Busting the Myths
10 key facts:
1. Without a single penny more in contributions, the local government pension scheme could pay all its liabilities for twenty years.
2. The NHS pension scheme gets £2bn more in contributions than it pays out in benefits every year. This additional money isn’t stored up for future pensions payments but goes straight to the Treasury to help pay for the bankers’ crisis.
3. Changes negotiated with the previous government have already reduced the value of public sector pensions by 10%. In particular, under the so-called “cap and share” arrangement, the cost of pension contributions for public sector employers was capped, so that future increases in pension costs above a set level would be paid entirely by employees.
4. Research by independent experts such as the Institute for Fiscal Studies (IFS) and the Chartered Institute of Public Finance and Accountancy (CIPFA) has already proved that both pension schemes are affordable and sustainable for the long-term, and that the cost to the taxpayer of public sector pensions has already fallen.
5. The relevant ministers want to increase public sector pensions contributions by 50% for those earning over £15,000. This additional money won’t be used to improve pension schemes for the future – it will go to the Treasury. So, in effect, it will be a tax on those that can ill-afford it.
6. The number of people contributing towards a company pension scheme in the private sector has almost halved since 1991. Two-thirds of private sector employers do not pay a single penny towards their workers’ pensions. This will force millions of workers into poverty in their retirement and the taxpayer will have to pick up the multi-billion pound benefits bill.
7. The average pension for local government workers is around £4,000 a year and £7,000 a year for NHS workers. For most women it’s even less.
8. The bosses of FTSE 100 firms – Britain’s largest companies – have, on average, a final salary pension scheme worth £3.91m. This would result in a pension of £224,121 a year: 23 times bigger than the average occupational pension (£9,568) and 34 times bigger than the average public sector pension (£6,497).
9. Within FTSE 100 firms, ordinary scheme members accrue benefits at a rate of 1/60th to 1/80th, while the standard accrual rate for directors is 1/30th. The accrual rate is the rate at which workers build up pension benefits - the lower the bottom number, the better the pension deal.
10. The most common Normal Retirement Age (NRA) for directors of FTSE 100 firms is 60, with three times as many directors able to retire at 60 than 65. In contrast, the most common NRA for ordinary scheme members is 65, and this is expected to rise further for most public and private sector workers
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