Thursday, May 31, 2012

Lies, damned lies and "examples"

Within moments of the Government giving the green light we are swamped with information clearly aimed at "selling" the Local Government Pension Scheme (LGPS 2014) proposals.

Clearly a lot of people were privy for some time to information which has only been shared today with our elected Service Group Executives (SGEs) - these factsheets and pamphlets didn't write themselves.

One particularly significant document is a set of "examples" which seek to illustrate the myriad ways in which a career average pension is preferable to the fuddy duddy old final salary scheme supported by our Local Government Conference (

What interests me about this document is that it includes three possible options for future earnings growth in the long run which are CPI-1.5%, CPI and CPI+1.5%, whereas when we published our pensions calculator - when we were trying to persuade members to strike - this was based upon the assumption that "Future AWE is assumed to be 1.5% above RPI. For the projection of pension from retirement, future RPI is assumed to be 4.6% pa (in line with September 2010 RPI), and future CPI is assumed to be 3.6% pa, i.e. 1% lower than RPI. (Actual CPI as at September 2010 was 3.1% pa.)")

In other words, UNISON believed that a realistic projection for long term earnings growth was CPI+2.5%.

This is no mere techical matter. The suggestion that (in the long run) earnings growth would not exceed price rises (never mind that real earnings might fall in the long term) is absurd. No capitalist society would be stable over decades in such circumstances.

The highest of the examples of earnings growth in the "examples" document falls well short of the more honest assumption which UNISON made last year. Could this be because the lower you assume that income growth will be the relatively better a career average comes out of a comparison with a final salary?

Yes, I fear it could.


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