Unsustainable pensions

Published on Friday 25 July 2008 20:15

W Yule (Letters, 24 July) is quite right to condemn the Equitable Life directors for promising unsustainable guaranteed returns to their investors while effectively getting off scot-free themselves.

However,

our politicians, senior civil servants and many top businessmen have clearly learned nothing from this fiasco and blithely continue to give similar unsustainable promises with their own finalsalary defined-benefit pensions, guaranteed from 65 or even younger and for unknown but ever-increasing lifespans.

These are unsustainable and inequitable. They typically amount to three or four times the pension level available to money-purchase defined-contribution schemes for similar contribution rates.

Worse still, at least in the public sector (and in much of the private sector) they are unfunded by contributions made to date, unlike money-purchase schemes. So the estimated unfunded public-sector liabilities of an incredible 1 trillion as at today's date, just for today's MPs, MSPs, MEPs and public-sector employees, will have to be paid by our children and grandchildren; already it appears that the tax paid by the average private-sector employee, purely to pay public-sector pensions, is greater than his or her own pension contributions. And such unfunded liabilities are, of course, not reflected in the government accounts.

This is an utter disgrace which virtually no politician is addressing. The MPs' schemes should be terminated forthwith; and the other final-salary schemes, public and private, should be wound-up over a five year period, with accrued benefits to date secured for the employee but with no further compensation. As economist Maynard Keynes once said to a critic: "When the facts change, I change my mind. What do you do, sir?"

JOHN BIRKETT

Horseleys Park

St Andrews, Fife