End of final salary pensions - in public sector too?

countrygirl27

Al the stuff in the news currently about the closure of final salary schemes in the private sector, do people think this is likely to happen in the public sector too?

Im 25 have been teaching and contributing for 2 years to the TPS, I still have 43 years to go until I retire, should I face the fact that I wont get a final salary pension?

(PS If so I'll be really hacked off as its the major benefit of being a teacher.)

dzug1

'Final' salary schemes are a thing of the past for new entrants in many parts of the public sector - the civil service scheme is for example now based on average salary throughout the career - not just the final 3 years.

Andy_L

dzug1 wrote: »

'Final' salary schemes are a thing of the past for new entrants in many parts of the public sector - the civil service scheme is for example now based on average salary throughout the career - not just the final 3 years.

However it is still a defined contribution scheme rather than defined contributions, with the employer (tax payer) accepting the financial risk.
The average salary scheme is (susposedly) worth the same as the older final salary scheme as you accumulate at a faster rate, 2.8% of salary per year rather than 1/60th (~1.7%). The savings on the new scheme are retiring at 65 instead of 60 and an agreement to share future increases in cost.

Sapphire

When it comes to the suggestions about stopping final salary schemes for existing members, this surely would not apply to members who have left an employer some years ago, and still are to get the pension as per their original agreement with the employer on their retirement date. In other words, the stopping of final salary schemes would apply to existing staff members only, wouldn't it?

Andy_L

The benefits of deferred members are, legally, untouchable as are the benefits accrued to date for current members.
Technically speaking the government could change the law to allow changes to accrued benefits but it's very much a "year zero" option and causes as many problems as it solves.

Sapphire

Andy_L wrote: »

The benefits of deferred members are, legally, untouchable as are the benefits accrued to date for current members.
Technically speaking the government could change the law to allow changes to accrued benefits but it's very much a "year zero" option and causes as many problems as it solves.

Thanks very much – that's very encouraging!

I thought it might be the case, because I remember when a condition of the final salary pension I have was changed while I was still employed in the place (quite a while ago now), we had to sign a form saying we agreed to the change.

Andy_L

If it's a private sector scheme then you have the risk of the sponsoring company collapsing so you might want to google the "pension protection fund" to check the extent you are covered. 90% of the first X pounds rings a bell

countrygirl27

thanks to evryone for their replies so far.

as far as Im aware my pension is what is known as a final salary pension because I get 1/60 x years service x salary. But what made me start thinking this, (and Im no expert) is that now the government is ploughing money into the private sector and banking and rescue packages etc, surely the government will have a deficit, like private sector companies?

One of the arguments and opinions I hear about this topic is this...
People seem v anti public sector pensions and the fact that they're 'cushy' and their taxes pay for it. But then people also say you should be paid less if you work in the public sector because you get a good pension.

I would say, you can't have it both ways!!!

cogito

countrygirl27 wrote: »

thanks to evryone for their replies so far.

as far as Im aware my pension is what is known as a final salary pension because I get 1/60 x years service x salary. But what made me start thinking this, (and Im no expert) is that now the government is ploughing money into the private sector and banking and rescue packages etc, surely the government will have a deficit, like private sector companies?

One of the arguments and opinions I hear about this topic is this...
People seem v anti public sector pensions and the fact that they're 'cushy' and their taxes pay for it. But then people also say you should be paid less if you work in the public sector because you get a good pension.

I would say, you can't have it both ways!!!

Average pay in the public sector is higher than in the private sector so it would seem tha public sector workers do indeed 'have it both ways'

CLAPTON

countrygirl27 wrote: »

Al the stuff in the news currently about the closure of final salary schemes in the private sector, do people think this is likely to happen in the public sector too?

Im 25 have been teaching and contributing for 2 years to the TPS, I still have 43 years to go until I retire, should I face the fact that I wont get a final salary pension?

(PS If so I'll be really hacked off as its the major benefit of being a teacher.)

Seems a rather depressing start to a career to think that a major benefit is your pension!

And no, there is absolutely no prospect of the current style of final salary scheme pensions still existing in 40 years time.

whitfreak

Countrygirl the UK government is always borrowing money for one thing or another, so its always in deficit.

If your pension scheme closes to existing members then any benefits you have already gained will be frozen and probably index linked until you retire. So say the pension closed today, 2 years worth would be a thirtyth of your current salary indexlinked (probably). You'd be given the option to transfer your contributions to the new scheme, or another scheme but they won't be able to force you. It might be worthwhile who knows. (and your lucky, the tps is now an average salary scheme for new members)

To those who complain about public sector pension, only civil service and MP's pensions are paid directly from taxes to my knowledge (employees contributions are used to pay those currently recieving a pension and any short fall is made up by the departments and tresurary). Local government and alike are funded schemes as in member contributions are added to a large pot of investments which should then cover the schemes liabilities, like private sector schemes work.