Huge row over pensions report

stevem01

No offense taken, everyone has the right to opinion, and I love a good debate.

But the 67 date is the State Pension , not the occupational pension. You have a choice of taking your occupational pension at 60 , exactly the same as a civil servant.

A civil servant would draw an occupational pension at 60 and SP at 67, a private sector worker would draw an occupational pension at 60 and SP at 67. The difference ?? (apart from the funding ?).

I think you have missed a very, very important difference.

Most private sector occupational pensions of the defined benefit kind (a rare beast these days in the private sector but not apparently in the public sector!!!) have a defined age at which the accrued pension benefit can be taken without suffering an early pension payment abatement. In many cases the normal retirement age of the pension scheme is 65 or it may (just may) be 63 - I don't think there are many offering retirement at 60 without an early pension payment abatement factor.

So, if an employee is still lucky enough to find himself in a private sector occupational pension scheme offering a defined benefit pension and they retire early, say at the age of 60, their occupational pension earned up to that time is then subject to an abatement factor which reduces the amount that is paid. This is because the occupational pension will be paid out to them for a few years BEFORE the normal pension scheme retirement age upon which the normal benefits are based.

Typical abatement factors are around 5-6% per year of early retirement. So to retire 5 years earlier than the normal occupational pension scheme retirement age of 65 would mean the private sector occupational pension scheme member taking a reduction in his accrued pension FOR THE REMAINDER OF HIS LIFE of around 25-30%. Not exactly a trivial amount.

I don't think this sort of early retirement abatement factor applies to the public sector schemes which have a normal retirement age of 60, with a full payout of the accrued pension from age 60. A hell of a difference - I'm sure you will agree.

dunstonh

I was an ordinary individual doing a normal job which was paying 20% more outside the public sector.

Chances are that the pension, sickness benefits, life cover benefits would cost 20% on a like for like basis.

Civil Servants get job security and the best pension scheme in the country and the taxpayer foots the bill. Not only that, all those tax payers are going to see the state retirement age increase or their tax bill increase or find the benefits reduced. In the meantime the civil service want to keep their cosy 60 arrangement.
Just like the self employed want to keep theirs at 50?

The difference is that the self employed have to save a heck of a lot of their own money to retire at that level. They are not asking the tax payers to fund their early retirement.

Also, not many can manage 50. Now its you not comparing like for like.

And what beggars belief?
That your grasp of finances leaves me a little bewildered.

Ok, you're the expert. Lets move away from views and opinions on the rights and wrongs as we are not going to agree. Lets look at who and how the pensions are going to be paid in future.

How do you think that the pensions going to be funded in the future then and by whom?

djohn2002uk

dunstonh wrote:

The difference is that the self employed have to save a heck of a lot of their own money to retire at that level. They are not asking the tax payers to fund their early retirement.

My last reply to you on this subject, it's pointless when you cherry pick the quotes or don't read them properly. You seem to have overlooked this reply.

"If i wanted to, yes. Big difference here is that I am paying for my own savings and therefore I have the choice. I would swap what i have to pay for your final salary pension anyday".
More like your charges will take into account the amount you need to pay for your pension, so clients are the ones paying. Shall we call them taxpayers?

Dora_the_Explorer_5

According to what I've recently read the state pension will equal something like 8.8% of average earnings in not too many more years. Don't think it's going to be a struggle for any government to cough up that much however many over 65s are around. The means tested benefits that people will have to claim will be another story of course. Who pays? The poor bloody infantry............. as usual!

oceanblue_3

djohn2002uk wrote:

"If i wanted to, yes. Big difference here is that I am paying for my own savings and therefore I have the choice. I would swap what i have to pay for your final salary pension anyday".
More like your charges will take into account the amount you need to pay for your pension, so clients are the ones paying. Shall we call them taxpayers?

........and possibly it's hard work, experience, and expertise that give some people the opportunity to earn more money so that they can choose to invest some of it, and not see it all taxed...........

dunstonh

My last reply to you on this subject, it's pointless when you cherry pick the quotes or don't read them properly. You seem to have overlooked this reply.

