Critics have described public sector pensions as a “Ponzi Scheme”.
Although there is no illegal deception involved, the essential elements are there. Those who paid contributions in the past saw their money spent, and their pensions are now being paid by workers making contributions for what they believe is their own future pensions.
When the music stops – i.e. when the Government closes these over-generous schemes – the poor taxpayer, mostly not in receipt of these generous pensions, is going to have to keep paying, and will get nothing back.
The design of these pensions, and more particularly the refusal of generations of politicians to reform them, is a stain on the character of our elected politicians and the civil servants who advise them.
But whenever political decisions are made (or avoided), it is always worth asking “who benefits”, and “who loses”?
Civil servants, who dominate the agenda of the highly contentious question of their pension design, are heavily conflicted. They stand to benefit if the system stays in place, and lose out if it is reformed.
They are not personally affected if future taxpayers are impoverished by their generous pensions; they simply need the system to survive until they retire.
This egregious conflict of interest lies at the heart of this failure of good government, and should never have been allowed to arise or continue.
To eliminate this conflict, civil servants must be taken out of the decision-making process, and have reform conducted by independent pension experts familiar with both public and private sector systems.
In the meantime, every year that passes with heads buried in the sand is another year in which future taxpayers’ incomes are mortgaged.