Morning:
6°c
Mayor: Gold-plated public sector pensions are unaffordable
Pippa Crerar10 Feb 2009
Boris Johnson today launched a scathing attack on gold-plated public sector pensions claiming they were "unsustainable and unaffordable".
The Mayor said it was "too much" to expect taxpayers to fund generous schemes when they themselves were hit by the economic downturn. He added that with pension funds devalued by falling markets and the elderly living longer in retirement the cost to the council taxpayer was simply too great.
However, the Mayor is certain to be criticised for his remarks since most public sector employees - including thousands of staff at Transport for London and in the Metropolitan Police - do not earn large salaries.
Mr Johnson opened himself up to charges of hypocrisy as he himself is due a generous parliamentary pension for his seven years as an MP as well as a scheme for the Mayor of London - both to be paid for out of the public purse.
Mr Johnson conceded as much in his Daily Telegraph column and said: "Speaking as a former MP and current Mayor, I hesitate to knock it, and I only do so because it is unsustainable.
"With firms now laying off staff in their thousands, with unemployment apparently set to hit three million for the first time since the Eighties, it is simply too much to expect council-tax payers to scrimp and save to pay for the pensions of local government's colossal clerisy.
"The second, and more serious, reason for believing the position to be unsustainable is that these public sector pensions are now, frankly, unaffordable. Human longevity is demolishing the actuarial calculations on which our pensions are based."
He blamed the "division" between private and public pensions on Gordon Brown's "reshaping" of the economy during his 10 years as Chancellor.
He said Mr Brown's "great pensions raid" had made it difficult for private firms to keep up final salary schemes while the public sector, meanwhile had become "massively swollen".
He concluded: "That's why the public pension funds have their great yawning deficits, and we can either cover those deficits with massive tax increases, or else we can reform."
Labour's John Biggs, chair of the Assembly budget committee, said: "Most public sector workers are in fact on quite modest wages I can't on the face of it see why the public sector should be punished for the failures of City bankers."
Reader views (32)
"my pension's rubbish, so you should have a rubbish pension, too".
As a fireman I pay through the nose for my pension, give me the money as wages or let me have my pension, whats it to be.
- Dave, london, 22/02/2009 14:17
Report abuse
It's sad to hear Tories moaning that their private pensions have been ruined by the failure of unfettered capitalism. That's what you voted for when you elected Thatcher with her total faith in the virtues of the Free Market. Sadly the Fund Managers were more interested in their own bonuses than their companies profits and allowed the City to screw up. However you'll vote Tory for more of the same. But please stop whinging when the capitalists do what capitalists do which is lok after number one.
- T Taylor, Harlow England, 11/02/2009 15:20
Report abuse
It is a shame that Boris doesn't criticise his chums in the Boardrooms who receive Golden Hellos, large salaries, bonuses,rolling contracts, Golden Goodbyes when failing and non-contributory pensions. It would be nice if the people in the Boardrooms could remove their snouts from the trough and lead by example for a change.
- B Basset, Luton England, 11/02/2009 14:53
Report abuse
Boris should give an example by promising to take only half his pension when he retires or better sill don`t take it atall I feel sure he has enough money to survive without it.Talk is cheap action is louder than words.Why do MP`s only have to serve seven years to qualify for a gold plated pension when most people have to work for thirty or more years to get a pension which just about maintains reasonable living.
- Don, london ENGLAND, 10/02/2009 21:59
Report abuse
As a pensioner with £124 to live on each week, I resent having to give up a third of this amount in council tax, a sizeable wodge of which goes to council workers' gilt-edged pensions. something is going to have to give! This cannot go on. It is simply UNJUST, UNWARRANTED and INEQUITABLE !!!!!
- Rc, Isleworth, 10/02/2009 16:44
Report abuse
"Colossal clerisy" - never has local government been so highly praised. I had to look up "clerisy" and found "men of learning as a class or collectively; the intelligentsia or literati".
- Steve, Lewisham, 10/02/2009 16:14
Report abuse
It would be a sweet irony if the circumstances were not so serious:-
Brown knows well that he cannot save the economy without cutting taxes and scytheing the public sector. The public sector is his core vote - the key to his obsessive desire for a mandate.
He cannot win an election without preserving his core vote and without saving the economy.
So he bites his nails!
- David Lewis, Oxford UK, 10/02/2009 14:33
Report abuse
But MPs allowances and pensions are?
- Frank, Home Counties, England., 10/02/2009 14:28
Report abuse
Well done Boris. It is about time this madness was stopped. Now look into the extra pension fund payments that are made from Council Tax payments to top up under funded Public Sector Council pension schemes. More and more money is being spent on Public Sector employees either through salaries or pensions than is affordable. If not changed asap and unemployment continues to rise then I predict riots throughout the UK within 18 months.
