Wednesday, 2 November 2011

UK Pension Tax

For twenty years, successive governments have raped and pillaged private pensions, allowing companies 'pension holidays' in the good times, and wholesale closure of schemes in the bad times. Now they want to use their success at impoverishing private pensioners as a stick to beat public sector pensioners with.

As ever, the government's case is a sham, based on half truths, and carefully forgetting their own part in the public sector pension 'crisis'.

But on closer examination, the government's role is clear.

Take two public sector pensions; the teachers, and the NHS workers. Similar schemes, both built in the day that a fair pension was taken for granted, and a generous public sector pension was the one 'perk' of an underpaid profession.

Currently, the teachers pension scheme is not in deficit at all; forcing the teachers to pay more to get less is no more or less than a tax. But the health service scheme is indeed in deficit, and appears to have a weak case in resisting the changes proposed. But why is it in deficit?

In education, some small areas have been privatised; cleaning and cooking, perhaps the grounds too. But in total, a small percentage of jobs have been put out to tender, and so the current scheme members can adequately meet the needs of the pensioner predecessors - as the scheme intended.

But in the health service, legions of staff have been privatised, with new joiners outside the pension scheme; cleaners, porters, laundry staff, even some senior managers, now contracted out in tax-avoiding private companies. In total, while the NHS still has many thousands of staff, the proportion allowed to enter the pension scheme has markedly reduced, leaving a far smaller number to pay the pensions of those who retired before their jobs disappeared.The current staff contributions cannot possibly bear that load; a load created by the government and forced on the NHS, against consistent - if unsuccessful - union arguments.

Why should the workers be forced to pay this bill, a bill created wholly by the government? If the DoH did their sums, they would almost certainly find that those occupational groups within the pension scheme were self-funding; it's the pensions of those groups no longer paying in that is crippling the system.

Few would argue, in isolation, against a delayed retirement age; but as staff can only ever reach 50% of their final salary, once that point was reached, they would no longer be profiting from the employer contribution anyway. And there's the rub; the government has been happy to confuse their dual roles - employer and government. The previous government had already made one raid on pubic sector pensions, with the result that all new employees already have 65, not 60 as their retirement age. If the government had stolen private sector pensions (rather than simply encouraging employers to), there would have been riots in the city, as well as private sector strikes. So why is it OK to steal public sector pensions, just because it's the only perk they have left?



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