These are not good times for the local government worker. But yesterday was tough.
At 8am I stood by my wireless like a child awaiting the football scores on a Saturday afternoon: The reason? the release of Lord Hutton’s interim review of public sector pensions which for some reason was held until from public consumption until 8am (does Lord Hutton need an extra lie in now he’s no longer a Government minister?)
Needless to say the results were as anticipated!
And then at 11:30am my colleagues and I trekked off to the local education centre where the corporate directors gave us first sight of the new structure and detailed how the redundancy process will work.
I’ve said it once I’ll say it again:
We’ve discussed the whole redundancy thing before and will do so again over the coming months (incidentally on the topic of redundancy do check out this well written, heart-felt and slightly wry take on the redundancy situation from someone who has already been told he is being made redundant; it comes recommended) but today I think it is worth focusing a little on the issue of pensions.
First things first: whilst today was a bad day for local government pensions the people I work with took it very well. I think there are three reasons for this:
1) The Government has done a really good job of preparing the ground on these issues; people seem to accept that change is coming and are willing to put up with cuts as long as they seem fair. The initial reporting of the Hutton report seemed to reflect this general principle.
2) The basic principles of working until we are 65 or more is not exactly revolutionary (changes to the State pension age make it almost mandatory) and changes to the way the final salary aspect is calculated are quite complicated for normal staff to understand. Hence the lack of outrage when the Chancellor changed the uprate from RPI to CPI in his emergency budget.
3) A surprisingly large amount of people know little, and care less, about their pensions. 2/3rds of private sector staff don’t pay into a pension fund. I assume that the numbers would be similar in the public sector were it not for the generous subsidies and persuasion attached to the public schemes. People show amazing levels of apathy about something so crucial to their lives.
I know this isn’t worth much but here’s my take on it.
Firstly, local government pensions should not be paid until the state pension age; whatever that is. i.e. if the State pension is paid at 68 so should the Local Government Scheme.
Secondly, we should not compare the local government scheme to the others in the rest of the public sector. It is fully funded and therefore will pay for itself. If local government can survive the next ten years as the baby boomers retire it should be sustainable. It does draw on the ‘tax-payers dollars’ but not to the same extent that the other schemes do as unfunded liabilities.
Thirdly, it is possible to continue with a defined benefit scheme. But, and this is a big but, the benefits need to relate to the amount of money put into the scheme. The days of giving huge and disproportionate pensions to Chief Execs and other similar big-wigs when their contributions are only slightly larger than others with half the pension pot have to end. At the moment the pension funds for the most wealthy local government pensioners are paid for by the poorest which is nothing short of plain wrong.
My defined benefit scheme would be based on contribution levels, years service and to a certain extent salaries but there would be bands for payments and the current disparity would be stopped.
Hutton has done us in Local Government a deep service today; I might have said ouch! and that’s fair as we are losing some benefits but if we can get our pensions onto a fair and equal footing and make them sustainable for the long term then this report might turn out to be an important turning point that will benefit us all.
PS. It is absolutely outrageous that civil servants only pay 2-3.5% of their salary towards an unfunded pension scheme… Pure ridiculous! And the Government should sort that out first before they start preaching to Local Government with it’s funded scheme.