- Joe, Thornton Heath, UK, 10/02/2009 14:02
Report abuse
Alan Hill, Oxford...
Gordon Brown could never have raided the Public Sector Pension - there is no money in it !
Public Sector workers (totally paid by the Taxpayer), pay into their Pensions simply to pay existing Public Sector Pensioners.
Even with the big increase in Public Sector 'workers' contributing, there is a large difference between what's paid in and what's paid out.
This is why, for instance, about 25% of your local Council Tax pays Pensions, not local services.
- Cap, london, 10/02/2009 13:54
Report abuse
The big difference between Public and Private schemes is the the Public scheme has no fund and is very generously a percentage of final salary. (not average salary over the life of the employment service)
Pension Contributions by the Public Sector are immediately paid out as Pensions to the retired.
Shortfalls in contributions, where not enough is being paid in to pay the Pensions, are then paid by the Taxpayer.
Private schemes either demand more contributions to sustain the fund value, or give reduced benefits.
The Public Sector model IS unaffordable, needing more and more Public Sector 'workers' to pay existing Public Sector Pensioners, which then results in even more Pensioners to be paid in future, needing even more Public Sector 'workers' to be employed....and so on.
I understand that about 25% of my Local Council Tax goes solely to existing Council Pensioners, and not to provide local services.
I also know that the number of Council employees is increasing quickly - so I can expect huge Council Tax bills in the future just to pay their Pensions !
In the meantime, my Private Pension fund has reduced about 35% this last year, and may with luck get back to today's value in 10 or twenty years.
-the Public Sector is totally paid by poor, unprotected working people like myself, generating real value for the economy, unlike the valueless cash consuming Public Sector
- Cap, london, 10/02/2009 13:50
Report abuse
I have worked in the public sector since 1982 and have paid 6% of my salary (which has always been below average earnings) every month towards my pension. This has recently increased to 7.2% and I cannot retire until I am 65 at the earliest. There is no such thing as a non-contributory pension in the public sector unless you are executive level. I have no objection to all private sector employees paying 7.2% of their salary to their pension but know from experience that many of my friends who do work in the private sector would not even contemplate paying this amount of money towards a pension.
- Mick, London UK, 10/02/2009 13:43
Report abuse
I honestly don't know how public sector staff can keep expecting the "money creation sector" to keep subsidising them.
When will the madness end?
- P Staker, London, 10/02/2009 13:07
Report abuse
As an Oxbridge graduate, I turned down much higher salary offers in the private sector for a modestly paid career in the public sector because I believe in the value of public service. I am by no means alone in having made this choice. Be very careful about demonising all public sector workers as paper-pushing clerics who are are out to drain the taxpayer and take a free day off when it snows, as in most cases this couldn't be further from the truth.
Additionally let's not forget that the public sector competes with the private sector to attract highly qualified applicants in many specialist fields. This is not done through high salaries or massive bonuses, but through modest benefit packages such as pensions. Lose the benefits and public sector pay will have to rise in order to lure top quality people. That is of course, unless you think that the standard of people working in the public sector is irrelevant to the standard of public services?
- Katherine K., Waltham Forest, 10/02/2009 13:05
Report abuse
I am from private sector. But before public sector, I feel need stop the pensions of the Member of Parliaments.
- Prasad, SIDCUP, 10/02/2009 12:45
Report abuse
Because the private sector is levelling down and providing inadequate pension doesn't mean the public sector should follow suit. However, the public sector should immediately increase retirement age for all to 65 and stop enhancing early retirees pensions (except in the case of severe ill-health). Each council tax bill should show the amount the council are alloting to pensions - employer and deficit contributions (as £s and % of spend) - and also list the actuarial cost of any enhancements to individuals' pensions and their names and reasons why - transparency brings accountability.
- Ab, London, 10/02/2009 12:27
Report abuse
I agree with Boris.I think they should pay an additional levy from their salary to compensate for their pension. Slap a 7% levy to pay for it.
- Mike, London, 10/02/2009 12:22
Report abuse
Public sector workers should get fair salaries and reasonable pensions. However, there has been a huge and disproportionate increase in the numbers of public sector workers, in their salaries, now higher than those in the private sector, and in recession-proof pensions, which are better than those in the private sector and do not fall with the markets. The public sector is paid for entirely by the private sector. This is all an unaffordable equation for the private sector taxpayer. That's the economic reality of it. Public sector jobs must be cut in huge numbers, average pay must fall and a new way of funding pensions found. It's like the bankers saying we deserve a bonus - pensions and bonuses are paid out with real money that someone else has to come up with for you, get real, those days are over for a while.
- Tom Moncrieff, london W6, 10/02/2009 12:01
Report abuse
Absolutely right Boris. Perhaps the next Tory government will scrap these unaffordable pensions and reinstate my private pension to what it should have been before Gordon robbed my pension fund which I spent 30+ years saving for.
