Public sector workers really do not like it when their pension scheme is referred to as gold-plated.
That is the term that journalists like me frequently use to describe the old final salary schemes and the newer career-average-based pensions those in the public sector enjoy.
We call them gold-plated because payouts on eitherare guaranteed.
Essentially, it is our easy way of saying what you get when you retire is what you were always promised, and you will have that until you die because we – UK taxpayers – are funding theirold age.
But I suspect that those with gold-plated pensions also do not like the term, because it reminds all of us just how generous these benefits are.
I can see that given the pressures civil servants, NHS staff and teachers feel like they are constantly under, the cuts they have endured, and the changes to their pensions in the past decade, they mayfeel affronted.
The implication is somehow they have not earned it.
But the problem is, objecting does not make it any less true.
Public sector pensions are gold-plated, though doctors, teachers, nurses, emergency services, you are welcometo them.
The impending election got me thinking about this because it is a time when politicians tend to make promises about our retirement savings.
But they are doing this without actually fully realising the pensions that the rest of us have to put up with.
So is it not time that MPs had the same pensions as the restof us?
Defined benefit schemes in the private sector are dying fast.
Out of the country’s 30m workforce, there are around 1.2m workers still saving into final salary pensions, compared with 2.4m in 2010.
That means that everyone else has a defined contribution scheme, with returns linked to how much you save and how your investments perform.
Some 10m savers may have only just been enrolled into a pension for the first time – and though they are at least saving, the amount is trivial.
The crucial difference between DB and DC schemes is risk – it just does not exist for savers in the public sector.
It does not matter what you save, how the stock market performs, or how long you live for, you will get what was promised. Calculations into these risks are what everyone else has to make.
Nothing quite smacks of ‘them and us’ as the divide between MPs’ pensions and our own. Although the days of their fabulous final salary scheme are gone, politicians still enjoy one of the most generous pensions in the country. The accrual rate of 1/51st is very tasty indeed.
Want to know why former chancellor George Osborne was so quick to unveil the pension freedoms without a proper assessment of the consequences? It is the risk factor.
It is little wonder that the nation’s retirement savings are such a mess when the MPs who set the rules are living in a different world from us.