Nick Clegg on Gold-Plated Pensions

In a speech to the Institute for Government, the deputy prime minister repeated the canard that  “public sector pension schemes are gold-plated”and unafordable.

As the recent report from the Office for Budget Responsibility makes clear the cost of PAYG pensions will rise in the short-term from 1.7 to 1.9% of GDP falling back to 1.7% of GDP by 2050. In other words the real terms cost of public pensions is relatively stable.

In the private sector,  gold-plated boardroom pensions are boosted by taxpayers while growing numbers of ordinary workers get nothing. A quarter of all tax relief on pensions goes to the top 2 per cent of earners, averaging about £20,000 per wealthy individual. The average value of tax relief per worker on basic rate wages is £1,000 per year.

The vast majority of pensions in payment are modest. Most pensions paid in both the NHS and civil service are below £110 a week – and a quarter of NHS pensions are less than £40 a week and a quarter of civil service pensions are less than £60 a week. Teachers’ pensions are some what higher with a modal range of £180 to £200 a week.

The real scandal here is that more than 60 per cent of the private sector workforce are not saving in an employer supported pension, and are likely to face poverty in retirement. This is why the Government has been right to introduce a new pensions system due to start in 2012, which will for the first time compel every employer to contribute to the pensions of their staff unless the employee opts out.

It’s time to start levelling up rather than attacking the pensions of hard-working vital public servants.