Five million out of 5.7 million public sector employees (88 per cent) have final salary pensions. Meanwhile only 3.6 million out of 22.5 million private sector employees (about 16 per cent) have final salary pensions.
These figures, accourding to the Sunday Telegraph, will be published by the Government Actuary's Department on Thursday. There have been a fall of one million in those in the private sector who are on final salary schemes over the past five years. That is largely the effect of Gordon Brown's tax on dividends received by pension funds which has helped make final salary pension schemes just too expensive for private companies. But what is too expensive for private companies, is not too expensive for taxpayers to pay for.
The civil servant, the teacher and the hospital manager all get relatively luxurious, final salary pensions, courtesy of taxpayers. The MPs and the prime minister get the most luxurious pensions of all.
This is the 'producer interest' at work. Politicians and civil servants create the rules which favour themselves, rather than those they are supposed to be serving. It is easer for public servants to pursue their 'producer interest' than for those who are in private companies. That is a fundamental reason why governments are less efficient in all their activities. They waste money. In this case the waste arises becaue it would be perfectly possible to hire the same public servants at the same wages - or only fractionally higher - without their relatively luxurious pension schemes. Public money is spent which could have been saved.
The taxpayers pay for this waste and these taxpayers include those paying income tax on incomes of a mere £5,000. In other words, people who are very poor pay tax to finance the unnecessarily high pensions of public servants. It is, of course, a scandal. But don't expect the BBC to be outraged. They are public servants. And don't expect politicians to say anything. They are a) public servants and b) don't want to offend the other 5.7 million public servants who are also voters.
All this is without going into another scandal in public servant pensions: the all-too-easy and frequent early retirements in the fire service and several other public services.
Posted by James Bartholomew • Indexed in Media, including BBC bias • Pensions • Waste in public services
Comments (1)
TrackBack (3)
Comments
Warning: file(http://63.247.138.2/~bartholo/randomquotes.dump) [function.file]: failed to open stream: No route to host in /home/bartholo/public_html/archives/2005/06/five_million_ou.php on line 287
Warning: implode() [function.implode]: Bad arguments. in /home/bartholo/public_html/archives/2005/06/five_million_ou.php on line 287
I couldn't agree more. It is a scandal. The following analysis is informative:
Defined benefit (final salary) schemes typically pay out 1/60th of final salary for each year employed, to a maximum of 30/60ths (ie, 50% of final salary). So if you earn a final salary of £60,000, this means that each year spent working gives you an extra £1000 per year in pension.
Assuming an average return on investment of 5%, this equates to an employer's contribution to a defined contribution scheme equivalent to £20,000 per year (33% of salary). Given that most private sector schemes give only around 5% of salary as the employer's contribution, this is a huge difference between the public and private sectors. For comparison, someone on £60,000 in the private sector with a defined contribution scheme would likely receive £3000 from their employer towards their pension pot.
Another way of looking at it is that the public sector employee on £60k is £17,000 per year better off than the private sector employee on the same salary!
Posted by: MQ at June 15, 2005 07:57 PM