If there’s one thing Alexander’s intervention confirms it’s this: the key question for the 2012 Budget is no longer whether the Lib Dems will get anything on personal allowances but how the next
Danny Alexander, a Liberal Democrat Cabinet minister, says the better-off are receiving overly-generous tax relief when they invest money for their retirement. Mr Alexander’s proposals would see tax relief halve from 40 per cent to 20 per cent. He also wants workers on the minimum wage, who earn up to
There are two fundamental problems with the analysis by the Institute for Fiscal Studies of the current negotiations on public sector pensions.
Firstly, the IFS compares public sector pension provision with that of the private sector and implies that the inevitable disparity has to be rebalanced by cutting the public sector rather than improving private sector provision.
Secondly, they choose to ignore the approximately £100 billion saved by moving from RPI to CPI and then says that if you exclude £100 billion and the fact that retired public sector workers’ pensions are going to have lower increases than before, they are better off.
The Coalition Government is currently coming under fire for cutting public sector pensions, but the truth is that pensions funding was cut 13 years ago by Gordon Brown when he launched his raid on pension schemes.
Until the last Labour Government came into office the accrual of interest on pension funds was not taxed — pension schemes could build up funds more quickly than other modes of investment in order to pay out benefits when members retired. Labour changed that and taxed interest on pension investments as it accrued; pension schemes which had aimed at paying out a …
By Tim Farron MP
| Fri 23rd December 2011 - 12:57 pm
Well that was quite a year, wasn’t it? It was a good one too!
I know, I know, after the referendum and the horrible results in May you’d be forgiven for believing we were sinking faster than Blackburn Rovers (how it pains me to write that), but you know what, it’s not true.
This year we did some amazing things, things you and I have wanted to do for years but never had the power to actually get done.
For one, we put an end to the horrific practice of locking up innocent kids behind bars for months on end in immigration …
Lib Dem Voice has polled our members-only forum to discover what Lib Dem members think of various political issues, the Coalition, and the performance of key party figures. Some 564 party members responded, and we are publishing the full results here over several days.
According to our latest survey of paid-up party members, Liberal Democrats want to see major changes to pension arrangements in the UK. Nearly three-quarters want to see universal benefits such as free television licenses and bus passes replaced with means-testing so that the wealthiest pensioners do not receive the same benefits as everyone else.
The government is continuing to persist in their unaffordable and unsustainable claims. The Hutton interim report published in October 2010 stated that as a percentage of GDP, the cost of public sector pensions will go from 1.9% to 1.7% by 2030 due to the reforms that happened in 2006 under the previous Government.
The government is deliberately being less than honest over the true impact of the pensions changes in order to meet their pre-election rhetoric. This is nothing more than playing games with people’s retirement plans.
The government is not negotiating. They are using classic bully-boy playground …
Steve Webb MP has raised fears about pensions’ poor image and how low interest rates and quantitative easing have damaged annuities. The Pensions Minister, who said the government is going to use employers to promote pensions and auto-enrolment, described auto-enrolment as being like a Ming vase – “very precious, but very fragile”.
He added he wants to change perceptions and instil confidence in retirement planning to ensure that charges are not too high and that pensions offer value for money. He said: “We need to move from a system that’s fiendishly complicated, that still leaves millions of pensioners living in poverty, to one, ideally, where we have a single, simple, decent state pension on which people can build.” …
He also said quantitative easing has damaged pensions. When asked about concerns over annuity risk given low interest rates and quantitative easing, the Minister admitted to “an issue about volatility, not knowing what you are going to get and an issue about poor returns.”
You can see Steve’s interview with Saga’s Director-General Ros Altmann below:
Social mobility means more than whether people are in the same income group as their parents. It also means that the lives of people “below” look more like those “above” them as time goes on.
Most of the twentieth century saw a clear demarcation between blue and white collar workers. Blue collar workers were paid less, and their lives were much less secure. They were more likely to be on short-term contracts – labourers were often hired by the day. Their work involved a greater risk of injury, and thus loss of work. They were less likely to have unemployment insurance and a company pension. The employment conditions for white collar workers were much more reliable – and that, as much as the difference in income, meant that white collar workers were able to buy a house, giving them a security not enjoyed by blue collar workers.
I have been following very closely the pensions dispute as it unfolds and one of my concerns is public sector workers could lose a lot of pay through strike action in what I am starting to believe is a political strike which they cannot possibly win.
I am also a little surprised at the way the government have handled things so far and, as a former national union representative, I have been amazed at times by their ineptitude.
Further confirmation I am afraid that the Tories and sadly many in our party don’t understand the real world of industrial relations.
Today in England and Wales, tens of thousands of public sector workers, many of them teachers, are expected to strike. Currently public sector workers largely enjoy more generous pensions than their equivalents in the private sector and the Coalition Government has acknowledged the growing difference in approach between the private and public sectors. The private sector long ago realised the rising cost and substantial risk involved in offering final salary schemes, based on years of service and end of career earnings, made them unsustainable.
