The number of retired public sector workers receiving pensions of more than £100,000 per annum has more than doubled since 2011, according to new research from the Intergenerational Foundation (IF) published in September 2014. In total, more than 395 high ranking public sector retirees now enjoy annual pensions of more than £100,000 compared to 148 people in 2011.
The research identifies that the number of public sector retirees receiving pensions of more than £50,000 a year has also nearly doubled during the same period, rising from 12,082 to 21,983. Those people on pensions of more than the average wage of £27,000 now total 108,410, compared to 78,000 in 2011 – up more than one third in just three years.
Angus Hanton, IF Co-founder, commented:
“These figures illustrate that the number of high flying public sector retirees on gold plated final salary pensions is increasing alarmingly, and this is at the expense of younger taxpayers. Welcome gains in longevity, combined with a demographic bulge coming up to retirement, have not been adequately addressed by policy makers. Hutton clearly stated in 2011 that a crisis was on the way. It is here. Younger generations are facing continuing unemployment, paying through the nose for their education, and have little hope of affording homes of their own, yet somehow they will be expected to fund these unfunded pensions.”
In contrast to these generous public sector pensions, most private sector employers have closed their final salary (defined benefit) schemes because they were becoming too expensive as people live longer. Currently, 13 million private sector workers have no pension provision other than the state pension.
IF used a series of Freedom of Information requests to investigate the major unfunded public sector pension schemes – for the NHS, the civil service, teachers, the armed forces and the judiciary – in order to illustrate the yawning divide between public sector and private sector pensions and the intergenerational implications of not facing up to their lack of affordability.
Hanton continued,
“The public seem unaware that the UK public sector pension scheme is run like an enormous Ponzi scheme, relying on new members coming into the scheme to pay those further up. There is no ‘pot of money’ being saved in the UK; instead each member’s contributions are used to pay a current retiree’s pension. The shortfall has to be made up from already overstretched public spending. This explains the outrage from private sector workers who have seen that government workers have been paying 6–12% contributions and receiving pension worth 36% of salary.”
IF calls for a review of the taxation of current high flying public sector pension claims and an acceleration in the phasing out of public sector final salary schemes. More frequent and transparent publication of pension liabilities is also recommended to ensure the public has a fairer picture of the scale of public sector pension liabilities facing the nation. In addition, an annual cap of 2% of GDP could be considered (based on the Japanese system). Such action, IF claim, would ensure the sustainability of public sector pension provision for the future and prevent governments from raiding funds such as the Royal Mail pension scheme.
