Monday, 4 August 2008

Lib Dems go after public sector pensions

Left of Labour my ****, as Jim Royle might put it. The Lib Dems are helping to stoke up anger at public sector pension provision. As I have argued many times before I think the attacks on public sector pensions are both vindictive and wrong-headed, and I say that as someone without access to a DB scheme.

The principal problem with pension provision in the UK is the collapse of private sector provision (combined with the fact that it never covered much of the workforce in the first place), not that public sector schemes are too generous. Therefore any sensible approach to pension reform should surely focus on improving what is bad, not attacking what is good. (I accept that costs have to be managed and that this implies reforms over time.)

Yet rather than try and put forward some genuinely progressive ideas, the Lib Dems prefer to play footsie with the Tories and the TaxPayers Alliance and attack the public sector. Hence this release today:

Top civil servants have pension pots worth almost £150m, funded entirely by taxpayers, figures uncovered by the Liberal Democrats have revealed.

The figures show that the average pension pot among the top ten civil servants from 19 Government departments is over £800,000 which could provide a retirement income of more than £60,000 a year.

The average pension pot among members of the public is worth £25,000, which would provide an annual income of just £1,100.

Commenting, Liberal Democrat Shadow Work and Pensions Secretary, Jenny Willott said:

"While many people can barely afford to save for retirement, it is difficult to justify the extraordinarily generous taxpayer contribution they are forced to pay into top mandarins’ schemes.

"These costs are clearly exorbitant compared to what the public can expect their own employers to put in. The Government cannot afford to stick its head in the sand any longer over public sector pensions.

"We need an independent commission to look at the options for reform of pensions for the next generation of public sector employees. They must be fair and affordable both for civil servants and taxpayers."

It's a classic bit of smoke and mirrors. Use the totally unrepresentative handful of top civil servants' pensions as a way to attack the whole lot, even though the average would be much lower.

In addition the figures look a bit wonky. It's very difficult to calculate what the average pension 'pot' is because many people will have several pensions from different employers. In addition in DB schemes talking about a pension 'pot' is pretty meaningless - the value typically used is the transfer value which doesn't tell you much.

One place you can look for information is the DWP's Pensioners' Income Series. If you look at the mean occupational pension for all pensioner units in table 2.1 on page 16 of this PDF you can see it is £93 a week, or just under £4,800 a year. Obviously that is skewed because it is a mean rather than a median but even so the Lib Dem figure looks strange. And bear in mind this is just occupational pension income. Some pensioners will also have built up some personal pension income over time.

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