A clever move on pensions

The trade unions’ apparent willingness to compromise on the emotive issue of public sector pensions could well turn out to be a master stroke as the Government grapples with how to reduce its long-term liabilities on retirement.
Both the GMB and Unison have sent out signals that they may be prepared to accept a local government pension scheme linked to employees’ career earnings rather than the current final salary.
The Local Government Pension Scheme (LGPS), being funded by staff and employers is not such a bottomless pit as unfunded schemes like the civil service and the NHS.
Contrary to some reports, the typical pension is £4,000 a year, reflecting the fact that most of the local government workforce is modestly paid and increasingly part-time.
It is true, however, that a small proportion of senior staff retire on extremely good pensions and that in the recent past, many council executives have been managed out of their authorities on very generous early retirement packages. Being a final salary scheme, the LGPS has potentially huge liabilities, and the workforce, as in the private sector, is living longer.
It is also unfair that while private sector final salary schemes have almost entirely dried up, the public sector continues to enjoy guaranteed final benefits underwritten by the taxpayer.
Furthermore, with the retirement age sensibly, if belatedly, rising to reflect the fact that we are all living longer, the LGPS, too, needs to increase its own retirement age.
Nonetheless, the idea that local government staff should also be impoverished in old age just so they can look the private sector in the eye makes no sense either. It is not their fault that private sector employers have withdrawn from open-ended pension commitments.
The reality is that the current baby-boomer generation has pulled up the drawbridge behind it by declining to fund the next generation’s pensions.
The task of government is to protect pensioners as best it can, public or private. The unions’ offer to accept a career-based scheme should help persuade ministers the LGPS can, and should maintain its commitments to provide a decent pension for staff.
Michael Burton, Editor, The MJ