Defending public sector pensions

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Defending public sector pensions | ToUChstone blog: A public policy blog from the TUC.

Common sense from the TUC, inclduing:

Particularly strange is the call to replace unfunded pay-as-you-go public sector schemes with defined contribution schemes. This would be immensely expensive for decades. At the moment contributions made by public sector employees and employers all go to paying pensions of those who have already retired. Introduce DC and the tax payer has to start to fund the whole of current pensions in payment while contributions are diverted to building up a fund to pay future pensions.

This would give us the absurdity of the state paying a fund manager to take these contributions and lend at least part of them back to the government. Not only would the government have to pay interest on this, but it would need to borrow other money to make up the sudden big hole in public finances caused by the diversion of pension contributions into a DC fund.

Public services provide the glue that holds a civilised society together. They are inevitably labour intensive, and paying their staff properly (which includes a pension) will not be cheap. But this does not mean that they are unaffordable. Nor is the solution to the private sector pensions gap an equality of misery, where every retreat from a decent private sector pension is matched by an equivalent public sector cut. Instead we should be levelling up, with decent pensions for all.