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Tories signaling end of the current Civil Service Pension Schemes?

2 December 2008

In remarks reported by the Financial Times, Mr Cameron told the Greater Manchester Chamber of Commerce: "We have got to end the apartheid. We are getting into a situation now where pretty much everyone in the private sector has gone to defined contributions and the final salary schemes are closed."

According to a report in the Guardian (page 19, 28 November) “He said MPs should set an example because "we have got to be able to turn around to the rest of the public sector and say that over time it does make sense to move towards defined contribution."

Currently staff in the civil service, indeed staff in the wider public sector, are members of defined benefit schemes i.e. you know what you are going to get out of the scheme.

On the other hand in a defined contribution scheme (sometimes described as a Money Purchase Scheme) you don’t know what you will get out for the defined contributions you put in. Your contributions and that of the employer are invested to produce a fund at retirement.

However the pension available at retirement will depend upon the level of contributions paid, investment returns earned and the cost of purchasing pension at retirement. These things cannot be known in advance. So if the stock market is a low, as it is now, you will get less if you retire than if you retire when the market is higher (even if both cases you made the same level of contributions).

The same Guardian report quotes a Tory spokesman as saying “"We know public sector pensions are a big challenge ... We have always said that moving MPs on to a defined contribution scheme will help in time with public sector pensions ... Clearly any changes would involve extensive discussions with interested parties."

Of course the chances of MPs voting to end their scheme are slim but if a vote is good enough for them why don’t we have a vote on our schemes as well.

In a recent posting a Guardian report is quoted as stating “But the government is probably going to have to think more radically in the spending review, including about the continuation of public-sector pensions in their current form”.

It appears that New labour may review our pensions; the Tories definitely will; so we just need the Lib Dems to jump in to have the hat trick.

In reality the only force on your side is the Union and in the wider public sector the other public sector unions. We want defined benefit schemes; it maybe that after the general election we will have to fight for those schemes.
 

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