The Royal Statistical Society has written to the UK Statistics Authority to call for a comprehensive review of inflation measures. The letter, from RSS President David Hand to Sir Michael Scholar (the Chair of the UK Statistics Authority) expresses concern about the way in which the Office for National Statistics concentrates on the Consumer Price Index, even though it is not the best index for all purposes – such as wage negotiations, where it is “not ideal.” The letter raises concerns about the way in which the ONS monthly inflation press notice now only headlines the CPI, leaving the Retail Price Index to the inside pages (a point we’ve also raised).

Read more »

   Filed under: Budget, Pensions, Welfare | No Comments »

Today the TUC published our response to the first phase of the Independent Public Service Pensions Commission, arguing that public service pensions are affordable and sustainable, contrary to the scaremongering of some commentators. Former Labour Business Secretary John Hutton has been appointed to head up a one-man Commission (no relation to the IoD’s so-called Independent Commission, whose arguments Nigel has thoroughly dismantled).  The Hutton Commission has a punishing timescale to investigate the issues and make recommendations, with an initial report in September followed by a final report in March 2011. Read more »

   Filed under: Pensions, Public services | 1 Comment »

Given how often we are told that public sector pensions are more generous than those in the private sector, there is some irony in the growing employer campaign to level down private sector pensions to public sector levels.

This flows from the Government’s decision – announced in the budget and covered here and  here on Touchstone – to index public sector pensions and most benefits in future to the generally lower CPI measure of price inflation rather than the previous RPI indicator.

Already ministers have announced that the minimum indexation standards that private sector DB pensions have to follow will in future be based on CPI. Read more »

   Filed under: Pensions | 2 Comments »

Pensions Minister Steve Webb has announced in a written ministerial statement (that I’ve not yet found online) that the government will in future use CPI indexation for occupational pensions and pensions paid by the PPF and FAS.

While occupational pensions are free to set their own increases they must meet a minimum increase in line with the cost of living up to a maximum of 2.5 per cent. This is known as Limited Price Indexing.

The law does not say which index should be used but requires the Secretary to say each year what the inflation rate will be. In the past this has been the RPI. In future the CPI will be used.

In the budget this change was announced for public sector pensions. Now private sector pensions have been levelled down to this too. We’ve already looked at what this means for public sector pensions.

   Filed under: Budget, Pensions | 4 Comments »

Nigel has already looked in detail at the IoD sponsored report of the Public Sector Pensions Commission. As he says, the report is based on challenging current assumptions about how you measure in today’s money the cost of pension commitments that go many years into the future.

Their main complaint  is that the Government currently assesses the cost of unfunded pension liabilities using a discount rate of 3.5%. They say that this is “artificial” and that it involves “accounting sleights of hand”.  There is even the suggestion that the current figures lack “honesty”.

Suggesting that the Treasury, who produce these figures, is dishonest is fighting talk. One would expect, therefore, that the report would give considerable attention to describing and attempting to rebut the basis upon which the figure of 3.5% is chosen. But far from it. The report simply says that the continued use of 3.5% is “unexplained”. But this statement is simply untrue. Read more »

   Filed under: Pensions, Public services | 1 Comment »

If you can’t face reading all my long posts here on the IoD/IEA Pensions Commission, here’s a succinct one I’ve written at Left Foot Forwards

   Filed under: Pensions | 3 Comments »

The short answer is no. The vast majority of its members have an easily traced and extensive track record of opposing public sector pensions. The Institute of Directors has a well established position on public sector pensions. It is set out in a paper by the secretary to the Commission Corin Taylor Pensions Apartheid.

It is worth pausing here to say just how offensive the term “pensions apartheid” is.

Apartheid was a detestable political system that ruined the lives of generations of South Africans. It has a precise meaning in international law. The crime of apartheid is defined by the 2002 Rome Statute of the International Criminal Court as inhumane acts of a character similar to other crimes against humanity “committed in the context of an institutionalized regime of systematic oppression and domination by one racial group over any other racial group or groups and committed with the intention of maintaining that regime.”

What kind of person thinks that this is an appropriate metaphor for a debate about pensions policy? Read more »

   Filed under: Pensions, Public services | 5 Comments »

Today’s see the launch of the latest attack on public sector pensions. This one comes from a so-called independent Public Sector Pensions Commission set up by  the Institute of Directors and the Institute of Economic Affairs.

This is another example of the clever pincer movement used so well by the shrink-the-state right to attack public sector pensions. First they stir up the politics of pensions envy by contrasting the non-existent pensions of two in three private sector workers with the supposed gold-plated pensions of public sector workers. Then they snap the pincers shut with some big scary numbers about the future costs of pensions.

In this post I look at the first arm of the pincer – the difference between public and private sector pensions.

Of course it is unfair that public sector workers get better pensions than workers in the private sector. But who brought that about? Read more »

   Filed under: Pensions, Public services | 2 Comments »

Today’s IoD sponsored report on public sector pensions combines pensions envy with the standard deployment of big scary numbers about the unaffordable costs of public sector pensions – each one bigger than the previous report.

The numbers in this report have been somewhat undermined by the change in the indexing of pensions in payment announced in the budget. Linking pensions to CPI rather than RPI will reduce their cost as in most years pensions will go up by less than the increase of cost of living for pensioners, but as the whole report is based on an edifice that has been dismissed by the National Audit Office it is important to understand where these numbers come from. Read more »

   Filed under: Pensions, Public services | 2 Comments »

An average eighty year old public sector pensioner would be more than £650 a year worse off if the budget change to the indexing of pensions had been in force since their retirement.

We have already noted that changing the price inflation index to CPI in benefits, public sector pensions and the state pension.

The new Social Trends however has figures for CPI and RPI going back twenty years. (Table 6.19 in Social Trends 2010) This allows us to work out that an eighty year old pensioner on the median public sector pension of £5,500 who has been retired for twenty years would now have a pension of £4,845 a year – 12 per cent or £655 less – if CPI uprating had been in force since their retirement. Read more »

   Filed under: Budget, Pensions, Public services | 4 Comments »

Last Saturday I had a post called state pensions will be cut by the budget.

However Nigel Hawkes from Straight Statistics has kindly pointed out an error. In working out the indexing figure for the state pension in 2012 I forgot the 2.5 per cent minimum uprating – I used the CPI figure of 1.9 per cent instead.

This does not make the claim in the headline wrong. The state pension will be lower under the new system in both 2012 and 2013, but the difference is much smaller. It’s right that I should ‘fess up and admit my mistake, and no doubt provide some amusement for our less sympathetic readers. Read more »

   Filed under: Budget, Corrections, Pensions | 3 Comments »

This week both coalition parties broke a pre-election promise not to reduce the accrued benefits built up by public sector pensioners. By linking future increases in public sector pensions to CPI rather than RPI they are ensuring that pensions will go up on average about 1 per cent less than they would once have done.

Yet the Observer chooses to lead its business section with a standard attack on “gold-plated” pensions, with not even any balancing comment or perspective. Read more »

   Filed under: Pensions, Public services, Public spending | 1 Comment »