Sunday, 23 June 2002


There is an interesting letter in the Sunday Times from John Tanner of Bristol. He writes:
Final salary schemes represent an unquantifiable liability and hence cannot be offered honourably by any organisation, public or private.

He goes on to say:

The law should not allow such hollow promises to be made and certainly governments should never have engaged in so doing.

I fully understand why private companies are ending their final salary pension schemes and it would be ludicrous to force them to keep these schemes in force (other than for existing contractual arrangements) as some trade unions are suggesting. But of course governments can offer final salary pension schemes – not because they are cleverer at playing the stock market but because they can use the power of taxation and money printing to meet any pension shortfalls. This may well result in an inflationary spiral but governments can meet their pension liabilities in nominal terms. The real question is why are there so many government jobs in the first place. It is the size and cost of the state sector, together with ever-expanding red tape, which makes it so difficult for those in the productive sector to provide for an adequate retirement income.