It's still a “Rolls Royce” pension scheme for States workers, says expert

Wednesday 12 March 2014

Changes to States workers’ generous pension deals do not go far enough and there is still a question over whether they can be maintained, according to an investment manager who has served both as Health Minister and head of the public spending watchdog.

Ben Shenton, the former Senator, says that public sector workers should embrace the new deal proposed by Chief Minister Ian Gorst that would end the old final salary pension deals. But he said that taxpayers should be under no doubt that they are still footing the bill for what he calls a “Rolls-Royce Gold-Plated Pension Scheme”.

His comments come after the Chief Minister announced the plans to end the final salary schemes, and replace them with a system that pays workers based on how much they earn over the course of their careers. His proposals, which have 'in principle' support from negotiators and which will now go to union ballots and a States debate, could come into force as soon as next year.

Workers will also have to pay more of their salaries under the new proposals – with most staff facing increases from 5% to 8% of their pay, and uniformed services going from contributions of 5% to 10.1%.

But Mr Shenton said that they were still getting a great deal – perhaps even too good.

He said: “Members of the Public Sector Final Salary Pension Schemes should embrace the changes and understand that whilst their old Rolls-Royce Gold-Plated Pension Scheme has been modified it remains a Rolls-Royce Gold-Plated Pension Scheme – one that is largely unaffordable within the private sector.

“They should also be thankful to the taxpayer as the States has committed to higher employer pension contributions (teachers) and substantial annual payments (millions) outside of employer contributions (pre-1987 debt).

“If you are a member of one the States Pension Schemes you are extremely lucky. Any member that opposes these relatively minor changes would have to be very greedy, or very stupid. Whether the luxury of such a generous arrangement can be maintained over the long term is another matter. In the meantime the pension schemes will continue to raid the pockets of the taxpayer, and public sector employees will enjoy a Rolls-Royce Gold-Plated Pension.”