bigger than the average public sector pension (£6,497). 9. Within FTSE 100 firms, ordinary scheme members accrue benefits at a rate of 1/60th to 1/80th, while the standard accrual rate for directors is 1/30th. The accrual rate is the rate at which workers build up pension benefits - the lower the bottom number, the better the pension deal. 10. The most common Normal Retirement Age (NRA) for directors of FTSE 100 firms is 60, with three times as many directors able to retire at 60 than 65. In contrast, the most common NRA for ordinary scheme members is 65, and this is expected to rise further for most public and private sector workers. |
MYTH - It's not fair, why should the public sector get good pensions when the private sector doesn't? The average director of a FTSE 100 company has a final salary pension worth £3.6m or £174,963 a year, while the average occupational pension generally is £9,500 a year and the average public service pension is £7,800 a year. That's the real unfairness. UNISON thinks everyone deserves an adequate pension, including workers in the private sector. We should improve bad schemes rather than make good ones bad. Providing adequate pensions means that fewer people will be receiving welfare handouts after retirement, which would cost the taxpayer more money in the long run.
MYTH - Public sector workers have it too good with huge pensions. The average public service pension is around £7,800 a year, for women working in local government the average is £2,800 a year, while the median for women working in the NHS is £3,500 a year: hardly huge pensions. Saving towards an occupational pension in many cases means a person is receiving fewer welfare benefits during retirement, saving the taxpayer money.
MYTH - Taxpayers are paying for public service workers' pensions. That's not fair. Everyone's taxes are used to pay for all public services - stethoscopes in hospitals, the salaries of primary school teachers, people to change the light bulbs in street lamps, and part of these people's pay is their pension. A pension is part of someone's salary package and is no different than an annual salary, a car, or the London weighting allowance. It's not fair to change something in a job contract after someone accepted the job. One in five people working in the UK works in public services. They are taxpayers too.
MYTH - Public service workers retire at 60. The normal retirement age in many of the public service pension schemes is already 65. Raising the retirement age hurts some people more than others. In general we're living longer, but that doesn't mean everyone will have the same quality of life. Many public service workers have jobs that are physically demanding or stressful, making it difficult or even impossible to continue working into old age. Similarly many low paid workers simply don't have the option of retiring early because they can't afford it.