Anthony Hilton: Public sector fights back on pensions

No-one these days has a good word to say about public sector pensions.

Anthony Hilton
Anthony Hilton

Sorry, let me correct that. No-one in the private sector has a good word to say about private sector pensions. But in the public sector something has stirred. For years this section of the industry has stayed silent while the attacks on it have become more vigorous. Now, some practitioners are beginning to find a voice. They want to roll back the perception that they are all fat cats with index-linked pensions living off the taxpayer.

That may be more of a challenge than they think, but they have to try. Politicians of all three parties now seem reconciled to the need for substantial cuts in public spending. Thus far none of them has gone out on a limb to defend public sector pensions. It is much more likely they will foster the perception that billions can be saved almost without pain by taking an axe to this area.

The TUC is clearly alarmed and recently delivered a tough message. The private sector and politicians should not think the public sector is a soft touch, it said. Their pensions were part of their contract of employment; arbitrarily stripping these away could provoke industrial and possibly social unrest.

Mike Taylor, chief executive of the London Pensions Fund Authority, feels so strongly that a time has come to fight back that his organisation has hired Penrose, the financial PR firm. He also used his members' annual meeting to try out a defence of the system that he plans to repeat at the annual conference of the National Association of Pension Funds in October.

Two of his points in particular struck home. The first was that local authority funds like his were not financed by the taxpayer, but by using contributions from employers and members to build up an investment fund. Second, the average pension paid to his members was small - the median being less than £5,000 a year. Only a tiny handful had pensions over £20,000. His sign-off was also to the point. The public sector employees who did not contribute to their pensions included nurses, police and teachers. If these are the groups politicians have in their sights, should they not say so?

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