"If i wanted to, yes. Big difference here is that I am paying for my own savings and therefore I have the choice. I would swap what i have to pay for your final salary pension anyday".
More like your charges will take into account the amount you need to pay for your pension, so clients are the ones paying. Shall we call them taxpayers?

You respond by cherry picking one issue. Then you accuse me of cherry picking? You also keep comparing retiring at 50 in the private sector with 60 in the public sector.

Its clear you haven't got a clue on how future funding requirements are going to hit the public and take to giving agressive responses to anyone who suggests that its about time that the civil service pension was reviewed and brought into the real world.

My earnings as a company and my earnings as an individual do have some link. However, the amount paid still comes out of my pocket and the benefits I will receive has a direct link to what I choose to pay in.

The civil service pension has no penalty in place to take at 60 and the benefits given are totally out of proportion to the contribution that the employees make.

To get those same benefits as the civil service, I would need to pay 15-20% of my earnings. How i achieve my earnings is irrelevant. However, to humour you, yes my clients are funding me. They do not have to. It was only my qualifications and service that gets me that income. The consumer has the choice to go elsewhere.

If i was not successful, I would have to reduce my retirement planning. Tesco would have to do the same, as does any other private sector company. You cannot spend what you dont have. Unless you are in the civil service that is.

cheerfulcat

djohn2002uk wrote:

Totally Unbelievable! He doesn't need to jail you, if you don't buy your food from somewhere to help pay for someones pension, you starve. Where do you think the profits come from? Do I really have to explain again that they are from your purchases?

Yes, but I get something for my money when I buy food. Money which I *choose* to spend is not the same as a tax levied on me which I have no option but to pay. And if I need food, I can buy at Tesco, or the corner shop, or even grow my own. I am not *forced* to give my money to Tesco.

EdInvestor

One thing I think is very unreasonable is these unilateral decisions to change the age with no transition period.

For instance the age you can take personal pensions is just about to jump to 55 from 50. There may be a short transitional period of about 4 years but that's it. You can see many people getting caught in this one, early retirement (aka redundancy) being so common these days.Possibly this will just mean the Govt has to pay more in benefits to bridge the gap.


Equally, although frankly I don't think it's really sustainable to have this big gap opening up between the public and its servants, nor do I think it's fair or acceptable to raise the public sector's retirement age for everyone immediately : imagine how you would feel if you were aged 59 and this happened to you. :mad:

IMHO there should be at least 10 years' warning allowed when such changes are introduced, so people can plan properly.

Pal

EdInvestor wrote:

One thing I think is very unreasonable is these unilateral decisions to change the age with no transition period.

For instance the age you can take personal pensions is just about to jump to 55 from 50. There may be a short transitional period of about 4 years but that's it. You can see many people getting caught in this one, early retirement (aka redundancy) being so common these days.Possibly this will just mean the Govt has to pay more in benefits to bridge the gap.


Equally, although frankly I don't think it's really sustainable to have this big gap opening up between the public and its servants, nor do I think it's fair or acceptable to raise the public sector's retirement age for everyone immediately : imagine how you would feel if you were aged 59 and this happened to you. :mad:

IMHO there should be at least 10 years' warning allowed when such changes are introduced, so people can plan properly.

The changes only apply to future accrued benefits. The individuals are still able to take the benefits they earned up to the date of the change at age 60, without any early retirement reduction. If these benefits are taken after age 60 a late retirement increase is applied to them.

Future benefits earned after that date can only be taken at age 65 unless a reduction is applied. Effectively this acts as a transition period. A person with only a year to go to age 60 will be hardly affected, and can offset the reduction in their last year of benefits by working for an extra few months past 60. This would give them an early retirement reduction on a small part of their benefit, but a late retirement increase on the much larger part.

For members further away from retirement the age at which they can receive the same pension amount slowly increases until (in 40 years time) the last current employees will need to retire at 65 to get the same amount.

I do however agree that careful communication and perhaps some grandfathering of benefits is appropriate for those very close to retirement.