If it wasn’t for Trade Unions, your children would all be at work today.
I am a member of the Universities Superannuation Scheme (USS). In contrast to many public sector pension schemes, USS is not funded by the taxpayer. My pension on retirement is based on my final
salary, calculated at 1/80th of that figure for every year I have worked. The
maximum number of years one can contribute is 40, so that the maximum pension
one can claim is 40/80ths (ie 50%) of final salary. A pretty good scheme and one I didn’t hesitate to join.
Thinking that I would be retiring at the then statutary limit of 65, I joined
USS in 1996 at age 25 when I started my first salaried research postdoc job,
following completion of my PhD. I thought that by doing so I would get the
maximum possible benefit when I retired at 65 (ie, after 40 years service).
I have paid into USS consistently since.
What are the main changes USS is making to the arrangements that I signed up to 15 years ago, and what are my objections to these changes?
(1) My contributions will be increased by 1.15% (from last April in fact) to
7.5% of my salary.
I actually don’t have a big problem with this. We all know that people are living longer, although I simply don’t believe some of the more hyperbolic claims that vast numbers of today’s youngsters will live to 100. The same papers that report those dubious predictions also happily report that today’s kids are so fat they won’t live as long as their parents. You can’t have it both ways….
PS, remember that the 1.15% increase in my contributions is not a 1.15% increase on what I was already paying. It is 1.15% percent of my salary. In other words, it’s the same as having income tax increased by 1.15%.
(2) Upon retirement, annual increases in the pension will be calculated in line
with the CPI measurement, not RPI as at present
This follows government policy for state pensions. The point is that because of the way CPI is calculated, it is almost always lower than RPI. A nice way to save on the money you have to pay out, and a nice way to reduce pensions over time. My objection to this is best done by
quoting Paddy Briggs, Pensioner elected Trustee of the Shell Contributory Pension Fund, in his recent blog :
“In effect this [switch to CPI] is a retrospectively applied income tax. Pensions are deferred earnings – during years of employment workers accrue rights and make contributions and thus they defer some of their income until later (pension) years. To change this after employment is finished [or long after they started contributing, my words] is a highly questionable action – almost a breach of contract (the social contract if not the legal one). ”
I don’t for one moment think the government or any pension scheme will change back to RPI, but I can object.
(3) The pension age will change in line with the state pension age
This is a change that peculiarly affects a minority in the scheme like myself.
I joined at 25 thinking that I would retire at 65, having paid the full 40 years contributions to get the maximum final salary benefit. But for people my age (40, born 1971), the government have changed the statutary retirement age to 67.
Now, hang on, the USS rules are quite clear. The *maximum* number of years one
can pay in, and maximum benefit one can therefore claim, are 40. Since I started at 25, how does increasing my pension age to 67 work? Clearly, the state pension cannot be claimed until 67. But USS?
Well, in a decision so obscure I cannot find any reference to it on the web, just in a correspondence I received, USS are kindly going to *recalculate* my pension contributions such that I, and only the tiny minority like me, must pay over 42 years. USS assures me that I will not actually end up paying any more than someone who pays over 40. I might be minded to believe them, they are
accountants and actuaries after all.
Now you might think this is trifling. But recalculating my contributions
to account for the change in retirement age is not good enough. Here’s why.
Let’s think about my 25 (and 26) year old self. I started my first postdoc on a pitiful salary. To make ends meet, I rented a one room bedsit, sharing a bathroom with 3 other bedsits. I could have
done with a bit more money, but I didnt mind because my contract with USS said
that if I paid in over 40 years I’d get maximum pension benefits. I did, and still do, regard my pension as *deferred pay*.
But now the rules have been changed. Suddenly I have to pay for 42 years, but
only get 40 years benefit. In other words, my 25/26 year old self was
fraudulently deceived (even though no fraud was been committed *at the time*)
into paying into the pension scheme for two years at just
the time in my life (lowest career salary) that I could have done with the extra income. As pointed out above, this is a highly questionable action – almost a breach of contract (the social contract if not the legal one).
I owe it to my 25/26 year old self to protest against the money that he was
deceived into unnecessarily paying.
(4) New entrants (and re-joiners after a career break) for USS will have their pensions calculated not by final salary, but by a career average re-valued earnings (CARE) type scheme.
Everyone agrees that the benefits from a career average scheme are not as good
as final salary (see USS and UCU websites for comparisons). In creating a two tier pensions scheme, USS is sowing the seeds for future resentment and problems between older and younger staff. Indeed, older staff need younger staff to be incentivised to join the pension scheme
otherwise it will not be able to fund their pensions. (If you think about it, all pension funds are at some level Ponzi schemes….)
But in any case, precedent tells us that two tier pension schemes are financially and politically
unsustainable. When introduced elsewhere, especially in the private sector,
existing members have *in every case* been forced into the inferior, lower tier
within four or five years. That outcome would make my objections detailed above seem pretty trivial. I wouldnt just be being defrauded for a couple of years, but over my entire working lifetime thus far.
So my striking yesterday was one of those moments in life where you have to stand up for yourself,
because if you don’t you are only storing up far worse problems for the future.
