The High Price of Public Sector Pensions
Public sector pensions currently differ from private occupational schemes in two significant respects. Private pensions cannot be drawn on before contributors to them reach a retirement age of 65. Public sector workers can draw their pensions in full as from the age of 60. Second, private pensions are fully funded in that they met entirely from funds created by contributions to them. Public sector pensions are heavily subsidised from general taxation, contributions to them increasingly falling short of their costs.
So concerned has the present government become about the tax liability that public sector pensions impose as they currently stand that it has announced its intention to reduce their costs by increasing the age at which public sector workers may draw a full pension to same age as that at which private sector workers can.
Public sector unions are up in arms at this suggestion and threaten what would amount to a general strike in defence of the current age at which their members may retire on full pension. These unions insist the costs of these pensions will have to met elsewhere.
There are just two ways in which the government can meet the ever mounting costs of public sector pensions without increasing the age at which public sector workers may draw them in full. It can raise taxes or … reduce the size of public services.
It is difficult to see any case for substantial tax increases to enable public sector workers continue to be able to retire on full pension five years sooner than private sector workers can. When the terms of their pensions were originally agreed, no one could remotely have anticipated by how much average longevity would have increased by now and with it the size of the blank cheque the government was signing on behalf of the nation. The public might conceivably agree to higher taxes to enable public sector workers continue to retire before private sector workers, but it is difficult to think they will take kindly to the idea.
Far more likely than any tax increases to meet the costs of public sector pensions will be the only other option government has in face of them. It will have to find the money by making cuts elsewhere in its budget: so public services will be obliged to be cut.
Current public sector workers might not be afraid of the prospect of such cuts, calculating it unlikely they will be adversely affected by any, especially when negotiated voluntary redundancy packages are taken into account. However, if they believe the propaganda of their unions as to how vital to the nation’s health and well-being public services are, especially in the case of those on low incomes, they might well want to think twice about forcing the government to implement such cuts.
Today’s public sector worker is tomorrow’s NHS patient and recipient of other public services.
Sadly, public sector unions will have to wake up to the fact that, just as in the case of lunch, there is no such thing as a free supper before bed-time.