The Coalition Government has a responsibility to ensure that pensions in the civil service are both fair …
The government is pressing ahead with plans to align pension ages across the public and private sectors. By 2020, both men and women in the private sector will have their retirement ages aligned at 66. But if the public sector is left unreformed, many people working within it would still be able to retire with their public sector pension available from the age of 60 or 65 (depending on whether they are male or female).
There is a progressive case to be made for aligning the public and private sector in this respect. Recent research has shown that currently the …
Pensions are again in the news. This time concerning the public sector. For a number of years now, private sector pension schemes have been closed or have changed from defined benefits into simple money purchase schemes. Why is this happening and what can we do?
In 1900, average life expectancy was just 50 years of age. Few people lived long enough to retire. By the 1950s, average life spans had reached 70. The state pension was introduced at age 65 giving 5 years of retirement after 50 years of work. Since then life expectancy has risen to 80, yet we still …
In 1970 a person reaching 60 could expect to live a further 18 years. Last year, they could expect to live another 28 years. Advances in healthcare, living standards and technology mean that people in the UK are living longer and life expectancy is rapidly increasing.
This is something we should celebrate, but it is also something for which we must plan. We cannot expect people to work until they drop but the longer people spend in retirement, the more strain this puts on public services and, in particular, on the Government’s ability to pay people a decent pension.
With trade unions threatening “sustained and indefinite” strike action if the Coalition goes ahead with its aims to reform public sector pensions in line with Labour peer Lord Hutton’s recommendations, Lib Dem cabinet ministers have been sticking to a simple message to calm the situation: there has to be reform, but we’re very hapy to engage in constructive negotiation.
Here’s Lib Dem business secretary Vince Cable speaking today:
Chief Secretary to the Treasury Danny Alexander writes in the Telegraph today on public sector pensions reform, calling the Government’s offer “by far the best that is likely to be on the table for years to come”:
This debate is often polarised between two extremes. There are some trade unions who seem to believe that pensions for public service workers should not change. Then there are those equally misguided voices who seem to think that the public services should be the front-runner in a race to the bottom.
Between these two, I believe there is an indisputable case for reforming public
When I was appointed Pensions Minister last May my first priority was protecting current pensioners. It was widely assumed that the spending review would see cuts to a range of forms of help that pensioners receive. But despite the spending pressures, the budgets for bus passes, free television licences, free prescriptions and the Winter Fuel Allowance have been protected at the level set out by the previous government. Better still, where Labour had planned to cut Cold Weather Payments to £8.50 per week we have made them £25 permanently to protect the most vulnerable when the temperature is below …
Robert Peston’s analysis of the proposed public sector pension reforms from John Hutton contains this key calculation:
The estimate – made by the analyst John Ralfe – that the switch would save just £2bn a year, out of the estimated total annual cost of state pensions (much of which is hidden) of £30bn.
That £30bn is Ralfe’s estimate of the annual cost. It is double the official estimate, with the disparity due to a disagreement on the appropriate discount rate for valuing future liabilities.
A reduction in the value of retirement benefits of 1/15th would of course be unpleasant. But compared
The annual allowance for tax-privileged pension saving will be reduced from £255,000 to £50,000, and the lifetime allowance will be reduced from £1.8 million to £1.5 million. This will replace the complex proposal legislated for by the last Government in the Finance Act 2010.
“Tax-privileged” is a tax break to you and me by the way. The governments estimates that in a normal full year these changes will bring in an extra £4 billion and affect around 100,000, four out of five of whom have incomes of over £100,000.
Reducing tax breaks for the most well off has long …
I’ve not yet had time to fully digest all 176 pages of John Hutton’s interim report on the future of public sector pensions, but here are some parts which have stood out so far and look to be the key issues for the future:
I have been struck both by the enormous complexity of the subject matter, as well as by the degree of misunderstandings and confusions that surround any debate about it. My report tries to dispel some of these myths. It is mistaken to talk about ‘gold-plated’ pensions as being the norm across the public sector. In the most part, the pensions that are paid out to public service employees when they retire are fairly modest by any standard, although in part these reflect part-career or part-time working. For some people these modest pensions now look over generous because of the changes that have taken place in the private sector over the last 30 years or so, where pensions have become generally much less valuable than they used to be. Fewer people in the private sector are also contributing to a pension. I hope these negative trends can be reversed and I fully support efforts to do so.
This downward drift in pension provision in the private sector does not however provide sufficient support or justification in my view for the argument that pensions in the public sector must therefore automatically follow the same course … I have therefore rejected a race to the bottom as the only answer…
Final salary schemes, which are the norm across much of the public sector, primarily reward high earners who progress rapidly through the salary scales…
All these past reforms , the current pay freeze and planned workforce reductions will reduce the future cost of pensions. The gross cost of paying unfunded public service pensions is expected to fall from 1.9 per cent of GDP in 2010-11 to 1.4 per cent of GDP by 2060 …
However, these measures will take many decades to fully affect the costs of pensions in payment, which are heavily influenced by existing pensioners, the vast majority of whom are still in pre-reform schemes. The Commission estimates that gross expenditure on unfunded public service pensions will remain close to current levels as a proportion of GDP over the next decade…
The increase in longevity also means that these pensions are now likely to be paid out for longer, increasing the overall costs. These extra costs, despite recent reforms, have not been equally split between employer and employees…
The most effective way to make short-term savings is to increase member contributions and there is also a clear rationale for doing so…
Evidence to the Commission has also made it clear that current pension structures, combined with the requirement to provide comparable pensions (‘Fair Deal’), are a barrier to non-public service providers, potentially reducing the efficiencies and innovation in public service delivery that could be achieved.
