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Contributors to our national life and standard of living

28/11/2021

One of the largest strikes for many year goes ahead this Wednesday, as public sector workers down chalk and switch off computers in protest at UK Government plans to change future public sector pension provision.

The strikes are a response to proposed UK government changes in the type of inflation used for increasing pensions, the amount of workers’ contribution payments taken from their salaries and, of course, the rising state pension age.

The Courts of Justice are currently hearing a case from six of the major trade unions on the UK Government changing the measure for up-rating pensions from RPI (Retail Price Indices) to CPI (Consumer Price Indices).

RPI, which includes housing costs, has been higher than CPI for almost every year in the past decade meaning that, in real terms, the amount in people’s pensions will be less each year. This is a cumulative effect which could mean the loss of a quarter of the value of a pension over 30 years.

The intention, of course, is for the Con-Dem Government to save billions of pounds, taking them away from pension funds to which public sector workers have contributed during their working career.

Plaid Cymru and the SNP voted against this in February, while Labour abstained. I laid an amendment to the Pensions Bill in October to debate this matter again, but Conservative and Labour MPs talked it out so that the debate could not be held.

Despite what is often quoted in the press, public sector pensions are generally affordable. Public sector pension funds have already been re-negotiated and a number of changes have been introduced in recent years. Union members agreed a deal in 2007 which the National Audit Office last year estimated “reduces costs to taxpayers by 14%”.

In Lord Hutton’s review of public sector pensions earlier this year, he estimated the cost of public sector pensions would fall by 0.5% as a share of national wealth by 2060, while Westminster Parliament’s Public Affairs Select Committee found that state pensions were affordable now and sustainable in the future.

Most recipients of pensions are not receiving the sort of gold-plated pensions highlighted in the media of hundreds of thousands of pounds per year. Currently, the female average in further education on retirement is £6,270, while the male average is £10,730. In the modern universities established after 1992, the female pension average on retirement is £11,893 while the male average is £16,146.

These proposals from the UK Government will therefore see pension contributions increase while the end amount received will be less – is it any surprise that people are concerned and angry? It wasn’t teachers or other public sector workers who caused the banking crisis – it was the finance sector and political ideological and regulatory failure.

Plaid Cymru recently uncovered that the most recent actuarial estimate of the Teacher’s Pension Scheme came from March 2004, yet those are the figures which are being used by the Government. The National Union of Teachers recently estimated that, in today’s terms, around £46bn more has been paid into the Teacher’s Pension Scheme since it began than paid out in pensions.

The UK Government has used this money as cheap loans from teachers. Let us remember that occupational pensions are not free money, they are salaries deferred from earlier in people’s working life. They should stop demonising public sector workers, from whichever sector. These people are contributors to our national life and our standard of living.

There is also a worry that these changes will force workers out of pension schemes altogether. Some of those currently struggling at the lower income levels may decide that the extra pension contribution payments for less pension at the end just isn’t worth it, and that may make pension funds genuinely unsustainable. It would leave many outside the current pension provisions and create a greater burden for the state later on. These changes would be a false economy.

Plaid Cymru tabled an Early Day Motion earlier on in these discussions which criticises the UK Government for undertaking these changes and expresses concern about the future sustainability of pension schemes. Sadly they have not yet seen the light.

With a couple of days to go, I hope that the UK Government have learnt the lessons of the past and return to the table with an acceptable offer before the day of action on November 30