Pension Divide Grows

by Dr. Ros Altmann

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The figures just released by the Office for National Statistics (ONS) highlight, once again, the growing divide between private and public sector pension provision.

contribution arrangements, the public sector has remained immune. While the numbers of workers in private sector schemes is falling, the numbers in public sector schemes is still rising.

The ONS figures show that, in 2008, there were just 2.6 million private sector workers contributing into defined benefit schemes, which is 100,000 fewer than in 2007 and less than half the number for 2000.

By contrast, there were 6.3million public sector workers contributing into defined benefit pension schemes in 2008, up from 6.1million in 2007.

In other words, public sector workers are building up more generous pensions than those available to private sector workers. Furthermore, the state pension will be increasingly important for private sector workers, but it is becoming less generous as state pension age rises. However, public sector workers will still receive their occupational pensions from the age that their scheme is contracted to pay it, therefore they will receive taxpayer-funded pensions much earlier than private sector workers in future.

Worryingly, no money has been put aside to pay for most public sector pensions in future. We need an urgent independent assessment of the costs of taxpayer-funded pension provision and the disparity between taxpayer spending on private and public pensions. There is a significant risk of social unrest, as taxpayer resources are increasingly diverted to focus on pension provision for just one group, while private sector workers’ pension prospects dwindle.

So far, all we have had is vague assurances that the costs of public sector pensions are ‘fully affordable’ and that there really is no problem. If this is true, let’s have an independent assessment to prove it. Are the Government’s figures reliable? Or are we storing up trouble for the future because the people who would need to take the decision to make changes have a vested interest in maintaining the status quo?!