The lack of long term cost increases (as a proportion of GDP), the way the schemes particularly benefit those who end up in the best paid jobs and the view that decreasing private sector pension schemes is no reason for the public sector to follow suit all look towards a final report that may recommend many changes of detail but will not propose radical reductions in overall public sector pension provision.
Here is the report in full – and do post up a comment if you spot something significant somewhere in the details:
Teeing up public sector workers like midwives for cuts in their pensions, Nick Clegg spoke recently about the “unreformed gold-plated public sector pension pots” that people like firefighters and soldiers enjoy. We hear a lot about the long-term cost of public sector pension schemes, as if they are a fiscal time-bomb ready to explode at the heart of the public finances.
Firstly, let’s take a look at the reality of these bounteous public sector pension pots. Take the average pension for a female NHS worker, £5,000. What is worse, half of all women pensioners who have worked in the NHS get a …
The story of this section in a nutshell is “short term good news, long term uncertainty”. In the short term pensions will get a good deal: “We will restore the earnings link for the basic state pension from April 2011, with a ‘triple guarantee’ that pensions are raised by the higher of earnings, prices of 2.5%”. This is a more generous deal, and sooner, than Labour proposed in their manifesto.
One mostly over-looked part of the coalition agreement is what it says on pensions:
We will restore the earnings link for the basic state pension from April 2011 with a “triple guarantee” that pensions are raised by the higher of earnings, prices or 2.5%, as proposed by the Liberal Democrats.
That, by the way, is a better deal for pensioners than offered by Labour who were talking about waiting an extra year before restoring the link and did not have an equivalent of the “triple guarantee” in their general election manifesto.
Lib Dem Work and Pensions spokesman Steve Webb was quick to share his thoughts about George Osbourne’s plan to raise the retirement age with Lib Dem Voice readers yesterday.
Today he has issued a stinging rebuke of the implications of the Tory scheme for women:
Women have been a total afterthought to this announcement. It is simply impossible for the Tories to save £13bn a year by raising the state pension age for men alone.
George Osborne’s plans would require the pension age for women to increase each year until 2016. The Tories must come clean or risk leaving every
Tory conference opens, and it’s time to party like it’s 1994
A few thousand Tories are converging on Manchester today, with two issues dominating discussion: Europe and welfare cuts. Ah, and there we were thinking The Major Years were but a distant memory.
On a more positive note, the Tories will be singing today from the localism song-book, with Caroline Spelman championing the party’s conversion to local control of local services – an interesting about-turn for an MP who opposed Scottish and Welsh devolution, and believes central government should impose council tax freezes from Whitehall.
Plans to raise taxpayers’ contributions to MPs’ pensions have been dropped, ahead of a Commons debate. A planned increase had been accepted by all parties in March but the government now says it will accept a Lib Dem plan to freeze the amount from public funds.
The proposal would have seen MPs’ own contributions rise by £60 a month, but the Lib Dems said taxpayers would have paid £750,000 more than last year. All party leaders have indicated that MPs’ final salary schemes must end.
The cost to the Treasury of MPs’ pensions has risen from
… government ministers’ pension pots are defying the stock market slump and are up by 10% in a year, it emerged this week. Research by the Liberal Democrats revealed that high-profile ministers have pension pots worth more than 10 times the average in the private sector. Gordon Brown has a personal ministerial pension pot of £274,000. Justice secretary Jack Straw’s is £294,000 and chancellor Alistair Darling’s is £235,000. Lib Dem work and pensions spokesman Lord Oakeshott says: “Ministers and mandarins live in a pensions time warp. They look like the first world war general
David Allen A clear, credible, principled strategy from the Yorkists! Makes a welcome change.
Sadly, followed by twenty below-the-line posts, providing nearly twenty ve...
Simon McGrath so we get a permanant increase in costs for these subsidies based on ( alleged ) windfall profits. Its another big increase in spending -how is it to be paid ...
Peter Davies @Kira CollinsThat assumes we want to help people more with their energy bills than with all the other bills they may be struggling with. There is no reason why ...
Rob Heale Agree that we need to focus on strategy and have clearer messaging:-
1. We MUST prioritise membership recruitment in all we do, including PPB's, most leaflets...
Kira Collins Disappointed. The most obvious means of reducing energy bills is to remove VAT. Relatively straightforward to do and does not adversely impact on the attractive...
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David Allen 
Simon McGrath 
Peter Davies 
Rob Heale 
Kira Collins 