‘Gold-plated’

Put the term ‘gold-plated’ into the search box on the Daily Mail website and you get 601 results, the vast majority of which of results of course concern pensions, public sector pensions. For example, stories like this: ‘Taxpayers must foot MASSIVE gold-plated pensions bill as Darling’s report reveals ‘ultimate stealth tax” which contain statements like this:

Shocking new figures reveal the ‘rocketing’ cost, which must be paid in full by taxpayers, of paying the gold-plated pensions of Britain’s 5.8million public sector workers.

But are the 5.8million public sector workers really going to get ‘gold-plated’ pensions? Lord Hutton, leading the independent commission conducting the public pensions review, according to the BBC has made it clear that the term is not appropriate:

Lord Hutton rejected the frequently made claim that public sector pensions are gold-plated.

He pointed out that the average pension in payment was currently £7,800 a year, which he described as modest, not excessive.

The BBC report also has some interesting figures for the Daily Mail to consider given how much hatred they throw at civil servants: the average current pension payment for civil servants is just £6,200, whilst local government employees languish at the bottom, averaging just £4,044. Police officers fare best, averaging £14,000 whilst fire-fighters aren’t far behind at £12,000. Teachers on the other hand who must work longer than both only manage to average £10,000.

The Daily Mail obsession with ‘gold-plated’ pensions in the public sector is only ever evidenced with the salaries of MPs or leaders within the civil service and is simply not applicable to the vast majority of workers in the public sector. It is rather like looking at what CEOs retire on and using that as evidence to suggest that all of the workers in the company must also be receiving massive pensions. It is, in short, complete nonsense.

I look forward to seeing how the Daily Mail covers this report. The BBC point out that the commission is considering the following long-term changes:

  • changing the public service schemes from a final-salary to a career-average structure
  • copying the Swedish and Dutch examples of defined-contribution schemes
  • raising normal pension ages beyond their current levels – typically 65 – as longevity increases.

The BBC also point out that George Osborne said that public sector pensions as they stand are ‘unsustainable’. However, they also point out the following:

The interim report points out that the long-term cost of funding public service schemes has already been drastically reduced.

The recent decision to uprate pensions in line with the consumer prices index (CPI) rather than the retail prices index (RPI) has shaved 15% from the cost of the schemes.

Taken together with other changes in the past few years, such as raising the pension age to 65 for newer recruits, the schemes now cost 25% less to fund than they did a few years ago.

“All these past reforms, the current pay freeze and planned workforce reductions will reduce the future cost of pensions,” the report said.

“The gross cost of paying unfunded public sector pensions is expected to fall from 1.9% of GDP in 2010-11 to 1.4% of GDP by 2060.

It will be interesting (and rather too easy to predict I fear) what parts the Daily Mail will choose to include and what to leave out. One final point that I think is extremely important to mention is this comment from Lord Hutton:

he rejected the idea put forward by employers’ organisations that because private sector pension provision was poor by comparison, public sector pensions should be dragged down to the same level.

“I have rejected a race for the bottom,” he said.

It is the ‘race to the bottom’ that the Daily Mail fully supports every time it tries to ensure public sector workers suffer the miserable retirement that so many in the private sector do. What this interim report suggests, if anything, is that a lot of public sector pensions are already there.

4 thoughts on “‘Gold-plated’

  1. You may also be keen to know the civil service pension issue has been thrown out of court THREE times. Judges rules each time the contracts given are non negotiable. Funny isn’t it, how the government says it can’t stop bankers bonus’ over contracts yet can rip up the contracts of the entire civil service.

    Incidentally the government now is trying to pass legislation to undermine the existing contracts thus making it unnecessary to go to court again if the fourth appeal fails.

    I know this as my father is in the civil service and this whole thing is making him very stressed.

  2. Is starting a response ‘I’m not defending the Mail but…’ as good as saying ‘I’m not racist but..’?

    I suspect so, and therefore I will not.

    I will say this, however, that the understading of this particular term seems to be different depending on who you talk to. Many will, quite rightly, point out that most public sector pensions are perfectly modest in value, and therefore cannot be called ‘gold plated’. However, the term more properly refers to the fact that public sector pensions are guaranteed, as they are fixed in value and underwritten by the state – as oppose to private schemes where retirees are at the whim of the markets both as they build up their funds and as they convert them to annuities.

    So, for example, all those retiring in recent years with public sector pensions (and private definied benefit pensions) have got the amounts that they expected to get. Conversely, people retiring with definied contribution schemes have suffered greatly as asset prices and annuity rates have plumetted.

    To me, that is why public sector pensions can rightly be described as ‘gold plated’.

    The actual value of a pension is another matter entirely. If someone on a final salary scheme gets a small pension then it’s down to the level of earnings they had in work, and their length of service. It doesn’t mean that they did not have an excellent scheme – and their pension is likely to be better than someone with a similar career, who made similar contributions, but had a definied contribution pension.

    There is a marked inequality between the two types of pension, and whilst a large stable corporation could feasibly match the public sector, most private organisations could not. It’s very easy for people to say that we should improve private pensions rather than worsen public ones.. but try telling the guy in the local shop that he needs to set up a final salary pension scheme for his assistant.

    So there is an issue here. Either public sector employees accept arrangements comparable to their private sector neighbours, or the state agrees to maintain and underwrite final salary schemes for everyone.

    This debate just seems to be ideologists and the vested interests on each side shouting at each other and spinning/distorting to their agendas. The Mail is as bad as ever, but the opponents aren’t much better.

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