A word about “deferred salary”
Anyone who decides to work in the public sector, especially in an area that
requires substantial educational qualifications like academia, accepts that their
career earnings are likely to be substantially below that of their intellectual and age-group peers who
went instead into finance, industry, business etc. For the first ten years or so of my career I was on pitiful salaries (and don’t forget that because I did a PhD I didnt start earning until 25). I saw friends buy houses and cars that I could never afford at that stage (and still haven’t bought a house thanks to rampant house price inflation and the subsequent banking and lending crises). However, like all academics I always knew that the USS pension scheme provides excellent benefits compared to most private sector schemes. Thus, it is seen as “deferred salary”. I accepted a low salary in the
first stages of my career in return for a decent pension at the end. Later on
in an academic career salaries rise, and I am currently on what I regard as a pretty reasonable salary for my position and responsibilities, but it is still substantially below what a similar colleague could expect to be paid in the USA. None-the-less, the “deferred salary” aspect of USS has helped to
attract leading academics from the USA to work in the UK, with obvious
benefits for out best universities and the knock-on for UK PLC.
Enough. Now some answers to stock Tory / ignorant objections to my right to strike:
* I pay your salary through my taxes, how dare you strike you arrogant public sector bastard.
Here’s some news for some of you: public sector workers pay tax too! Indeed,
because they pay their taxes through PAYE, they have no way of avoiding them. Unlike say, oh, the numerous “tradesmen” we all meet in real life who like to
sometimes be paid “cash in hand”…..
* We all have to pay our bit to relieve the country’s debt and budget deficit
Public sector workers didn’t cause the banking crisis, which increased the
nation’s debt by about half. Bankers did. Tax them properly first. But in any
case, public sector workers are just like the rest of the workforce. They are
not aliens, or robots trying to defraud everyone else, or non-domiciled residents who pay no tax. They are losing benefits like everyone else. They have had their pay rises frozen like everyone else (and will do for next few years). They are affected by the deliberate policy of letting inflation run high, like everyone else. They pay increased VAT like everyone else. Indeed, the government even admits that the ~3% rise in contributions it is demanding from eg teachers won’t go into their pension “pot”, but simply into the Treasury’s general coffers. It is, in fact, just an
increase in taxation specifically for public sector workers! Imagine the outcry from all you private sector types if income tax was suddenly increased by 3%….
* Private sector pensions are terrible, so why should the public sector have
Err, that’s a weird argument. So, let’s follow the logic all the way shall we. A race to the bottom. Why don’t we just bring back slavery! We could start in the private sector, and then drag the public into slavery too. “You lucky public sector bastards, we private sector slaves were whipped 45 times this morning. We demand public sector slaves get whipped 50 times!”
Seriously though, it is absolutely disgraceful what has happened to private sector pensions. Many private sector workers have tried to do something about it,
although many, not believing in trades unions, have found themselves fucked
without any recourse. The behaviour of many companies in ending their schemes
is sheer greed, and passes the burden of paying for old age onto the
taxpayer. Those of you moaning about public sector drains on the taxpayer
might like to consider that for a moment.
There is also the matter of the many members of the private sector who have chosen to bury their heads in the sand and never bought into a pension scheme. These
people have to some extent contributed to this country’s housing crisis by
piling into the buy-to-let business in lieu of a proper pension, forcing massive increases in prices for potential first time buyers (and subsequent rent rises that inhibit the ability of young people to save for a deposit). And if BTL goes tits up, or they just never bother with any investment for old age, these people will expect the taxpayer (including all those public sector taxpayers) to pick up the bill when they are too infirm to work any longer.
* I’ve had to take time off work to look after my kids because of you striking bastards
Hmm. Well, no-one said that strikes weren’t meant to cause pain. After all, the whole idea is to draw attention to an issue. But it’s one day. And I’m sure teachers in particular thought long and hard before striking in the full knowledge they’d be hurting parents. As for students, well they got to watch Homes Under the Hammer without the guilt complex of skipping lectures!
Judging from some of the foam-mouthed reaction you’d have thought it was 1984 or 1979 all over again. But look, we’ve all had to take days off for a white van delivery driver (quite possibly paid cash in hand) who then never showed up. Live with it, everyone has the democratic right to strike.
* The strike is costing the economy [insert large made up number while placing little finger against lower lip]
Back in April there was a Royal Wedding and we were all given the day off. No-one complained about the damage to the economy. Especially foaming at the mouth Daily Mail readers. Indeed, anecdotal evidence suggests that yesterday shopping centres did a roaring trade as public sector workers and mothers forced to take a day off to look after their kids went and did some Xmas shopping. We should strike more often! As for the 12 hour queues at immigration at Heathrow, what a load of utterly predictable bollocks. Quicker than normal, my spies report.
* Public sector strikers should be shot in front of their families – Jeremy Clarkson
As an employee of the BBC, Jeremy Clarkson is in fact one of the highest paid public sector workers in the country. I believe he lives near Chipping Norton in Oxfordshire, next to Rebekka Brooks and David Cameron. I’ll see you all there when Jeremy is the first to be lined up against the wall.