The new Government intends to set up an allegedly "independent" Commission investigating the long term affordability of public sector schemes. The intention is to agree a settlement that is fair for all tax payers as well as for public servants. As of today UNISON does not have any details but has argued that the:-

• The terms and reference must be balanced and ensure that pensions are not just affordable but adequate to provide decent pensions in retirement for public sector workers.

• The composition of the Commission must include representatives of scheme members including Trade Unions. Trade Unions delivered an agreement with the last Government to contain pension costs through cost share and increasing retirement ages for new starters. The agreements already reached should contain cost and be fair to the tax payer.

• A Commission should not be set up just simply to compare public and private sector pensions. The private sector continues to fail its workers on pensions, the defined contribution schemes that are being set up to replace defined benefit schemes are wholly inadequate and will lead most of the workforce to be totally reliant on the State in the future.

• The Commission must recognise that the vast majority of public sector workers are low paid part time and mainly women. In the Local Government Pension Scheme (LGPS) over half the pensions in payment are under £3,000 per annum and the average pension paid to women is only £2,800 per annum. In the NHS Pension Scheme over half of women pensioners receive a pension of

less £3,500 per annum.

• This is not gold plated it simply allows low paid workers the chance of saving for retirement and not being totally reliant on the tax payer.

Is there an ever increasing black hole in Public Service Pension Schemes?

• No, some commentators have their own agenda in exaggerating the problems of costs in the public sector. Most of the figures quoted in the Press are meaningless telephone numbers; they should be well aware that the pension scheme does not suddenly need to produce a cheque to pay its entire deficit unless the employer closes the scheme or goes bust. Precisely because public sector schemes can take a long term view, the cost is likely to be sustainable.

• The LGPS is funded and at the moment income from investments and contributions exceed expenditure on benefits by £4 billion to £5 billion a year that is being paid into the funds to pay for the future.

• Outside commentators often quote any contribution rate they like to support their theories but the actual bench mark employer contribution rate in the LGPS for future service is currently 13.6% even if we take into account the cost of the past service deficits the contribution rate is only 17.4% not the 30% often quoted by commentators.

• Many of the employers who are paying a higher overall contribution to the scheme are doing so because of past underfunding and contribution holidays.

• Like all pension provision the cost of providing pensions that members can live on may continue to go up in the future but the LGPS funds in particular are protected by the spread of different kind of investments. It is not expected that employer costs will rocket at the last valuation date which was 1 April 2010.

Most employers can spread any deficit over well over 20 years because of the statutory nature of the schemes.

• The NHS Pension Scheme despite the fact that it does not have an actual real fund is also cash rich. Last year in England & Wales income from contributions exceeded expenditure on pensions by over £2 billion.

• Despite the fact that it does not have a fund it is still valued on the basis of cost providing the benefits in the future, and employee/employer contributions are calculated accordingly.

• Under cost share the employer contribution is limited to a maximum of 14% so there is no runaway costs. Over the last 10 years in England & Wales contributions to the NHS Pension Scheme have exceeded £46 ½ billion of which over £16 ½ billion were paid by the employees.

• Members of pay As you Go Scheme like the NHSPS far from being a burden on the Tax payer have actually kept taxes down as Successive Governments have spent the money they received in contributions on other things rather than putting it in a fund. So if the Government wants to do away with PASG schemes then it should pay back all the money that was paid as contributions and it just spent!

Is there Pensions apartheid between the Private and Public Sector?

• Why do commentators use the word apartheid (a racist regime that oppressed millions) when talking about the attempts of millions of workers to save for their retirement? Well if you want to destroy something you give it a nasty emotive word. And those politicians and commentators that use it are not interested in the truth but their own agenda and prejudice.

• The real divide is between the fat cats in the private sector that vote each other huge pensions while trying to cut the pensions of their staff. It is very sad that in the private sector increasing proportion of the workers are being forced to join pension arrangements that will not provide adequate benefits when they retire as employers use the excuse of a recession to cut costs. The private sector increasingly fails its workforce over 50% of employer pay nothing at all!

Conclusion

• Simply cutting public service benefits for the future will mean that an increasing proportion of the workforce will become wholly reliant on the tax payer. It is difficult to see how this can help anyone. It certainly will not save much money!

• The Commission should really be looking at all pensions to ensure adequate pension provision in the private as well as the public sector. It cannot be allowed to be just an excuse for a race to the bottom.

• UNISON undertook research which shows that if the LGPS did not exist then the tax payer would be paying at least £2 billion a year in lost revenue and increase means tested benefit payments and this has been updated

• UNISON has produced jointly with other unions leaflets busting the myths of the attacks on Public Sector Pension Schemes that on the UNISON Pension website and have been distributed to Branches. UNISON’s Pension Unit has produced presentations and run regional road shows defending the scheme.

• Public Service schemes whether they have funds like the LGPS or Pay as you go like the NHSPS are both sustainable because of the reforms that have already been undertaken and the work that will continue to contain costs

through cost share.

• We live in challenging times the cost of all pensions is going up because life expectancy is increasing which means a lot of work is being undertaken on how schemes can deliver and remain affordable but the key word should be adequacy. At the moment Public Service Schemes are fit for purpose because they allow most workers to save for their retirement and get a pension that is above the poverty line. A pension schemes that is cut back to a point where it cannot provide an adequate pension will be an irrelevance even if it is affordable!