Tory pension plan? Cuts!

Instead of levelling up, the Tories want to level down – the pensions of public sector workers will be cut, using the defence that private sector workers have less generous pensions. Would it not be a better idea to ensure that every worker has a decent pension in retirement?

The FT reports:

Cameron hints at phasing out public sector pensions
By Andrew Bounds, Alex Barker and Nicholas Timmins
Published: November 26 2008 23:32 | Last updated: November 26 2008 23:32

Generous final salary public sector pensions would be phased out by an incoming Conservative government, David Cameron has signalled, in comments that could presage a huge battle with up to 5m NHS staff, teachers, civil servants and local government officers.

The Conservative leader has told businessmen that he wanted to switch public sector workers away from final salary schemes and into money purchase – or defined contribution – schemes.

The issue has become a hugely charged one in recent months as private sector workers face the threat of paying ever more in tax to support generous public pension schemes at a time when their own final salary schemes are being scrapped or scaled back.

The Conservative leader told a meeting of the Greater Manchester chamber of commerce earlier this week that “my vision over time is to move increasingly towards defined contribution rather than final salary schemes” for the public sector.

“We have got to end the apartheid in pensions,” he said, where growing numbers in the private sector rely on, usually much less generous, defined contribution pensions but public employees still enjoy final salary schemes largely paid for by the taxpayer.

He accused the government – which recently introduced relatively minor reforms expected to save £13bn over 20 years on a total liability that the Treasury puts at about £650bn – of being “remarkably feeble” on the issue.

Any such move would almost certainly cost money in the short term, even though there should be substantial savings later. However, defenders of the idea say that the Treasury is facing a 40 per cent increase in the cost of public sector pensions to 1.4 per cent of national income in 20 years’ time, according to the Pensions Policy Institute.

But Mr Cameron’s argument brought a furious reaction from the unions. Brendan Barber, the TUC general secretary, said the news would come “like a bolt from the blue to millions of hard working public servants”.

Both Unison and PCS, the biggest health and civil service unions, said that they would oppose any such move. Dave Prentis, general secretary of Unison, said that, at £7,000 a year, the average public sector pension was far from generous.

Mr Cameron’s office said last night that the Conservative leader – whose comments came in answer to questions from the floor after his speech – was merely outlining “the direction of travel”. The party has not yet “ruled any option in or out”, a spokesman said.

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