June 21, 2010
Britain tackles "unsustainable" pension costs
A newly created commission, taking aim at public-sector pension costs in Britain, is expected to recommend that government employees "pay hundreds or even thousands of pounds more into their pension pots, as the era of early retirement on generous payments is brought to an end."
The Daily Telegraph reports the changes could come as early as next spring (here). George Osborne, the Chancellor, said on Sunday that the disparity between public and private sector pensions was "unsustainable" when the country was entering an age of austerity. Britain was heading down "the road to ruin" without urgent action to cut the national debt, he said. (snip) Chancellor also hinted that a freeze in public sector pay, to be announced in Tuesday's emergency Budget, could last for more than the year that had been expected.
His approach risks a confrontation with trade unions, who last night warned of industrial action if public sector staff were forced to bear the brunt of Government spending cuts. Meanwhile, on this side of the pond, "Many states are acknowledging this year that they have promised pensions they cannot afford and are cutting once-sacrosanct benefits, to appease taxpayers and attack budget deficits," the New York Times reports (here).
The Times cites six states, including New York, that revised their pension laws, but the changes primarily apply only to future employees. (For an explanation of New York's Tier 5 pension plan, which affects workers hired after January 1, 2010, see here.)
In contrast, Colorado has imposed cuts on current employees and retirees, reducing an annual pension increase from 3.5 percent to 2 percent. Retirees are challenging the change in court.
How much do New York state and local retirees collect in annual benefits? Check for yourself on SeeThroughNY.net, the Empire Center's government transparency web site. Last week, the 342,543 members of the Employees Retirement System were added to the website.
Nearly 1,400 of the retirees collect pensions exceeding $100,000 a year. Retired police and firefighters accounted for two-thirds of these six-figure allowances (here).
The annual pensions of 134,796 teachers and school administrators (outside New York City) were posted on the site in May. More than 1,000 of them earn pensions of $100,000 or more (here).
In an editorial Sunday, Gloversville Leader-Herald wrote (here). Government and the public education system have given away the store in employee negotiations over the years. Retired public workers may deserve pensions, but the taxpayers can only afford so much. The Journal News, making a similar point in an editorial, "Poor oversight led to bloated pension benefits," wrote here): Some financially strained states, faced with the same financial nightmare, have moved to savings-based, defined contribution pensions--akin to what many private-sector employees pay into--for new hires. Doubtless, New York will eventually do the same; the question is whether it will be before or after taxpayers storm Albany and the last business pulls up stakes for more tax-friendly environs.
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