End of final salary pensions - in public sector too?

Geoffo_M

CLAPTON wrote: »

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

Why not? A Labour government will never take on the unions. But it needs doing

exil

Well, we may not ALWAYS have a Labour govt (I'm a Labour voter but I can't rule it out that the Tories could win). That said, the Tories did nothing about public sector pensions when they were in power. Perhaps because senior civil servants, judges, generals, admirals etc would be the main sufferers if they were changed for the worse.

There's nothing wrong with FS schemes other than the volatility of the stock market and inflation rates making it impossible to avoid swinging between massive overfunding (as in the 80s/90s) and underfunding (as now) and therefore the schemes appear as a massive potential black hole in company accounts if pessimistic assumptions are made. We should ALL have a pension to look forward to that we can predict with some confidence so we know how much private provision to make. So maybe we need a better state scheme as they have in Europe? But would we like to pay more tax to have one? And would we trust future govts to maintain the scheme?

whitfreak

countrygirl27 wrote: »

Right OK - so the pensions system will change, so I now revise my question:
how do people think they will change?

And the bit of pension that Ive already built up, that would stay the same, but my pension 'post change' would be calculated differently?

As I say Im no expert but I'm always being told that my scheme (TPS) is one of the best around. So I want to guard it!

I dont think public sector pensions will change in the near future. One thing they could do is increase your contribution rate from 6.4% to something more evil. Effectively reducing your pay, but not changing your entitlement.

From the couple of public sector schemes I've looked at final salary is closed to new member, they now get a defined benefit scheme based on the average of their salary over all of their career. There are fewer other benefits and can result in slightly smaller pensions presuming you move up the ladder than under FS. So they could move existing members to this.

I find it unlikely that they was move to anunity bases pensions for current members. But I can see defined benefit schemes being closed to new members within the next 10 years.

(Andy L - I stand corrected)

m_c_s

It is worth stating a few facts:

1.There is a process by where any future increases in the cost of providing civil service final salary pension schemes is considered. It is a shared responsibility process between employers and scheme members. This process limits the average contribution of the employer at 20% (ok that is very good!).
2. There is a revaluation of civil service pensions in 2010 and whether the costs go up or down will dictate the employers contribution level.Currently it is on average 18.9% for 2009.
3. If costs of the pension scheme go down the cabinet office hold onto any savings!
4. In 2007 the cost of providing the civil service pension reduced thus money was returned to CO!
5. If costs go up after the 2010 valuation then cost sharing between employer and employee has been agreed.

MikeJones_2

For information purposes:

- Civil servants to get public sector pension for 29 years (Money Marketing 27/01/2009)

Mike

I work in the field of Pension Education and Pension Guidance in the UK. I am a member of the Specialist Pensions Forum as well as being a Voluntary Adviser for The Pensions Advisory Service. I work with scheme members, employers, trustees, scheme administrators and advisers on most things to do with employer sponsored pension schemes. The views expressed by me in this thread are my personal opinions. You should seek professional advice from an appropriately experienced and qualified adviser. I am not an IFA.

oldandgrumpy

I bet the MP's pension scheme will not change to their detriment! And following the CS in adopting private schemes will certainly not be an option!