Saturday, 7 March 2009

The TPA and 'pensions dictatorship'

The TPA report on pensions also includes a section on employer contribution rates. It says that employer contributions went up by 7% over the past year. In the intro to the report no context is given for this figure, which is described as 'inflation-busting', so the impression is given that councils are just chucking more money at pensions.

The thing is, the LGPS is a DB scheme. The employer contributions don't have any direct link to pensions that are paid. Pensions aren't going up by 7%. The increase in contributions reflects a number of factors - poor investment returns, improved longevity, etc - that affect the funding of the scheme. The contributions are agreed with the actuary with a long-term view of how to return the scheme to a reasonable funding level. Put simply, the cost of providing pensions (any pensions - public or private sector) has been pushed up by these factors. So to attack councils for increasing pension contributions in the current environment is a bit like blaming them for spending more money on fuel when the price of petrol increases. And again if you look at private sector DB schemes you will see exactly the same thing happening.

One final thought, the TPA is - like the Tories - using the term 'pensions apartheid' to describe the difference between public and private sector provision. Leaving aside the numerous obvious flaws in such a poor analogy (for example to work this would mean that in South Africa there was a class of super-rich black South Africans who had even more rights than white South Africans) doesn't that make the TPA's own position a bit odd? What I mean by this is that the end of apartheid involved granting proper rights to black South Africans, rather than taking away the rights of white South Africans. The TPA in contrast want to force worse pensions on more people through national government. So the TPA seem to be advocating, to extend the analogy, a sort of pensions dictatorship, where everyone's pensions are diminished by national government to the lowest common denominator.

Now I'm joking, because I recognise that chucking about such loaded terms in respect of pension rights is over the top. But the TPA think it's quite OK to invoke the struggle against apartheid in support of their own shabby attempts to strip decent pensions from people. It's the sort of thing that reinforces my already low opinion of them.

1 comment:

Charlie Marks said...

You are too timid - the TPA are arguing for a return to the poorhouse!