Cameron: Time to slash public sector pensions

wintersunshine

http://www.thisislondon.co.uk/standard/article-23593402-details/Cameron%3A+Time+to+slash+public+sector+pensions/article.do

Cameron: Time to slash public sector pensions



Vote winner or loser?

Andy_L

"my vision over time is to move increasingly towards defined contribution rather than final salary schemes"

Could that be anymore mealy mouthed?

Kez100

Where did my answer go? Is the OP opening loads of threads with the same title?

MrMicawber_2

We should all be able to contribute to pensions where we know what we end up getting, depending of course on what we [and our employers] contribute. We need security and clarity and defined contribution gives neither. Given another 20 - 30 years and there will be the devil's own mess where we have a huge proportion of the population over 65 and only a very small proportion with sufficient pensions. Politicians are ignoring this and the effect on the economy is going to be severe.

BUT - you don't get something for nothing and to achieve this people are going to need to pay for it. Unfortunately the average person doesn't seem to acknowledge their own mortality until they are about 45 never mind thinking about a retirement income.

Regarding the actual first question (sorry), the public sector pensions are getting unsustainable and there is very much a 2 tier system in place. I don't think it should be slashed for those in the system but something has to give for new starters.

I'd have a state final salary scheme for those who wished to contribute. But the price of security wouldn't come cheap. Given a life expectancy of 85, a contribution of 20% from age 25 (which would include employer and employee contributions), income growth of 6% pa, a pension growth rate of 7% pa up to the time of taking the pension, a growth rate of 6% after this and a pension increasing at 5% per annum after this and you could have a pension of just over 2/3 of your last 5 years average earnings.

Paul_Herring

Is he including MP's pensions in 'public sector?'

Milarky

My answer would be to set a cap on state contributions at some level higher than these currently would cost

eg if it costs 18% of salary (employee 6%) at present then when the gov't contribution got to 20% it would just stop rising. [A 20% taxpayer contribution is equivalent to the tax relief on 100% of salary - which is the most that anyone else could generate themselves] The employee would then be told:

"You can either top this up yourself or your scheme benefits will go down a bit - please consult an independent financial advisor for what is in your best interests"

[And of course they'll have to look at this probably every two or three years. Those nearest to retirement age will be most strongly advised to top up because the gap will be smaller. Those with longer may be advised to so for now - but probably cap their own top-ups at some point before actual retirement. Those with years to go will have to face the fact that thei DB scheme benefits will morph into DC ones - albeit the most generous DC around - that the cost of preserving their scheme benefits is incommensursate with their salary level]

Andy_L

Milarky wrote: »

My answer would be to set a cap on state contributions at some level higher than these currently would cost

eg if it costs 18% of salary (employee 6%) at present then when the gov't contribution got to 20% it would just stop rising.

Pretty much what's been done with the new Civil Service scheme, although increases above the limit are split 50/50 between employer & employee.

Problem is there's only so much salami slicing you can do with a DB scheme. The only option acceptable to Joe Public will be a move to DC, however that will still be better than many private sector schemes which exist only on paper and have no employers contributions.
Trouble is any attempt to have an "overnight" change will double(ish) the annual cost of the unfunded schemes as current employers/employees contributions will have to be invested rather than being used to pay current pensioners, which is probably why Mr Cameron said, paraphrasing slightly, "It's going to take an awfully long time to fully change"