Pay pensions and conditions

The Scottish Government’s own figures for 2016 show that average public sector hourly pay rates at £14.82 per hour are much higher than the private sector’s £10.67. It also shows that the Scottish public sector worker (in a lower cost economy) is paid slightly more than the UK public sector worker £14.77. The differential between public and private sector pay in Scotland is much higher than in the rest of the UK where private sector workers earn slightly more than their Scottish private sector colleagues at £11.06 per hour. So the myth that public sector workers work for less pay is clearly way off the mark. The Scottish Government report doesn’t go to individual councils but its highly unlikely that the pay differential is lower as the Borders has some of the lowest wages in Scotland yet our Council workers will be paid on the same rates as their equivalents working in places with much higher costs of living such as Edinburgh, Birmigham, Manchester etc. Whilst the private sector wages have adjusted to local conditions the public sector has not. The Council does not need to pay the high wages it does to compete with the private sector – it already pays super premium wages.

Looking at the Borders Council’s own website on working for them, annual leave excluding public holidays is 28 days over 5 and a half weeks holiday, compared to the typical private sector leave of 4  weeks. This rises after 5 years’ service to 33 days or over 6 and a half weeks in the private sector you might be lucky to get 5 weeks. The working week 35 hours, average private sector workers work on average work almost two hours a week extra.

And the best or most costly to the taxpayer is public sector pensions. Until April 2015 public sector workers enjoyed a final salary scheme based on a percentage of their final salary, something that was phased out of the private sector many many years ago as it is just so prohibitively expensive. But fear not, the public sector workers made sure that the move to a pension based not on their final salary but their average salary will be “phased in” over some 13 years so they won’t lose out. So it will be half a generation before the public sector moves fully to the new scheme. The private sector moved to what is called “defined contribution” years ago. Under this scheme the employee and the employer make contributions over the period of employment into a pension pot when the employee retires their pension is dependent solely on what that pot is worth and what annuity it can buy. The Borders public sector worker though will be guaranteed to get a pension based on their career average salary at the rate of 1/49 per year of service. So what does this mean lets take Bev in the Borders Council admin her career average salary might be say £35,000 she works say from 25-65 40 years so her pension will be £28,571, it will of course be higher than this as its index linked so she doesn’t need to worry about inflation. So what does Bob who works for a local private building company have to do get the same pension ( we will assume his career average salary is £35,000 as well)  According to the FT’s latest annuity rates to get a pension of £28,571 he would need a pension pot of £948,887. Assuming he made contributions of 7% (the same under the State Scheme) and his employer made say 10% contributions – over his working life contributions would total some £238,000. As the FTSE 100 is now slightly lower than it was way back in 2000, Bob’s pot wont have made much. In Bob’s case he will just have to live on a fraction if the income he got whilst he was earning whereas Bev will be living on about 80% of what she got paid whilst working at the council which combined with her old age pension will mean she will probably see a slight increase in her income. So poor Bob not only is having to make do on modest pension but he also has to live with the fact that he has been working longer hours, had fewer holidays, was paid less than his council counterparts and was paying all his taxes to make sure Bev got a platinum plated pension.

So Council its really quite simple to preserve and enhance public services, you stop paying more than the going rate you increase the working week, you cut holiday entitlement and you switch to a defined contribution pension scheme. Job done.

Why the contribution is important

Because it woudl result in massive savings meaning that public services could not only be preserved but enhanced. I suspect the only problem is that if you tried to implement it the worlers will go on strike and the bosses would be adversely affected so why on earth woudl they even bother to put the plan into action - a clear conflict of interest

by adsmith on December 05, 2016 at 03:36PM

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