Local government pensions and the Tories

RobertoMoir

seagull112 wrote: »

I can't really comprehend why you think it's fair that I'm required to pay more into other people's pensions than I can afford to pay into my own or, indeed, why any family scraping to cover the mortgage and struggling to build their own personal pension should be lumbered with the cost of covering public sector workers, who retire years earlier on risk-free pensions.

Absolutely. The whole entire pensions system, both public and private, needs an overhaul in this country. As does health-care for the elderly.

Question is are people willing to demand that or are they going to settle for getting behind whatever headline grabbing politician is threatening to bash the "other lot"'s pensions this week?

Are you in favour of reforming pensions, or are you just in favour of reforming my pension?

seagull112

DiggerUK wrote: »

I think it needs a post from an IFA at this point.
If a 21 year old, finished with their education, just started their first job asked you to plan for them receiving 50% of salary in retirement, would you advise them that they were dreaming.
Or would you be able to show them, that with with regular reviews it was achievable.

I have my own ideas on how pensions for all at a reasonable level could be provided.

P.S.
I'm not looking for a barney with an IFA, just an honest exchange. :beer:

OK Digger ... well I'm not an IFA (& I'm not looking for a barney either!) but this might go someway towards providing the information you're looking for:

This example of (one particular) Public Sector Final Salary Scheme was taken from The Guardian on Saturday 11th June 09:

Jenny, 37, teacher
Current salary: £43,000
Pension at age 60: £20,425
Tax-free lump sum: £61,275
Jenny pays 6.4% of her £43,000 a year salary into the Teachers' Pension Scheme (TPS). She joined the scheme at age 22 and expects to work until age 60. For each year of service she clocks up an annual "final salary" entitlement equal to 1/80th of her salary when she stops teaching. She will also get a tax-free lump sum on retirement equal to 3/80ths of that salary. This calculation of her benefits is a deliberately conservative one and she would be highly likely to receive rather more if, for example, she gets promoted and/or her pay goes up.

Using the online calculator provided by The Guardian in association with Aegon, I've tried to work out how much a 21 year old (female) would need to put into a pension scheme to get a similar lump sum & pension (in today's money i.e. taking inflation into account) at the age of 60, and the answer is approx £630 per month now (including tax relief ) & increasing by 3% each year.

This Pension Calculator would be very useful to anyone trying to calculate their likely pension. I'm afraid, as a new user, I'm not allowed to post links, but it can be found on the aegonse.co.uk website using the links 'pensions', 'saving-for-retirement' & 'calculators'.

seagull112

RobertoMoir wrote: »

Are you in favour of reforming pensions, or are you just in favour of reforming my pension?

As I said in a much earlier post, " I believe that everyone should have a decent pension to see them through retirement, but that the system should treat everyone equally."

I have never suggested that anyone who has paid into / been promised a pension shouldn't get it, but before future committments are made I'd like the government (whoever they happen to be) to do an honest appraisal of the long-term costs & make the system fair, both in terms of costs & benefits. I also think there should be a standard retirement age for everyone.

DiggerUK

Clapton,
If the argument that Public Sector Pensions (PSP) need to be scaled back, or even abolished, then private pensions (PP) are the only route left.
As the argument is always the earlier you start, the better your pension will be, then 21 seemed a good age to ask supporters of PP, if, with proper management, a final pension of 50% was achievable.
It would be normal under those circumstances for the 21 year old to be advised to see an IFA, not an economist.
Didn't comprehend your "although it's trivial to work it out for yourself" Maybe you posted too quick. (We've all done that.)

Seagull112,

I don't have a problem with Jenny's pension. I don't have a problem with my own PSP.

If changes have to be made to PSP then is the alternative PP provision capable of providing a 21 year old with a pension close to 50% final salary. I'm not even suggesting that we call it a 50% final salary scheme, just something that gets near that figure.

So far nobody has said if PP could make this figure realisable, or if it is pie in the sky. If a viable and acceptable alternative to PSP is on the table, then me and mine have something to negotiate for.

As things stand there is a lobby to just end the provision of PSP, without spelling out the details of the alternative that is to replace it.

If pensions affect all of us, why not have some degree of parity that benefits us all.

My question stands, can a 21 year old hope for a pension in retirement of about 50% of their final salary. 630 a month is astronomical.

jem16

seagull112 wrote: »

Jenny, 37, teacher
Current salary: £43,000
Pension at age 60: £20,425
Tax-free lump sum: £61,275
Jenny pays 6.4% of her £43,000 a year salary into the Teachers' Pension Scheme (TPS). She joined the scheme at age 22 and expects to work until age 60. For each year of service she clocks up an annual "final salary" entitlement equal to 1/80th of her salary when she stops teaching. She will also get a tax-free lump sum on retirement equal to 3/80ths of that salary. This calculation of her benefits is a deliberately conservative one and she would be highly likely to receive rather more if, for example, she gets promoted and/or her pay goes up.

This example highlights the problem of believing everything that is in the newspapers.

First of all no unpromoted teacher in Scotland can have a salary of £43k - highest at the moment is £33,400. So pension even allowing for a full 40 years would be £16,700.

In reality this very rarely happens for female teachers in particular with career breaks or part-time work to bring up children.

I am currently paying 15% into my pension and have been for the last 18 years. Even at that I can't make the maximum pension so mine will probably be around £12k if I continue to age 60 (which I would rather not to be honest) but it could well be less. At the moment I have less than £9k with only 7 years to go.

