More public pension distortion

In today's Scotsman we have an opinion piece on public service pensions worthy of the Daily Mail on this issue. No statistical or historical twist is wasted to make the central point of the argument that public service pensions are no longer viable.

As I am on holiday I don't intend to waste too much of a beautiful sunny day on this, but some points are so irritating that they need to be answered.

The amount paid out in pensions is not the key test of the viability of any pension scheme. What matters is do you have the assets to cover those pensions. The Scottish LGPS is 95% funded, a figure that most private sector schemes I have also negotiated would be delighted with. Payments are rising because of forced early retirements, due to 35,500 jobs gone in Scottish local government since the crash. Caused incidentally by the very financial service industry the author is a member of. People in glass houses really ought not to throw stones!

This basic error is then statistically manipulated by comparing it to Council Tax income. The Council Tax is only a small and declining element of council funding, in part due to the Council Tax freeze. Of course to compare it with total funding wouldn't produce such a scary figure would it?  

Then we have "pension payments to pensioners now exceeded contributions received. This evolution will require adaptation of the funds’ investment policy as this has arisen approximately five years ahead of the expected time frame". Yes, so what? That again is due to the crash and job losses, but it is covered by past contributions and investments. There are private schemes with no payments coming in, but they still pay out pensions.

Oh, and quoting a right wing think tank in support of your ideology is simply building with straw. Talking about ideology, here we start to get to the meat of the article. Scrap Fair Deal ( actually different agreement in Scotland) to make privatisation much easier. After all we don't want private companies burdened with paying proper pensions do we? The state can pick up the bill for all those poor pensioners while the company makes profits and the bosses pay themselves massive bonus payments. They might even have the cash to pay the authors actuarial firms fees!

Finally we have government and unions behaving like King Canute. I'll save the history lesson for another day, but the schemes were renegotiated in 2008 with cost sharing provisions. Hardly early medieval history! And now we are doing that all over again, not to fund pensions, but to pay for the deficit caused by the financial crash. Spot the real consistent theme here?

Far from King Canute, even the Hutton report shows clearly that the cost of public pensions will fall from 2% of GDP to 1.8% in 2030 and 1.4% in 2060 as a consequence of the 2007/8 reforms. In addition, other recent changes to schemes will reduce costs even more including increased contributions, CPI to RPI and later retirement age.

I could go on, but the golf course is a far more attractive option for me and you the reader!