Public sector pensions to cost taxpayer £10bn a year by 2016: by numbers

Savez-vous la différence enter eux et nous, eux il en parle, nous on joue à l'autruche?

J’ai gardé la photo, car elle était appropriée.

Extrait de: Public sector's 'Madoff-style',  Philip Aldrick, Economics Editor, The Telegraph,  11 Feb 2011

Public sector's 'Madoff-style' pensions pyramid will spark crisis, warns Centre for Policy Studies

Britain's civil servants must be weaned off their gold-plated final salary pensions to avert a "fiscal calamity", a new report into the looming pension crisis has warned.


UK- Public Sector

Public-sector retirement promises have become a "Madoff-style pyramid, now collapsing under the weight of insufficient contributions, rising longevity and an ageing workforce", Michael Johnson said in his report for the Centre for Policy Studies, "Self-sufficiency is the key".

Comme, si on ne le savait pas, ça fait des années on connaît le problème, mais vous connaissez nos politiciens, il ne pense qu’à court terme.

Unless the problem is addressed, Britain faces a "societal division" caused by the gulf between private and public-sector pension provisions, and the "disproportionately high pensions paid to high earners" in the Civil Service.

Without reform, the divisions will be entrenched between the generations, he added, warning of "looming generational inequality [that] manifests itself as a rising tax burden on today's workers, who then save less for their own retirement".

More than three-quarters of civil servants are in a final salary scheme, compared with less than a fifth of private-sector employees, with the taxpayer providing almost 80pc of all public-sector final salary contributions.

In 2009, the state paid £14.9bn towards the £19.3bn cost of the UK's four largest civil service schemes, while staff provided £4.4bn.

By 2016, Mr Johnson added, the taxpayer is likely to be contributing an even larger portion as the state makes up a projected £10.3bn shortfall between total contributions and total payments. "It is a system that is out of control," he said. The total unfunded UK public-sector pension liability is estimated to be up to £1.18 trillion – 80pc of GDP or £47,000 per household.

To build a sustainable system, he urged the Government to begin the process of closing final salary schemes and moving towards defined contribution plans unrelated to salaries and depending on the performance of investments.

Je vous l’ai dit, les régimes de prestations déterminés (closing final salary)
sont un vrai gouffre sans fonds.

He recommended two courses of action:

A "brave" path, phasing in a "watered-down [salary-based scheme] before the introduction of a pure defined contribution framework, perhaps in 2020", or;

·         A "cautious" path, offering staff a "career average" scheme up to a salary cap of £38,000 with defined contribution above that.

·         However, he added that the second proposal, which would help protect lower earners, "is likely to be merely an interim step on the road to a pure defined contribution framework".

The Government is in the process of reviewing public- sector pensions under Lord Hutton, who is expected to report back next month. He is not expected to go as far as Mr Johnson has proposed, indicating instead that staff may be asked to make higher contributions, retire later, and perhaps move to a "career average" salary scheme.

Lord Hutton's changes will build on recent reforms, including the decision to inflation-link pensions to the consumer price index instead of the retail price index, which will shave 15pc from future costs and raise the pension age for newer recruits to 65.

As a result, the cost of paying unfunded public sector pensions is expected to fall from 1.9pc of GDP in 2011 to 1.4pc by 2060. However, Mr Johnson pointed to the spiralling cost of the existing pensions as "robust evidence that the [unfunded schemes] are unsustainable".

Treasury forecasts show the present amount of cash liabilities to be £48.8bn this year. "That is a measure of the cashflow problems for the future," he said. "It shows that current contributions [of £21.1bn] are too low, and don't reflect the scale of the problem coming our way."