I consider myself to be one of the lucky ones. The majority of LG workers have a pension far less than what I will get but of course the papers always highlight the top end with higher salaries due to promotion and who have worked constantly with no breaks.

RobertoMoir

seagull112 wrote: »

This calculation of her benefits is a deliberately conservative one and she would be highly likely to receive rather more if, for example, she gets promoted and/or her pay goes up.

And of course the graniuard neglects to mention she'd already have to be promoted a good few times to be on that salary. This is not a basic teaching salary.

seven-day-weekend

My husband was earning around £27000 (not £43000) at the end of his teaching career (early retirement at 55 in 2004). He was a classroom teacher, no management responsibilities (by his choice). The figures quoteds are for a teacher with management responsibilities.

seagull112

jem16 wrote: »

First of all no unpromoted teacher in Scotland can have a salary of £43k - highest at the moment is £33,400. So pension even allowing for a full 40 years would be £16,700.

First of all... I didn't say it was a starting salary, I didn't say that the teacher was unpromoted, I didn't say that she was in Scotland, I didn't even say that the salary was an average. Obviously there will be teachers who earn less ... and more.

Just because one particular example doesn't reflectly the position of every single worker in the public sector, doesn't mean that the figures contained within it are incorrect.

The point is, it's (one particular) example of a public sector salary & correlating pension that's:

(a) correct
(b) current
(c) easily accessible (as I don't have access to every single public sector salary / pension & couldn't quote them all even if I did)
(d) in the range to which (I think) a university graduate, entering the Private Sector workforce at 21, might aspire to reach by the time they retire
(d) just happens to offer the 50% salary to pension ratio that DiggerUK suggested would be appropriate for everyone.

The purpose of the exercise was not to suggest that every teacher (or other Public Secor employee) earns £43,000 after 16 years service (some earn less, some more), it was to address DiggerUK's question:
"If a 21 year old, finished with their education, just started their first job asked you to plan for them receiving 50% of salary in retirement, would you advise them that they were dreaming."

It's up to you to decide whether asking a 21 year old working in the private sector to pay £630 per month from their starting salary into pension funds that are:

(a) not guaranteed
(b) subject to the performance of the markets
(c) open to pillaging (currently in the range of £5 Billion per year) by any government that needs to make up for mismanagement of finances elsewhere

is a 'dream' or a nightmare.....

CLAPTON

DiggerUK wrote: »

Clapton,
If the argument that Public Sector Pensions (PSP) need to be scaled back, or even abolished, then private pensions (PP) are the only route left.
As the argument is always the earlier you start, the better your pension will be, then 21 seemed a good age to ask supporters of PP, if, with proper management, a final pension of 50% was achievable.
It would be normal under those circumstances for the 21 year old to be advised to see an IFA, not an economist.
Didn't comprehend your "although it's trivial to work it out for yourself" Maybe you posted too quick. (We've all done that.)

Seagull112,

I don't have a problem with Jenny's pension. I don't have a problem with my own PSP.

If changes have to be made to PSP then is the alternative PP provision capable of providing a 21 year old with a pension close to 50% final salary. I'm not even suggesting that we call it a 50% final salary scheme, just something that gets near that figure.

So far nobody has said if PP could make this figure realisable, or if it is pie in the sky. If a viable and acceptable alternative to PSP is on the table, then me and mine have something to negotiate for.

As things stand there is a lobby to just end the provision of PSP, without spelling out the details of the alternative that is to replace it.

If pensions affect all of us, why not have some degree of parity that benefits us all.

My question stands, can a 21 year old hope for a pension in retirement of about 50% of their final salary. 630 a month is astronomical.

As I've already said for an individaul considering a pension within the current rules etc then see an IFA but to talk about the affordability for EVERYONE to have a decent pension you need an economist.

Just to give a feel for the problem

suppose you earn £20,000 per annum
you want in real terms (todays valuations) a pension of 1/2 your salary
you're 20 today and will work until 60 (i.e work 40 years)
your live expectancy at sixty is about 28 years

so a trivial calculation (OK I know the shortcomings and will correct for those in a minute)


your retirement pension pot needs to be
1/2 of 20,000 x 28 (years ) = 280,000

so that means in simple terms you need to save (or your employer or the state (i.e. other tax payers)
280,000/40 = 7000 per year

now the question is ..out of a salary of £20,000 would a reasonable person be prepared to save 7,000? (ie. 35% of your salary every year) ... a great many would not

Now the lucky teacher that posted above pays in 6% (or so) with the tax payers putting in the rest..,. for the individual that's a great deal but for the whole country to afford that level of pension raises deep questions.

Now you can argue that of course I haven't taken any savings interest or investment income into account... and I haven't ... if you do the calculation assuming a 1% real growth then the amount you need to save drops to 5,500 or 20% of income.

Then you need to take into consideration that many people won't start investing at 20, people have career breaks etc. many people will increase their salary over time and want 1/2 of their higher (maybe final) salary etc.

What I'm trying to do here is NOT give investment advice but simply to give a simple feel for the scope of the problem if every one is to get a 'decent' pension

RobertoMoir

seagull112 wrote: »

As I said in a much earlier post, " I believe that everyone should have a decent pension to see them through retirement, but that the system should treat everyone equally."

I have never suggested that anyone who has paid into / been promised a pension shouldn't get it, but before future committments are made I'd like the government (whoever they happen to be) to do an honest appraisal of the long-term costs & make the system fair, both in terms of costs & benefits. I also think there should be a standard retirement age for everyone.

Fair enough. My post was rhetorical rather than anything pointed at you. I already explained my point of view about the usefulness of these threads in another post.