The £100 billion negotiation

Leading pensions expert Michael Johnson explains why reform to public sector pensions is so important in his new report: The £100 billion negotiations.

In this report on public sector pensions, Johnson shows that:

  • ONS data shows that public sector workers receive pay packages 13% higher on average than those in the private sector. The main cause of this difference is the far more generous public sector pensions. But this is probably a significant underestimate.
  • Full implementation of Lord Hutton’s proposals, let alone anything weaker, would not fulfil the most fundamental of Lord Hutton’s own criteria: the new arrangements would not be sustainable, from both affordability and fairness perspectives.
  • The unions’ claim that public sector pensions were shown by Lord Hutton to be affordable is based on implementing changes to pensions which they have yet to agree. What’s more, Lord Hutton’s assumptions for growth, productivity and public sector job growth (which make public sector pensions appear more affordable) look increasingly optimistic.
  • The Coalition is being out-manouevred by the trade unions in its negotiations over public sector pensions.
  • This matters. Cutting the cost of public sector pensions by 25% would save taxpayers billions of pounds every year, stretching into the future. The present value of such an annuity saving would be over £100 billion in today’s money.

Johnson puts forward proposals on how the Coalition should pursue negotiations which will bring public and private sector pensions into balance, with results that would be sustainable, fair and affordable.

Tim Knox, Director of the CPS, comments: “The stakes are very high. The relatively lavish pensions enjoyed by many public sector workers are a burden which will largely be met by the private sector. Yes, reform of public sector pensions is tremendously difficult. But this must be ruthlessly pursued if we are to have a lasting and fair solution.”

To view the full press release, click here.

Media Impact:

Michael Johnson - Friday, 9th September, 2011