Wednesday, 28 September 2011

Out with the old...

I want to try and explain, concisely, why I have a problem with public sector pensions.

Well, they are unfair. That is to say, it is unfair if one group of workers get a level of income underwritten by the state where another does not.. simply by virtue of who their employer is. If, say, Vodafone offered a great pension to it's staff, and HM Government agreed to underwrite the liabilities even if Vodafone itself couldn't pay them... well, there would be something of a kerfuffle.

If, by the way, you think that private pensions should be brought up to public sector pension standards then, well, you're a bit of an idiot. Why? Well whilst we could well say that Tesco or Barclays should be able to do this, you might want to have a word with the guy who runs that little shop on the corner and see how he feels about setting up a final-salary pension fund for his staff.. and ensuring that he lives long enough, and remains solvent enough, to ensure it's always properly funded. You could, of course, award him tax-raising powers so that he can, on a level playing field with the government, ensure that his liabilities are met.

But here's the thing... I don't think public sector pensions are necessarily unaffordable. I think that if the state wants to guarantee a level of retirement income for people then, so long as we all vote accordingly for that policy, it's a great thing. I'm suspicious of many things the state does, but looking after old people who've paid into society throughout their lives is fine with me. It's something we should all want to participate in.

But there's the thing. We ALL want to participate in it. If society, the state, is going to agree to provide this awesome benefit, then it should provide it to everyone.. irrespective of their employer.

So.. let us not talk of dragging down public sector workers to shonky private-style pension provisions. Let us not have a really really boring squabble about whether one lot is paid more than the other, or works harder, or is nicer to bunnies. Let us establish a national pension scheme which is open to everyone, and which all employers are required to allow their employees to join. Let's set, as far as we can, the same retirement ages for everyone. Let's cap the amount an individual can get out at a level we're all agreed upon (say, for the sake of brevity here, the average wage). Let's set contribution levels and a strategy for using/investing the contributions with a view to it not needing any direct injection of funds from future taxpayers (though, of course, it may well have invested in assets which future taxpayers benefit from and thusly pay for).

This would create a monster pool of money, and deciding what to do with that would be something of an issue (and, let me be very clear, politicians should have no say in it.. and the whole thing would operate entirely independently of general taxation). But let's gloss over the niggles. Because whilst this would be complex, and expensive, and bloody terrifying.. it would be FAIR. And we can all get together and have ourselves a little vote to decide whether we want to do it.

If not, well close down all the unfunded defined benefit state schemes.. at least for new members.. and let's all move on in the same shit leaky boat.

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