TUC explodes public sector pension myths

The claims by business groups, right wing pressure groups and opposition politicians that public sector pensions are unaffordable, out of control and produce easy immediate public expenditure savings are all myths, according to a new TUC briefing.

Critics who say that public sector pensions are unaffordable or out of control often misrepresent the figures by presenting pension commitments that go decades into the future as an enormous final demand bill that has to be paid all in one go, says the TUC.

The truth is that public sector pensions now cost around 1.5 per cent of GDP and while this is forecast to slowly rise to 2.0 per cent over the next twenty years it then falls slightly. Public sector pensions cost less than state pensions and long term care, which are also set to increase as the population ages.

Nor are there easy quick savings from public sector pension changes, says the TUC. The cost of pensions in payment depends on the pensions already built up by thousands of former public sector staff. Cutting these pensions is of doubtful legality, and in any case all political parties have said that they will respect these accrued benefits.

The TUC briefing says that moving to a funded defined contribution pension for public sector staff would cost a huge amount of money and not produce savings for decades. Tax payers would immediately have to pay for all public sector pensions in payment as member and employer contributions would be used to build up the future pensions of current staff. These contributions currently pay for pensions in payment.

Fat-cat pensions in the public sector are a myth, says the TUC. Unlike in Britain's boardrooms, top public servants are all members of the same pension scheme as other staff. The majority of public sector pensioners receive a modest pension of less than £5,000 a year. The average local government pension is just £4,000 a year and half the women on NHS pensions get less than £3,500 a year.

The briefing highlights recent reforms in public service pensions. Almost all new staff will have a normal retirement age of 65, just like many existing public sector staff.

TUC General Secretary Brendan Barber said: 'Many private sector employers have cut or abandoned decent pensions for their staff. The result is that many people at work today will face a big drop in their living standards when they retire.

'Now employer groups and opposition politicians are saying that public sector pensions should be levelled down so that Britain's nurses, teachers and other vital public sector staff should face the same hardship when they retire. Each day seems to bring new dodgy statistics and scaremongering about the cost of public sector pensions, along with bogus claims that there are easy public spending cuts to be had.

'The public sector is rightly a big employer and giving its staff a decent pension - as all employers should - does not come free. But the costs of public sector pensions are affordable, they are not out of control and far from paying out fat cat sums the majority of public sector pensions are under £5,000 a year. Nor are they unreformed, with big changes in almost every scheme to help cope with longer lives.

'There are a lot of public sector staff, many more family members who depend on their future pension and many public sector pensioners. They are unlikely to vote for cuts to their pension.'