Paddy Tipping campaigns on public sector pension reform

Paddy Tipping pressed the issue with the newly appointed John Hutton recent debate

"I welcome my right hon. Friend to his new post and remind him that public sector pension reform is one of the big issues facing him. Does he accept that the trade unions recognise that change is necessary—indeed, inevitable—but that they are reluctant to discuss the detail and the timetable for work? Given that, will he hold some meetings soon to see whether there is a chance of finding consensus on this real problem?"

The short debate contained little real meat - unsurprisingly John Hutton wanted to resolve the situation satisfactorily, but no detail was gone into.

In the last session Paddy Tipping put forward EDM 579 which sought the annullment of the 2004 amendments to the Local Government Pension Scheme and collected a massive 252 signatures.

I don't know exactly what Paddy Tipping is objecting to in the legislation (which is a very good illustration of why he ought to have his own blog) but this is what I think.

Public pensions are suffering the standard problems of defined-benefit (final salary) schemes - they are getting increasingly expensive, as this news item describes The shortfall in public sector pension schemes is £690bn, far greater than official figures indicate, a leading actuary firm has said.

From my back of envelope calculations: for someone who retires at 60, a standard 1/60th per year final salary scheme is probably worth about a third of their salary - ie if they earn £24,000 then they are getting an extra £8,000 put into their pension in return for £1,600 or so of their own contributions. (Not taking into account any rise in seniority during career, which would increase the pension's value still further). That's how much it is likely cost to fund it, and that's how much it ought to be valued at when comparing salaries with other jobs that don't offer a final salary.

Given the problems of an ageing population, it seems inevitable that the retirement age will need to rise, probably to 70 over the next 40 years, and no financial sleight-of-hand will change this. It would therefore seem sensible to raise the retirement age for public sector workers. That said, increasing the age at which an employee is entitled to retire is clearly a change to their terms of employment, for which they should receive some compensation. Alternatively, the retirement at 60 option could simply be closed to new joiners.