Reform's attack on public sector pensions doesn't go far enough
Richard Tice has announced that new employees in the 10 councils now controlled by Reform UK will not be allowed to join the Local Government Pension Scheme (LGPS), and that existing staff already in the LGPS will get lower pay rises to compensate for their generous pensions. This change is all part and parcel of cutting costs for local council taxpayers.
If Mr Tice really does believe in cutting taxpayer costs, then shouldn't all five Reform UK MPs withdraw from the MPs' generous, and expensive, defined benefit (DB) pension scheme?
Each year MPs earn a pension of 1/51 th of their salary, increased in line with inflation, with a retirement age from the state pension age, if they are no longer MPs.
After just one five-year parliamentary term, an MP on the current salary of £93,904 would be entitled to a pension of £9,206 a year in today's money, fully inflation-linked, and with a 3/8 widow/widower pension. Twenty years as an MP means a £36,000 pension – higher if they served as a minister.
The MPs' pension scheme annual report shows the cost of new pension entitlements for 2024 was 28.8 pc of salary, with MPs themselves paying 11.1pc, leaving taxpayers to pay the balance of 17.7pc. This means total pay and pensions for an MP is over £110,000; £93,000 salary and £16,600 pension.
And because the annual cash contribution paid by today's taxpayers is only 10.5pc of salary, a big chunk of the cost is being passed on to future taxpayers.
Nigel Farage is no stranger to controversies over his pension. In 2017, following Brexit, he said he wouldn't be giving up any of his £73,000 MEP pension, so don't expect him rushing to leave the MPs' pension scheme.
Meanwhile, Chancellor Rachel Reeves – who as an MP for 15 years has a pension of at least £26,000 a year – is trying to push pension schemes to invest more in UK equities and infrastructure.
Unlike other 'unfunded' public sector pension schemes – the NHS, teachers, civil servants and armed forces – which pay pensions from annual taxation, the Parliamentary Contributory Pension Fund holds assets, like private sector schemes. And it seems to be setting a good example on UK investment
At March 2024 it had £866m of assets, with 40pc held in UK equities, much higher than private sector DB schemes or the LGPS, and with another 9pc in UK property. It also has a 10pc target for 'renewable infrastructure' and 'energy infrastructure', which it's close to meeting.
But before the trustees get too smug they should explain what they think they are doing holding 10pc of assets – £90m – in high-risk 'junk bonds' rated BB and below, not just a bit higher than the average, but spectacularly higher.
The trustees should also give taxpayers a full breakdown of the annual fees and costs of running its Byzantine investment mandate, with umpteen managers.
MPs want their cake and to eat it, too
The published figures show £1.2m in investment management costs, just 0.14 pc of assets, impressively low. But astonishingly, this doesn't include the costs for 'pooled investment vehicles' – making up 80pc of assets. The trustees say, with a straight face, that these costs are 'not separately provided'.
Dame Meg Hillier (Labour) and Dame Harriet Baldwin (Conservative), the current and former chairman of the influential Treasury Select Committee are both trustees. Can they use their reputation for asking awkward questions and demanding transparency when grilling reluctant ministers, to get the fund managers to provide the total costs (a multiple of the modest fees quoted)?
In 2013 Dame Harriett argued in her response to a consultation that MPs should move from DB to DC pensions like 'the majority of private sector pension schemes'.
She was right in 2013, and is still right today. The current pension should be stopped, and MPs moved to a DC pension, with taxpayers putting in 10.5pc of salary, the current cash contribution, still much more generous that the average in the private sector.
