Pensions Part 2

Mark Sandford - April 2012
Mensa emblem

In an earlier article published last year, I illustrated the growing divide as regards pension provision in the private and public sectors. This issue has raised its ugly head yet again on several fronts with industrial action being threatened by unions on behalf of public sector workers notably teachers. The mood within the public sector has certainly hardened as the impact of State expenditure cuts now begins to bite.

On March 28th 2012 both university lecturers and teachers marched on the Department of Education in protest at proposed changes to their pensions. Teachers are now being asked to contribute more into their pension schemes with no guarantee at all of a better return. On top of that, the State retirement age has now been raised for both sexes and public sector employees across all sectors will be getting no pay increase at all. Staff within the public sector believe rightly or wrongly that they are being expected to take the brunt of the government's efforts to reduce the structural deficit in the nation's finances. Unions have also become more and more angry over this government's contemptuous attitude to the public sector.

Within the private sector, two unions Unite and Usdaw have finally managed to secure an agreement in a long running dispute over pensions with Unilever. The closure of a final salary scheme triggered off 1 day strikes at 12 sites across the country that produces such household items as Persil and Dove Soap. Apparently after further negotiations, improvements were made to a career average scheme that will apply to all staff. The unions have also secured a promise from Unilever that no further change will be implemented before 2018 and after that date unions would be consulted on any proposed changes.

The campaign group The Taxpayers Alliance has also published a report on local government pension schemes which it believes to be utterly inadequate. About 4.5 million workers are enrolled in the Local Government Pension Scheme, of which 1.8 million are still active contributors. It has taken annual statements of accounts from many local authorities and then applied actuarial estimates to calculate an overall funding position. Government ministers are determined to cut regardless the cost of public pensions which they claim to be unsustainable. Contrast this with the Chancellor's recent tax cut in the Budget to 45p from 50p for those earning over 150,000 a year. Apparently several City Councils have horrendous deficits over 500 million, notably Birmingham and Glasgow.

Central govevernment has to realise that if people are living longer and hopefully working longer too, the State must shoulder some of the burden. Those on low and middle incomes cannot be expected to pay more and more into a pension scheme when salaries and wages are hardly rising at all. Households are struggling generally with costs of necessities going up but wage packets remaining at a standstill. This issue is liable to cause more unrest within the public sector and do not be surprised to see more one day strikes.

(See or

Mark Sandford - Permission granted to freely distribute this article for non-commercial purposes if attributed to Mark Sandford, unedited and copied in full, including this notice.

Members can discuss this and other articles on the economics forum at International Mensa.

About Us

Economania is the website of Mensa's internationally recognised Special Interest Group dedicated to economics, trade and finance.