- Roger Slade, Winchester, Hampshire, England, 10/02/2009 11:54
Report abuse
its time we set the record straight.
The private sector is paying for the pensions of the public sector.
and where were the public sector on "snowy monday"?
Most of the private sector went to work/tried to get to work, where as most of the public sector took a day off.
- Mario Kempe, london, 10/02/2009 11:42
Report abuse
Boris is right to be regarded as a hypocrite but he is spot on. If only GB had had the guts to equal retirement age to increase over time for all people plus change the pension scheme to be linked to average rather than final salary scheme.
- Dan, South London, 10/02/2009 11:37
Report abuse
We in the Fire Service have always been underpaid, we also get stopped 11% of our earnings for pension purposes,so go ahead, stop our final pension payments,and pay us for what we do,but dont forget that we face a little more danger in our job than the average private sector worker.
- Terry, London Fire Brigade, 10/02/2009 11:34
Report abuse
As someone who works in the public sector I agreee with some of what Boris is saying, however, there needs to be a balance. Private sector pensions were doing very well until Brown decided to make a 'smash and grab' on their funds when he became Chancellor in 1997. Prior to this they benefitted from a number of advantages over the public sector. Holiday payments, where for a number of years they made no contributions to the pension funds but the benfits remained the same, was common. Also many of the larger private companies ran 'none contributory' pensions schemes for their staff, whilst others in the financial sector received very cheap mortgages and loans. The public sector employees were not party to any of these benefits and are compulsorily required to pay between 6% and 11% towards their pensions. The private pension fund is also transferable to different employers or fund managers, so they can benefit from improved investment returns. However, as there is no 'cash pot' in the public sector. If workers leave their pension remains 'frozen'(subject to some indexing)and is not payable until they reach 60. As such they have to start with zero funds if they move to the private sector. Some say that the public sector can retire early, but many in the private sector can also retire between 55/60. MPs should set an example by abandoning their gold plated pension schemes,(payable in full after only 15 years)and hidden expenses, before destroying the pensions of anyone else.
- Paul, South London, 10/02/2009 11:32
Report abuse
The civil service has not had final salary pensions for a number of years for new entrants in line with the private sector. Most of those who started before this change, chose to keep their final salary pensions. Civil servants do contribute to their own pension as a percentage of the money allocated to each set of pay negotiations. Boris yet again opens his mouth and sticks his big foot in it!
- Bruce, South Croydon, 10/02/2009 11:25
Report abuse
I find it crazy that public servants can expect a pension whilst in the private sector your lucky if you can get any sort of pension.
The acid test is whether these civil servants would do as well in the private sector, personally I doubt whether they would be as well rewarded elsewhere.
- Gerry, London, 10/02/2009 11:20
Report abuse
Fine,as a Public sector worker who is prepared to sacrifice my own life to save that of a complete stranger on a daily/nightly basis I say pay me/us a decent wage,and leave our pensions to us.
- Colin, London, 10/02/2009 11:03
Report abuse
Well said Boris. Finally.
- Isabel, Woking, 10/02/2009 10:59
Report abuse
The fact is that the "gold plated" pension is an important aspect of my pay as a civil servant. If it was suddently withdrawn I would suffer a substantial pay cut. It was one of the reasons I joined from the private sector (like anyone else, as much as I value my job I don't do it without any regard for material reward!). I suspect the final salary schemes are not sustainable in the longer term, but if they are phased out there must be compensation in terms of higher pay to allow purchase from a private scheme.
- Alan, London, 10/02/2009 10:28
Report abuse
"Most public sector workers are in fact on quite modest wages I can't on the face of it see why the public sector should be punished for the failures of City bankers."
The main reason public sector workers stay in their low paid jobs is the security of a pension. My actual take home wage has slowly gone down, in real terms, over the years. I put up with this because if I stay I will receive a decent pension. Unlike the fat cat bankers, no one is going to give me a million pound bonus, but I bet they wouldn't do my job, for the money I get!
- Helen, UK, 10/02/2009 10:24
Report abuse
Whilst Boris could be regarded as a hypocrite the fact is that he is correct.
What John Brigg's fails to point out is that most people in the UK will pay more into somebody else's pension pot than they will do for themselves. In addition public sector workers on modest incomes are now more likely to find that their salaries are on par with similar workers in non-public sector jobs.
- Mark, South-East London, 10/02/2009 10:22
Report abuse
He's absolutely right. I don't know why these grotesque jobs were created in the first place - other than to provide vote-fodder for Labour.
- Chris, London, 10/02/2009 10:17
Report abuse
But it's OK for the private sector to suffer, most of them are on modest salaries too.
If Gordon Brown had raided the Public Sector Pensions there would have been one hell of an outcry.
- Alan Hill, Oxford UK, 10/02/2009 09:53
Report abuse