As well as reducing cost and risk for taxpayers, this would help to kick-start the reform of other public sector pensions, where staff are still earning DB pensions that are more generous than those in private sector ever were.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Reuters
33 minutes ago
- Reuters
Quarter of UK mental ill health benefit claimants expect to lose out from planned reforms, charity says
LONDON, June 5 (Reuters) - Around one in four British people with poor mental health who claim welfare benefits expect to lose their entitlement under proposed government reforms, according to research published by a charity on Thursday. Britain's government aims to save 4 billion pounds ($5.4 billion) a year by 2029-30 through tightening the rules for claiming a benefit known as personal independence payment (PIP) designed to cover disability-related costs, whether a claimant is in work or not. The Money and Mental Health Policy Institute said it interviewed 227 people with mental health conditions who receive PIP, which can be worth nearly 6,000 pounds a year. Some 24% of those surveyed said they expected to lose the benefit, while 39% were unsure if they would be affected. About one in five of those surveyed were in work, and nearly two thirds of them said reducing the benefit would make them work less, rather than more, due to difficulty affording transport costs or private mental health support. "Our analysis shows that these changes would actually result in many people with mental health problems who have a job cutting their hours or leaving the workplace altogether," the charity's chief executive, Helen Undy, said. PIP is paid to 3.7 million people in England and Wales, 6% of the population, and new claims have risen by two thirds in recent years. The government hopes that tighter eligibility rules will encourage more claimants to seek work. Under the government plans, claimants would need to have a severe difficulty in at least one area of daily life to qualify for the benefit, rather than a range of less severe problems. Britain's budget watchdog in March estimated that a third of claimants would be affected by the change, of whom around half would lose benefits after being reassessed. The new plans are subject to consultation until the end of the month. Finance minister Rachel Reeves has been under pressure from campaigners to reconsider, following a U-turn over a decision to scrap heating subsidies for most pensioners. ($1 = 0.7372 pounds)
Western Telegraph
35 minutes ago
- Western Telegraph
Swinney urges Hamilton voters to reject ‘gutter politics' of Reform
The vote sparked by the death of Scottish Government minister Christina McKelvie in March will take place on Thursday, with a result expected early on Friday. The SNP and Labour were initially seen as the frontrunners in the race, but Nigel Farage-led Reform UK has surged in the seat and hopes to push for second place. One of the major talking points of the campaign has been the criticism levelled at Reform after an attack advert published by the party claimed Scottish Labour leader Anas Sarwar prioritises people from Pakistan over those in Scotland. The ad showed a speech from the Labour MSP where he urged more people from a south Asian background to enter politics, and it was later denounced as racist by Reform's opponents. Speaking ahead of polls opening at 7am on Thursday, Mr Swinney again claimed the contest is between the SNP and Reform, saying: 'Today, people in Hamilton, Larkhall and Stonehouse can reject the politics of Nigel Farage and elect a local champion by voting SNP. 'Farage doesn't care about Scotland – he wants to cut our budget, undermine our Parliament and introduce charges for the NHS. 'Labour have given up on the campaign and have barely even bothered to defend their record of scrapping the winter fuel payment and cutting support for disabled people. 'So this by-election is a two-horse race between the SNP and Farage. And today, people in Hamilton, Larkhall and Stonehouse can unite behind the SNP and defeat the gutter politics of Nigel Farage by voting for Katy Loudon.' Anas Sarwar said his party's candidate Davy Russell is a 'local champion' (Jane Barlow/PA) The by-election presents the first real test of both Scottish Labour and the SNP since last year's general election, where the former returned to being the biggest Westminster party in Scotland and the latter haemorrhaged MPs, falling to just nine. Ahead of the vote, Mr Sarwar said the choice facing voters is 'more failure with the SNP or a local champion' with Scottish Labour's Davy Russell, accusing the nationalists of talking up Reform to 'distract from their own failures'. He added: 'Time and time again, the SNP has failed Hamilton, Larkhall and Stonehouse. 'From our overstretched NHS to our declining education system to our crisis-hit housing system, almost all of what is broken in Scotland is run by the SNP. 'They don't deserve to win, but only Scottish Labour can beat them. 'The SNP wants to talk up Reform to distract from their own failures, but Scots will see through the spin. 'This is a chance to put this failing Government on notice and chart a new direction for all of Scotland – let's seize that opportunity.'
