New pensions research undermines government’s ‘fairness’ myth

by - 9th November 2011, 8.00 GMT

New pensions research from trade unions undermines the government’s ‘fairness’ myth.

While the percentage of private sector workers in similar pension schemes to public servants has plummeted in recent years, the average for those still in ‘defined benefit’ schemes is almost the same as that in the public sector.

In 1997, 34% of private sector employees were in a defined benefit pension scheme – where pensions are linked to earnings; last year that figure was just 11%. For these, the average pension is GBP 5,860 a year, while the average public sector pension is GBP 5,600.

Over the same period, the proportion of private sector workers in any occupational scheme has fallen from 46% to 34%.
The figures are included in new research published today by unions that also shows that changing pension indexation from RPI to CPI in the private sector is estimated to save employers GBP 100 billion over the lifetime of existing schemes. This would be a direct transfer of wealth from employees to shareholders, the unions say.

Other facts in the new pamphlet, Fair Pensions for All – produced by the PCS with the National Pensioners Convention, NUT, UCU and Unite – include:

- It is only four years since public sector pensions were significantly renegotiated with the previous government in a deal that the National Audit Office reported in December 2010 was “on course to deliver savings and stabilise pension costs”, and will save GBP 67 billion for taxpayers.

- Corporate profits have expanded from 13% of gross domestic product in the mid-1970s to 21% today. In the 1990s, corporate Britain saved itself GBP 18 billion through pension holidays, while employees continued to contribute. Private sector pension schemes received GBP 37.6 billion in tax reliefs in 2007/08 – that same year they paid out pensions worth only GBP 35 billion.

- UK pensioner poverty is among the worst in Europe, with France spending over twice as much on pensions and Germany two-thirds more. In the last 30 years, our state pension has gone from being worth 25% of average male earnings to just 15%, now standing at GBP 102 a week, only 57% of the government’s official weekly pensioner poverty level of GBP 178. Meanwhile, the cost to taxpayers of means-tested pensioner benefits is estimated to be GBP 13 billion a year.

These figures completely undermine the government’s claim that cuts to public sector pensions are about ‘fairness’. While it’s true we all contribute towards public sector pensions, taxpayers are also subsidising private sector pensions twice: through tax relief; and in the over-reliance on means-tested benefits in retirement.

PCS general secretary Mark Serwotka said: “This research blows a hole right through the government’s claim that its cuts are about fairness. Ministers used to talk about affordability, but we proved that wrong – now we’ve proved they’re wrong about what is fair.

“While ministers want to cut the pay and pensions of public servants, fewer and fewer companies are being fair to their staff. The truth is, we are the ones who are standing up for fair pensions for all.”