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CPS Pension Costs Total Rubbish

Tuesday, February 5, 2013

Centre for policy studies claim of £9 billion extra costs for public sector pension schemes is "total rubbish" says GMB.

The net effect in the move to a state flat rate pension is a small gain to Treasury because there are more losers than winners which is nothing to do with the cost of public sector pension schemes says GMB.

GMB, the union for public sector workers, issued a further statement following it’s firm rebuttal  yesterday (4th February ) of the false claim by the Centre for Policy Studies (CPS)  that 'public sector pension schemes will now cost an extra £ 9bn per annum and should be renegotiated'.  See notes to editors for copy of GMB press release of 4th February.

This new GMB statement for the record comes after CPS issued a further clarification of its position. It also follows correspondence between CPS and GMB on the matter.

Brian Strutton GMB National Secretary for Public Services said “It is now clear that CPS are wrong on three specific points regarding their claim of an additional £9billion costs to public sector pension schemes. The conclusions they arrive at, based on these non- existent costs, do not follow and in fact are completely “bonkers”.

So the figures in the CPS report are total rubbish and it is regrettable that mainstream media published this utter nonsense.

For the avoidance of doubt let me set out again for the record the facts in relation to their three groundless claims:

1. CPS argument that there is an extra £3.4bn cost to public sector pension schemes due to ending contracting out.

This is not a cost to pension schemes - it is a national insurance increase on public sector employers and employees with the proceeds going to Treasury. It has no effect on public sector pension scheme costs. The net effect on the public purse is a net gain - the employer cost is paid by one hand of government and taken by the other, the employee national insurance hike is a windfall to Treasury.

2 CPS argument that there is an extra £4bn cost to public sector pension schemes due to getting full contracted out pension.

It is true that public sector pension scheme members will get their full contracted out pension. This is not a change. They will get the same scheme pension they would have got. There is no additional scheme pension and no additional scheme cost.

The CPS has counted the extra state flat rate pension that public sector workers will get as if it was a pension scheme cost which is completely false.

The net effect of all winners and losers in the move to a state flat rate pension is a small gain to Treasury. This is because there are more losers than winners. However this is nothing to do with the cost of public sector pension schemes.

3. CPS argument that there is an extra £2bn cost to public sector pension schemes because the wrong longevity assumptions have been used.

CPS now recognises that the longevity estimates they prefer, using ONS data, were the ones actually being used for public sector pensions costings so there is no further theoretical new cost arising. There is no extra £2bn public sector pension scheme cost.

In summary the CPS has taken some effects and cost changes to the state flat rate pension; muddled them up; mixed in some non -existent cost; and erroneously presented these as new costs to public sector pension schemes.

What costs and benefits do arise are in relation to the state pension not public sector schemes.

The state pension effects are well documented and GMB has already raised these directly with government.

The CPS conclusion, that public sector schemes should be renegotiated in light of their cost claims, is therefore completely groundless. It is also a very poor suggestion given that the public sector pension reform took nearly 2 years to negotiate and is being legislated now.

For all these reasons GMB strongly stands by its rebuttal of all the CPS allegations.

Finally, CPS has made the point to GMB that there is an underlying issue of a lack of joined up thinking on pension reform between DWP and Treasury. GMB agrees with CPS on this point.”

End

Contact Brian Strutton 07860 606 137 or Phil McEvoy 07918 768773 or 0208 947 3131

Notes to editors

Copy of GMB release dated 4th February

"Bonkers" call by right-wing think tank to restart public sector pension negotiations based on new "costs" that do not exist says GMB.

CPS are destroying their own credibility and are lining up in competition with the Taxpayers Alliance to win the 2013 “axe grinder of the year award” with this report says GMB

GMB, the union for workers in public services, rebutted claims by the Centre for Policy Studies (CPS) on higher cost of public sector pensions and rejected calls for the current public service Pensions Bill to be scrapped and new negotiations started. See notes to editors for summary of the report.

Brian Strutton, GMB National Secretary, said “The CPS has got so excited about getting media to run yet another story attacking pensions that they have produced a shoddy report of made-up numbers and rather ludicrously called for the whole public sector pension reform program to be torn up and started again.

CPS are destroying their own credibility and are lining up in competition with the so called Taxpayers Alliance with an early entry to win the 2013 “axe grinder of the year award” with this report.

The three ‘new’ costs put forward simply do not exist:

Firstly, the CPS says the end of the state additional pension contracting out rebate will be a £3.4bn pension cost to the taxpayer – wrong, it is a tax not a pension cost and it benefits the taxpayer.

Secondly, the CPS says public sector employees will still get pensions as if contracted out at an additional cost of £4bn. Wrong, this is not an additional cost it is the same cost as before.

Thirdly, the CPS says there could be an extra £2bn cost if longevity has gone up faster than thought. Wrong, if there is an increase in longevity (and that is unknown) it will not be an additional cost but will be controlled by the cost cap imposed by government. So there is no ‘new’ cost at all. In fact the OBR says the reforms save the taxpayer 40% of pension costs.

The real purpose behind the CPS argument is to say the public service Pensions Bill, which implements the reform program negotiated between government and unions, should be scrapped and the process restarted. This is absolutely bonkers. Nobody in their right mind would sensibly advocate going through years of negotiations again and delaying reform even further.”

End

Notes to editors

CPS report summary

THE PUBLIC SERVICE PENSIONS BILL AND THE DWP’S WHITE PAPER by MICHAEL JOHNSON

This paper explains for the first time why the future cost of public service pensions could be more than £9 billion a year above current expectations.

This has primarily arisen because of the interaction – or “toxic tangle” – between two pension proposals currently before Parliament: the Public Service Pensions Bill and the DWP White Paper on the single-tier pension.

Together these have created two additional costs:

- about £3.4 billion a year due to the loss of the public sector employers’ NICs rebate following the end of contracting out; and,

- about £4 billion a year as a result of public sector employees continuing to enjoy an enhanced occupational pension, as if still contracted-out, whilst being entitled to further accruals within the new single-tier state pension, once it appears.

In contrast, private sector employers who are today contracted out will be permitted to change their scheme rules (and reduce the pensions paid) without trustee consent (not least to enable them to recoup their lost NICs rebates).

A further £2 billion a year in additional cost may well arise as Lord Hutton’s modelling used life expectancy rates that are now six years out of date.

The Public Service Pensions Bill should therefore be stopped in its tracks until the White Paper’s cost implications for it are thoroughly examined. This should include the use of up-to-date projections for life expectancy.

It was already widely accepted that public sector employees already enjoy pensions which are far more generous and secure than the great majority of private sector employees. These new findings show that the sustainability of the post-Hutton pension settlement is even more questionable than previously thought.

The need for bolder reform of public sector pensions is far greater than that proposed in the Public Service Pensions Bill.

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