The IoD is due to release a report today that will perpetuate the myth that public sector pensions are unaffordable.
The union’s Deputy General Secretary Dai Hudd said: “The IoD’s hypocrisy is breathtaking. Directors from the UK’s top 100 companies are set to earn a yearly average pension of £3,879 per week – more than many retired public sector workers will get in a year. Yet the people who provide the glue that holds society together are portrayed as the villains of the pensions piece.”
Hudd pointed out that in 2008-09, higher rate tax relief paid on private sector pension contributions cost the taxpayer more than total expenditure on public sector pensions.
“For every pound that taxpayers spend on public sector pensions, we pay £2.50 to subsidise the pensions of the richest one per cent in society.”
On the true cost of public sector pensions into the future, Hudd said the Treasury, the National Audit Office and the Office for Budget Responsibility agree that the best way to measure this is by looking at the proportion of national income expected to be taken by their pension costs. This shows that projected costs look set to rise from 1.7% of GDP today to a peak of 1.9% in 18-19 years’ time and then back down to 1.7% by 2059-60.
“The IoD and the Taxpayers Alliance are distorting the pensions picture. Bandying trillion pound sums around, without including the fact that there is disagreement on how the sums are calculated, is disingenuous.
“Yes we want an open, transparent debate. But we are not going to get that if a small band of right-wing ideologues continue to distort the pensions agenda,” said Hudd.
“One of the reasons why people are buying into the anti-public sector agenda is because they have been sold down the river by the private pensions industry.
“Between 1999 and 2009, the average real rate of return on equities – the primary market for people in defined contribution schemes – was minus 1.2 per cent per annum. While the finance sector makes big returns, the taxpayer will have to make up the shortfall in retirement incomes through means-tested benefits.
“We need a fundamental restructuring of the whole pensions landscape. The real debate is how to achieve fair and sustainable pensions for all. A good starting point would be to reduce income inequalities, corporate excesses and finance industry abuses. Not something you are likely to hear from the IoD,” Hudd added.
He also pointed to a crucial factor that is being neglected in the current debate: whether or not people will physically be able to work for longer. Independent studies have shown that health is a bigger determinant of whether people stay in the labour market than even their pension entitlement.