Western Telegraph
35 minutes ago
- Western Telegraph
‘Bold rewiring' of economy needed as Tories seek to regain trust, Stride says
In a speech on Thursday, Mel Stride is expected to promise the Conservatives will 'never again' make offers they cannot afford as the party seeks to forge a 'credible' financial plan for the future. Taking aim at both Labour and Reform UK, the Tory frontbencher will accuse Chancellor Rachel Reeves of 'fiddling the figures' by changing her definition of national debt, and warn that 'populism is not the answer'. Liz Truss's 2022 mini-budget spooked the markets and led to a spike in mortgage rates (Jacob King/PA) Addressing the legacy of the 2022 mini-budget under Ms Truss's premiership, which spooked the financial markets and led to a spike in mortgage rates, Mr Stride will say: 'For a few weeks, we put at risk the very stability which Conservatives had always said must be carefully protected. 'The credibility of the UK's economic framework was undermined by spending billions on subsidising energy bills and tax cuts, with no proper plan for how this would be paid for.' In a furious response, Ms Truss has accused Mr Stride of having 'kowtowed to the failed Treasury orthodoxy' and being 'set on undermining my plan for growth'. The shadow chancellor will claim that the Tories acted swiftly to restore stability, but the party's credibility would take longer to recover. 'That will take time, and it also requires contrition,' he is expected to say. 'So let me be clear: never again will the Conservative Party undermine fiscal credibility by making promises we cannot afford.' Ahead of the Chancellor's spending review next week, her opposite number will accuse her of 'abandoning' financial responsibility. Ms Reeves has two self-imposed 'fiscal rules' – funding day-to-day spending through taxation and for debt, measured by the benchmark of 'public sector net financial liabilities' (PSNFL), to be falling as a share of GDP. She has insisted these constraints are 'non-negotiable' amid wrangles with Cabinet colleagues over departmental budgets ahead of next week's announcement. Chancellor Rachel Reeves has said her fiscal rules are 'non-negotiable' (Peter Byrne/PA) Mr Stride will say: 'At the spending review next week, we can expect her to trumpet all of the additional projects and programmes she is funding – without mentioning the fact it is all being paid for from borrowing.' Attacking Nigel Farage's Reform party after its gains in the local elections last month, the shadow chancellor will say: 'Take Reform. Their economic prescription is pure populism. It doubles down on the 'magic money tree' we thought had been banished with Jeremy Corbyn.' During the speech in central London, he will say the two 'core priorities' for the party will be 'stability and fiscal responsibility', with control of spending and reform of welfare and public services. He will add: 'And a bold rewiring of the British economy – to unleash growth, productivity, and opportunity across the country.' Conservative leader Kemi Badenoch has said that the comeback she anticipates for the party will take time as it seeks to avoid 'rushing' into policy commitments. Mr Stride will insist modern politics requires more 'thoughtfulness', with the Conservatives planning to spend the next four years forging a 'credible' plan to return to government. 'We will need to take our time if we are to forge a credible plan that delivers for the people of our country,' he will say. 'Over the next four years, our party will do just that.' Since being ejected from Number 10 after just 49 days in office, Ms Truss has conceded her plan to quickly abolish the 45p top rate of tax went too far, but otherwise defended her failed bid to boost growth. Responding to the Tory announcement on Thursday, she said: 'Mel Stride was one of the Conservative MPs who kowtowed to the failed Treasury orthodoxy and was set on undermining my Plan for Growth from the moment I beat his chosen candidate for the party leadership. 'Even when judged by the OBR's flawed calculations, my plans were chalked up as costing less than the spending spree Rishi Sunak pursued as Chancellor during the pandemic – yet Mel Stride never took him to task over any of that. 'And why has he singularly failed to examine the role played by the Bank of England in causing the LDI crisis that sent gilt rates spiralling? Why has he never asked the pertinent questions of the Governor, despite the Bank since admitting that two-thirds of the gilt spike was down to them? 'My plan to turbocharge the economy and get Britain growing again provided the only pathway for the Conservatives to avoid a catastrophic defeat at the election.' She added: 'Until Mel Stride admits the economic failings of the last Conservative Government, the British public will not trust the party with the reins of power again.' Reform's deputy leader Richard Tice said: 'We'll take no lectures on economics from a party that more than doubled the national debt, raised taxes and government spending to 70-year highs and shrank economic growth to 70-year lows. 'Meanwhile, we unearth Tory-run councils wasting £30 million on a bridge to nowhere. They can never be trusted again.' The Liberal Democrats accused the Conservatives of attacking Mr Farage's party for 'the same fantasy economics' they had pursued 'while secretly plotting a pact with them' as they branded the speech 'absurd'. Deputy leader Daisy Cooper MP said: 'It's insulting that the Conservatives think a few warm words will fool people into forgiving them for all the damage they did to the economy and people's livelihoods. 'Families are still reeling from the Conservatives' lockdown law-breaking and still paying the price after their mini budget sent mortgages spiralling. 'Now the Conservatives have the cheek to criticise Reform UK for the same fantasy economics while secretly plotting a pact with them: it's absurd.'
