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David Cameron angers TUC with threat to public sector pensions

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  • David Cameron angers TUC with threat to public sector pensions


    David Cameron has angered public-sector workers by promising to end the "apartheid in pensions" that often guarantees them more generous payments in old age than their private-sector counterparts.
    The Conservative leader told a meeting this week that "my vision over time is to move increasingly towards defined-contribution rather than final-salary schemes" for employees in the public sector.
    Tory officials said that no one who already had a public-sector pension would lose out and that Cameron was indicating a "direction of travel" rather than announcing firm policy.
    But his comments, which were reported today in the Financial Times, provoked an angry response from the TUC general secretary, Brendan Barber.
    "This will come as a bolt out of the blue to the millions of hard-working public servants that see a decent pension as a vital part of their reward for doing tough jobs on pay that is often far from generous," Barber said.
    "It is the kind of issue that could make the difference in marginal seats at what polls suggest will be a close election. Public servants will be frightened and deserve to be told in much more detail what the Conservatives' plans are."
    Many public-sector workers are members of final-salary pension schemes of the kind that private-sector firms are phasing out because they are too expensive.
    Workers on a final-salary scheme are guaranteed pensions at a certain level. But workers in the alternative money-purchase schemes do not have the same security because the value of their pensions depends on the performance of the stock market.
    Politicians from all parties have expressed concern about the viability of public-sector pensions because many schemes are unfunded, meaning that pensions are paid by today's taxpayers, not from money saved up in a scheme.
    The Treasury puts the total public-pension liability – the amount that will have be paid eventually to everyone who qualifies for a pension – at £650bn.
    At a meeting in Manchester this week, Cameron said that the government had been "remarkably feeble" in dealing with this issue. He said: "We have got to end the apartheid in pensions."
    The Tories are committed to closing the generous House of Commons final-salary pension scheme for new entrants and replacing it with a money-purchase scheme of the kind that operates in most private-sector workplaces.
    A Conservative spokesman said that this would "help" Cameron achieve his long-term aim of reforming public-sector pensions. But he stressed that nothing had been decided.
    "Nothing has been resolved, one way or the other," the spokesman said.
    He said that anyone who had accrued rights under a public-sector pension would have those rights protected and that any change would involve "extensive discussion with interested parties".
    But Barber said that, given that the Tories has criticised the government for creating a situation where private employers were closing their final salary schemes, they should not be abolishing the same schemes for public servants.
    "Unless Mr Cameron is planning not to honour pensions promises made to current public servants, it will cost more in the short and medium term," Barber said.
    "The government would have to both honour existing unfunded pension commitments, which go on until every current and past public servant dies, and start to build up funded pensions pots for future service. Costs would increase sharply for at least a generation before securing any saving."
    In the debate on the pre-budget report in the Commons yesterday, Vincent Cable, the Liberal Democrats' Treasury spokesman, said that the current public-sector pensions arrangements were "unsustainable" and that, unless there was reform, public spending would have to be "drastically squeezed" to keep payments going.
    But Cable said that when Lib Dem peers recently proposed the setting up of a commission to investigate this issue, Labour and Tory peers voted against it.



    guardian.co.uk © Guardian News & Media Limited 2008 | Use of this content is subject to our Terms & Conditions | More Feeds

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