Public-private wage divide gets 50% wider

Andy_L

Old_Slaphead wrote: »

Public sector pay negotiators was quite happy to use statistics when they showed lower pay rates to justify their final salary pension provision.

no, if they used statistics is such a sub-gcse way they'd get laughed out of the room

Old_Slaphead wrote: »

The best that can be done is averages.

no it isn't, the report that started this thread drills down to salary by occupation (which is why we know medics are the highest paid and shop assistants the lowest). Now I'm curious as to why it doesn't do the same for public/private - you could put together a good conspiracy case for either side

Old_Slaphead wrote: »

Now it's time pensions too were brought into line.

Fine by me, it would make public/private comparison far easier, now which average would you like to use

Sir_Humphrey

Andy_L wrote: »

The last few times the min wage has been increased the MoD has had to increase the bottom of it's pay scale by more than they would have done to take people above min wage.

However it's at that level that I would agree that public sector workers are over renumerated as min wage doesn't include the value of pension contributions, although it's people at that level who tend to be the loosers in a final salary scheme

Mainly however those min wage jobs have been contracted out so whilst still being paid for by the tax payer they count as a private sector worker, skewing the average.

+1. It is true that relative pay gets worse, the higher up in the public sector you get. IMO, that is partly down to excessive pay in at boardroom level in the private sector.

As for my own pay and conditions stand, they are acceptable for me (I am relatively well paid by civil service standards). Obviously, I am keen for them to remain acceptable.

Andy_L

Sir_Humphrey wrote: »

Re paragraph 1, it is correct that new civil servants are on a career average pension. The outcome of this is an deincentivisation to gain promotion (i,e it will encourage timeserving).

It's career avergae but the accrual rate is higher - it's supossed to be actuarially equivilant to the old FS scheme but shares out the money more fairly between plodders & flyers

Sir_Humphrey wrote: »

I do not know about the existing benefits being enshrined in law. It is certainly enshrined in my employment contract. My existing pension entitlement (such as it is) has never been under threat.

Accrued rights in FS schemes are protected by both statute and contract law (as are Private Sector schemes).
Technically the Gov could "change the law to let them break the law" iyswim but it would be a "year zero" option as it ends the gov's ability to use bonds to raise capital as no one will trust them on a multi-year financial deal, and indded would destroy the money purchase pensions as they are ultimatly based on government gilts/bonds

Sir_Humphrey wrote: »

Putting civil servants on a money purchase scheme would lead to significant up-front pay increases (market forces)

The big downside to move the unfunded schemes to money purchase is it doubles(ish - depending on the contribution used) the current annual costs untill people die off as the contributions currently used to pay pensions will have to be invested whilst the current pensioners still have to be paid

Old_Slaphead

Andy_L wrote: »

no, if they used statistics is such a sub-gcse way they'd get laughed out of the room

Seemed to be the most quoted reason for the 'generosity' of public sector pensions was low pay (however defined).
It would be interesting to use comparative data to whatever data was used 10-20 years ago when the low pay reason was more appropriate. Given the well above average pay increases given to teachers, nurses, police amongst others I'm sure whatever method of comparison was used would now show a considerable favourable movement towards the public side.

Andy_L wrote: »

Fine by me, it would make public/private comparison far easier, now which average would you like to use

How about a defined contribution scheme with a max employer contribution of 10%. That would make it better than about 95% of private schemes (those lucky enough to have one - remember many have NOTHING). It would also save the country £billions and remove a long term accumulating liability of circa £1trillion (and rising)

carolt

Long-term public pensin liability is clearly a problem - but you have to balance that out against needing to pay public sector workers equivalent to the private sector for the samejobs. Or you will find large numbers leaving - the pension is the only decent perk.

Old_Slaphead

carolt wrote: »

Long-term public pensin liability is clearly a problem - but you have to balance that out against needing to pay public sector workers equivalent to the private sector for the samejobs. Or you will find large numbers leaving - the pension is the only decent perk.

There are no "samejobs". Anyway where's hundred of thousands of doctors, nurse, teachers, policemen, firemen, soldiers, civil servants etc etc going to go. There are no jobs in private sector.

It's a devisive issue and there are no easy solutions.

Given the vast amount of public debt, bailouts to bankers, accrued pension commitments, PFI liabilities - in total approx £2.4trillion or £100,000 per family - something dramatic needs doing to avoid serious imparement of living standards for the next few generations.

Anybody got any good ideas?

Cannon_Fodder

Print some more money?

Giving everyone £100,000, should do it.

Sir_Humphrey

Andy_L wrote: »

It's career avergae but the accrual rate is higher - it's supossed to be actuarially equivilant to the old FS scheme but shares out the money more fairly between plodders & flyers



Accrued rights in FS schemes are protected by both statute and contract law (as are Private Sector schemes).
Technically the Gov could "change the law to let them break the law" iyswim but it would be a "year zero" option as it ends the gov's ability to use bonds to raise capital as no one will trust them on a multi-year financial deal, and indded would destroy the money purchase pensions as they are ultimatly based on government gilts/bonds



The big downside to move the unfunded schemes to money purchase is it doubles(ish - depending on the contribution used) the current annual costs untill people die off as the contributions currently used to pay pensions will have to be invested whilst the current pensioners still have to be paid

Thanks, that is very informative. I had forgotten the part about the accrual rate.

chewmylegoff

Sir_Humphrey wrote: »

Re paragraph 1, it is correct that new civil servants are on a career average pension. The outcome of this is an deincentivisation to gain promotion (i,e it will encourage timeserving). Career average pensions also apply to new NHS Doctors too.

i was never a member of the new career average scheme - but i can't see why it deincentivises promotion since:

i) if you got promoted and were paid more money, your career average earnings on which your pension is based would be higher, hence your pension would be higher.

ii) even if this isn't true (can't see why it would be, but i'm not sure how the average is worked out) your pension isn't going to be reduced by a promotion, and you would earn more money whilst working.

Re paragraph 2, an extension in working age to 65 is the most likely eventuality IMO.

wouldn't be surprised to see the retirement age at 68 / 70 by the time i retire. this is the easiest way for the govt will change the terms of your pension entitlement.

public sector pensions in 30 years' time will look very different to how they look now. whether the govt decides to meddle retrospectively with what you have accrued to date remains to be seen. as you say, it would seem political suicide to do so, given the numbers of public sector workers, but the landscape may be different in the future.

i think it is most likely that the scheme will go money purchase - and that there will be a moderate employers contribution of say 4-6% of salary, which the employee will be forced to match.

i know one thing - i'm transferring out my entitlement.

Sir_Humphrey

chewmylegoff wrote: »

i was never a member of the new career average scheme - but i can't see why it deincentivises promotion since:

i) if you got promoted and were paid more money, your career average earnings on which your pension is based would be higher, hence your pension would be higher.

The benefit of promotion is reduced, particulary for those near the end of their careers. It is not uncommon for someone to join as an AO in their twenties, and reach HEO by about fifty. A switch to career average clearly reduces the financial benefit in gaining promotion.

A promotion generally gains someone about £4-5k PA at the lower levels. So the reward for promotion for a someone aged fifty is about £50000 over ten years which is not much when pensions are taken out of the equation. HEOs have a lot more responsibility and a heavier workload than EOs.

I won't comment too much on your expectations about the future. At the end of the day, if we lost our pensions, market forces would push up our wages (after a short lag). It would also damage the economy by removing a lot of structural demand in the short run until wages rose to compensate.

EDIT: To summarise, I think you are simply extrapolating existing trends in employment conditions into the future. I do not think this is valid as it pushes present trends too far into the future.