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A few thoughts on the pension strikes

So a funny thing happened last weekend. I say funny, it wasn’t really, but you know what I mean.

I was having a drink with a friend who’s a healthcare professional in the NHS. We were talking about the 30 November industrial action. She’s not going out on strike, as she has quite a lot of elderly patients who need her to come and sort their bits and bobs out, and she doesn’t want to let them down. She is upset by the pension changes, though, and feels that her efforts aren’t valued. But she also feels that the strikes have come too early in the process, and the unions have, as you might say, gone for the money shot a bit too soon.

We got talking about the difference between private and public sector pensions. And when I took her through what she’s entitled to compared to what she might get in the private sector, she was taken aback.

Here’s how it broke down, very roughly. She’s 35 and earns her age give or take a bit. She’s been in the NHS superannuation scheme since her early 20’s, so about 12 years. She’ll retire at 67, having notched up maximum service on the current basis. So, if we assume her salary remains constant in inflation-adjusted terms (it won’t but it’s a better proxy for CARE schemes), then she’s in line for 1.5x her salary as tax-free cash and a pension of £17,500 a year, uprated for CPI and with survivor benefits.

She knew some of that, but not the tax free cash bit really. I’m pretty sure the CPI vs RPI debate passed her by. But here’s what got her. As near as dammit, in constant money terms, and accepting a fudge that longevity will have increased by her retirement date and that this compensates in part for dynamising at RPI rather than CPI in a quote (sorry, got a bit compliancey there), she’d need a fund of just over £500,000 for the income and £52,500 for the tax free cash.

So this dedicated healthcare professional needs to build a fund of £550,000 off a salary of £35k. For the record, a 23-year old starting now would need to save about 17% of salary to get this fund, assuming constant salary and a bunch of other unrealistic things.

Her husband, a solicitor, gets a matched 6% of salary contribution from his employer. Even if he put all the bonuses he ever gets in to his pension, he’ll never achieve the same goals in percentage terms as his wife.

I’m not right wing, far from it. I think unions and collective bargaining are vital and the right to withhold labour is fundamental. But the public sector does need to understand that it is in a different universe to the private sector. And this isn’t about a race to the bottom, though that sounds fun, but about moving public sector workers onto something more sustainable but which would still make nearly all private sector workers choke on their comprehensive range of attractively priced voluntary benefits.

In short, take the deal and don’t make a fuss. It could be a lot worse.

I drew this stuff on a napkin for my friend. Her closing words were, f the unions had shown us this earlier on, we’d have taken the deal and these strikes wouldn’t be happening.

Like I say, not all that funny really…

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