Your questions answered - Week Three - Public Sector Pensions

22.06.10 - Helen Symons

What should be the future of public sector pensions? Would a future Labour Government led by you stand by the agreement reached between the TUC and the Labour Government in April of this year and commit to provide 'good quality, index-linked, sustainable, defined benefit pensions' for public sector workers?

Diane Abbott:

A large number of my constituents work in the public sector The idea that they should have to contribute more to their pensions because of a deficit caused by bankers is ludicrous.

We should not be hitting as many people as we can with these cuts, which is what the coalition seems to be doing. Public sector workers traditionally earn lower wages than those in the private sector and often good quality pension schemes are their ‘bonuses’.

The coalition cuts are hitting ordinary people the hardest. When David Cameron says our way of life must change, he means our way of life not his. It is unfair that we should be taking money from the pockets of the poorest people to appease private sector workers in the City.

The actual cost of public sector pensions to taxpayers will not rise, as the coalition government is suggesting. Several trade unions have backed this and suggested the government needs to look long term rather than drastic cuts in the short term.

As leader of the Labour Party, I would stick by our promise to provide sustainable public sector pensions. In fact, I would reconsider the cuts altogether. Instead I would look at increasing tax for high earners as a way of evening out the playing field.

Labour lost out at the polls because people thought we had stopped listening to them. These cuts suggest the coalition might also be in danger of losing touch with the ordinary man and woman. This is a lesson they may have to learn the hard way, as Labour had to.

Ed Balls:

Britain’s public service workers will have been shocked at the sudden review of their pensions announced on Sunday, especially since Cameron and Clegg have repeatedly said they want to target public sector pensions for cuts.

It is wrong for the new government to pre-empt this review, and to restore some faith in its independence, the commission must at least have a proper trade union voice.

I am right behind Dave Prentis' call last week to stand up for public sector workers’ pensions. The picture of 10 million public servants retiring into shameless luxury is a media myth - the GMB calculates the average pension in local government is just £77 a week dropping to £50 for women. Moreover pensions are for the long term and should not be based on short-term share prices.

Yes we are all living longer. But Labour and the trade unions have already acted since 2005 to keep public sector pensions affordable for the future. The NHS, civil service and teachers’ schemes are still based on final salary but now have a ceiling on taxpayer contributions. And for years employers like the Post Office took ‘contribution holidays’.

Teachers, nurses, postal workers, police officers, local government staff and other workers who have dedicated their lives to public service deserve to retire in dignity. We all rely on their efforts.

So the Tory/ Liberal attacks on public sector pensions are hypocritical, unfair and unwarranted – at worst they are an excuse for cuts - and I will fight them tooth and nail.

Andy Burnham:

Decent pensions for public sector workers are an important recognition of the vital work that public servants do. It is insulting for the Government to infer that all public sector pensions are ‘gold plated’. What they don’t say is that the vast majority of those working in the public sector provide vital services, for far lower wages than the few headline cases of those who earn more than the Prime Minister. What they also won’t tell you is that whilst telling us that schemes for the people who deliver our health services, teach our children and collect our rubbish are ‘unaffordable’, that they’ve significantly increased the pensions bill to provide for those who work in Downing Street.

Pensions are going to come under increasing pressure, and will start to cost a lot more over the next five years. However, my response wouldn’t be to deny access to high quality pension schemes, but to work with public sector unions to see how we can tackle the problem together. With a report this month from Age UK showing that the wealthiest in society benefit disproportionately from the tax relief given to private pension schemes, those schemes must also be considered within my review. It wouldn’t be honest to say that I don’t think anything needs to change. However, change should start at the top, with the highest earners in the public sector having to step up their contributions. Once changes to ensure that the highest earners are paying more have been implemented, then it may be necessary to see what else needs to change, in consultation with the unions. There may be a need to increase employee contributions across the board, payment periods may need to increase and there might have to be a review at the rate at which pensions are paid out – but I will campaign for decent, index linked, final salary schemes to remain in the public sector.

David Miliband:

We should stand up for good public sector pensions and good privates sector pensions. My priority is tackling pensioner poverty and enhancing pension provision in our country, not engaging in a race to the bottom – and Labour’s manifesto is the right place to start.

According to the National Audit Office, most pensions paid to former NHS and civil service staff are worth less than £110 a week. A quarter of former health workers get less than £40 a week. By contrast, fewer than 0.2 per cent of teacher pensioners, 1.8 per cent of civil service pensioners and 2.5 per cent of NHS pensioners get pensions of more than £40,000 a year. When the Tories seek to undermine public sector pensions, we need to remind people that they would end up targeting many formerly low paid workers.

Second, cost. There has been a two per cent increase in the average pension in payment since the turn of the century. Ironically, one of the reasons the Office for Budget Responsibility recently projected an increase in the net cost of public sector pensions is because of the negative impact of the planned public sector pay freeze on employee pension contributions.

The most pressing problem with pension provision in this country is that nearly two-thirds of private sector workers have no employer backed pension scheme at all. It is estimated that 7 million workers are not saving enough for retirement, with 750,000 employers in the private sector still not operating an occupational pension scheme.

Labour’s pension reforms addressed this problem – and any government delay to our plans for workplace pensions, with compulsory employer contributions, would be a massive hit to the future of British pension provision, especially amongst the low paid. After all, the real ‘pensions apartheid’ is not between the public and private sector, but between low paid workers with no pension coverage and high paid workers who have taken the lion’s share of the generous tax breaks on pension contributions.

Following the announcement of a review, the government should commit to not making any changes to public sector pensions without consensus, including with the relevant trade unions. This was an essential part of Labour’s pension reforms, through both the Turner process and the measures already agreed which will increase contributions to public sector pensions by 1bn a year from 2012/13.

Ed Miliband:

We owe a debt of thanks to our public sector workforce who are there for us every day of the year, providing some of the most vital services on which families across the country rely. It’s not just pensions that the Tories and Liberals are planning to cut, its also public sector pay and the cuts they are demanding risk bringing vital public services to their knees. They will hit those who work in the public sector and those who rely on public services. It is vital that Labour commits itself to fight on the side of the public sector against the savage and unfair cuts being pushed through by the Tories and Liberals.

Of course I stand by the agreement we reached with the TUC earlier this year. It is a fair way forward, protecting the pensions which public sector workers have worked hard for and ensuring they are sustainable in the long-term and I will stand by it just as I stand by our public sector workers.