Tuesday, October 27, 2015

Lively Public Sector Pension Fringe #Lab15

This report is late but the affordability of public sector pensions schemes keeps coming up. Picture is of me taking part in my latest verbal duel with Michael Johnson (pink shirt on-the-right) on public sector pensions at the CIPFA fringe during the Labour Party conference.

The fringe was chaired by Kevin Schofield from Political Home. The first speaker (not in picture) was the new Shadow Minister for Work and Pensions, Nick Thomas-Symonds MP.  Nick argued the  need to build a new consensus on public sector pension provision and that fairness was top of his agenda. He then had to leave.

Michael is a former Investment Banker, Policy adviser to David Cameron and now Research Fellow at the Centre for Policy Studies. He is, let me say, a somewhat controversial and even provocative figure in the pensions world (and financial matters generally). 

He spoke about public sector pensions being responsible for fostering an "inter-generational injustice" and that they do not exist in the private sector and will not exist in the public sector either in the future. Interestingly he doesn't think you should look at claims of £1.3 trillion in liabilities for public sector pensions schemes. Since no one can agree on how to calculate liabilities. Instead he thinks you should look at the cash flow projections, and it is clear in his view, that they are getting worse and soon they will simply run out of money if nothing is done.

CIPFA speaker, Paul Woolston argued that we need to make some big choices and it is crazy that health is ring fenced but local government budgets are cut.

In the Q&A I challenged Michael about public pensions being unaffordable in particular the Local Government Pension scheme (LGPS) which is a funded scheme. While we are indeed being ripped off by the financial services industry, modern day defined benefit schemes are as sustainable and affordable nowadays as they have ever been. Millions of workers in the private sector still have DB schemes especially directors. Why are brand new DB schemes being opened in South Korea which has amongst the longest life expectancy in the world? The reason why DB provision in the UK private sector has declined is down to the unrealistic and outdated way liabilities are measured and not to do with deficits.

Michael did not accept this argument and claimed that new schemes in Korea cost 28% of wages. He did accept that the retirement age being linked to the State Pension did make public schemes more affordable.

The GMB National Secretary, Brian Strutton, veteran Councillor Dan Filson and feisty UNISON retired member, Moira Owen, all joined in the fun. Brian told Michael that the cash flow of the LGPS was improving not getting worse. Dan was unimpressed with the time given by the panel for the Q&A and Moira pointed out that she had worked long and hard for her pension and that the average LGPS pension was only about £3000 per year.

Michael, of course, was in his element, basking in all the controversy and arguments. 

Hat tip picture Moria.

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