Pensionsbill
Reader David Donaldson is correct but even he might have understated the cost of public sector pensions (Letters, 2 February). The Schools Minister in England, Nick Gibb, has written that local authorities pay 23 per cent of their classroom teachers’ salaries (which he says are £39,500 on average) into their defined-benefit pension scheme.
In October 2021 the IEA (Institute of Economic Affairs) published a paper showing that the government’s reported headline cost (30.4 per cent of salaries) of public sector pensions is “based on an arbitrary assumption of investment returns (ie a discretionary interest rate)” whereas the “true cost, declared deep in its pension accounts, was 62.2 per cent or a difference of £57 billion”.
In 2015 the director of resources in Coventry City warned that by 2019 council pensions would cost no less than one-third of our council tax. That has probably not changed significantly since then; and as Mr Donaldson wrote, the total net public sector unfunded pensions liability is around £2 trillion, similar to our official national debt and close to our annual GDP. Including the £5tn of unfunded state pension obligations gives a total of over £7tn, and rising with longer lifespans, or over £100,000 for every man, woman and child in the UK, to be paid by our children and grandchildren and theirs.
That is one reason why after Covid declined and Vladimir Putin waged war, the prime minister – whether Johnson, Truss or Sunak – in anticipation of the foreseeable wage claims, should have spoken to the nation to make clear how precarious the state of the UK is, and has been since the 2008 bankers’ debacle, to try to preempt at least the more excessive demands.
It is also why, as was obvious even well before 2008, all public sector pension schemes should have had their accrued benefits to date crystalised, and from then been converted into defined contribution schemes like the great majority of the private sector has had to do. Likewise, all benefits, holidays, sick pay and pension entitlements should be on-the-table in current negotiations; for example, why not trade off higher wage settlements now for immediate changes to unfunded pension schemes?
JOHN BIRKETT
St Andrews