WORK LONGER, PAY MORE, GET LESS
This seems to be the message coming form the Hutton Report on Pensions in the Public Sector. Workers in the public sector will now be required to work much longer before retirement, will be expected to make a greater contribution to their pension which instead of being based on the last three years (the final pension scheme) will now be an average of their working life and this will result in them getting much less in pension. Also the Armed forces and the police would have to work for a further ten years and no longer be able to retire at 50 on full pensions. No surprise that people like nurses, firemen, civil servants etc. are feeling miffed.
The Telegraph reports that: “Gordon Brown was warned explicitly that he would cause the death of the final salary pension scheme and cost companies and individuals billions of pounds when he took the knife to the pension system in his first Budget. Confidential documents sent to the Chancellor before he axed the dividend tax credit in 1997 also warned that the worst-hit victims would be the poorest members of society.
The internal Treasury forecasts, released last night under the Freedom of Information Act, state that the changes would "cause a shortfall in existing assets of up to £75 billion" and that "employers would have to contribute about an extra £10 billion a year for the next 10 to 15 years to get pension scheme funding back on track".
His actions were, without doubt, the death knell for the final pension scheme. I was one of many victims of this money grab: when I retired I had a retained pension from one company which had been estimated to produce £750 per annum on an escalating basis. It ultimately produced less than £250 per annum; another scheme was so infinitesimal that I was paid a lump sum which amounted to around £250 instead of any monthly income.
I remember when some of the largest investors were pension funds and they had so much income that they could fully fund pensions into the distant future. Following that first Budget many Final Pension Schemes were no longer viable and, over the course of several years, have subsequently been replaced by a considerably inferior scheme known as “money purchase”.
As a nation we are always being lectured that we should make provision for our “old age” and yet here are the Government taking away benefits which have always been considered part of the remuneration of people like nurses, firemen and civil servants whose incomes have never been top rate so that their retirement will not be as comfortable as they had been led to expect and, having to pay more for their pension, they will have less to save to make a nest egg for retirement.
Please keep the people of Japan in your prayers following the devastating earthquake and the terrifying tsunami.