Bernard Moffatt, Outside Left: Real problem with pensions

Bernard Moffatt

Bernard Moffatt

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A pension furore raged earlier this year.

We were told radical action was needed. This from politicians who, I seem to remember, negotiated the new pensions.

When I started as a union official, pensions in the public sector had been established for over a decade and I had retired by the time Alf Cannan emerged waving his GUS agreement shouting ‘pensions in our time’!

The problems with public sector pensions were indentified early on. It was clear by 1977 that the manual workers’ No 1 scheme could not fund itself so most manual workers joined the 1977 scheme.

By the early 1990s, post-axwell, the government commissioned an actuarial review. The actuary explained that if the ‘rag bag’ of schemes were not harmonised down to six, with increased contributions, trouble would occur later. The unions signed up.

He produced his report and the government quietly binned it. It was buried so deep that the experts the government brought in later, pre GUS, knew nothing about it!

In the early 1990s something else happened. The No 1 scheme failed new tests brought in post-Maxwell. The contributors were told: ‘You won’t get what we thought. You’ll have to pay more NI to top up your state pension’.

The unions tried to rectify it. We spent the next decade talking to government. Indeed the last person I gave this an airing in front of was the PSPA with Chris Robertshaw sitting on it.

It was to no avail. So at age 65 the manual workers’ No 1 scheme pensioners who have retired early on medical grounds are subject to something called ‘claw-back’. The theory is ‘clawed-back’ pension is then offset by increased state pension paid for by increased NI contributions. The only thing is, it doesn’t.

We are not talking a great number of people. When the scheme collapsed there were about 45. By the time I and a No 1 scheme contributor got an airing in front of Chris and his PSPA chums there were fewer than 20. The government had talked for 10+ years whilst the problem ‘resolved itself naturally’. It would not have taken a great deal to fix. We were/are talking about modest pensions whose recipients will be amazed at suggestions that people can get pension pots of £400,000 and £40,000 a year.

I was a union official for 22 years and never came across a pension remotely near that level. On occasion you would do a calculation for a medical retirement and the person would say: I can’t manage on that, I’ll try and work on. Some worked on and then shortly after retiring they died. Many times I thought ‘if he had died a few months earlier his wife would have got the death in service benefit – now she’ll get buttons’!

So, who has unleashed this pensions mayhem on us? Back in 1973 a manual worker on the Highway Board didn’t want a pension taking a percentage out of what was then poverty pay but the politicians of the day introduced it. In 1977 they upped the percentage. In the 1990s some schemes failed so they made them pay additional NI. Promises made, promises broken.

Then along comes GUS complicating an already complex situation and we all know who the architects and administrators of that were!

How do we fund pensions going forward? Well, start by adopting the stance that actuary adopted 25 years ago. Quietly set out the problems, listen to the views, then set out a solution.

Finally, to all those critics of PS pensions I say this: you weren’t so vocal years ago when a lot of people were paying in, few drawing out, and some many instances dying before they reached pensions age. You weren’t screeching to the heavens when schemes like the manual workers’ No 1 failed. Like those in government you probably thought ‘the problem will resolve itself naturally’.

If anyone deserves to be angry, it is workers enrolled in these ‘Ponzi’ schemes.

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