How big should my pension pot be ?

marklv

novice-saver wrote: »

Here's an idea to save some public sector money:

sack middle managers who have nothing better to do than troll on internet forums.

Marklv, If your I.T. deparment is any use at all, they'll know how much time you spend here.

It's happened in the past in the private sector, so it's not new or difficult to do.


Have a day.

Much the same could be said for the other posters on this thread - or are they all retired? Smartass.

marklv

bendix wrote: »

Lol @ novice-saver. Damn right.

This reminds me of old Sir Humphrey who used to post on here informing us how indispensible his job (which seemed to involve protecting the nation from the firework-related mishaps) was and how rushed off his feet he was, while spending six hours a day on here sharing his wisdom.

Oh yeah, so speaks the successful businessman who will retire a millionaire. Interesting work that allows you to spend hours on the Moneysaving expert forum. :rotfl:

Old_Slaphead

marklv wrote: »

Much the same could be said for the other posters on this thread - or are they all retired? Smartass.

You're just hacked off because you've joined the public sector to build up a nice pension and have a cushy 20 years and now you find that you're gonna have to work longer for less (assuming that you're not one of the 10% 'savings' that is).

I think it's you that's the angry one!

Paul_Herring

Nothing constructive left to say it would appear.

bendix

marklv wrote: »

Oh yeah, so speaks the successful businessman who will retire a millionaire. Interesting work that allows you to spend hours on the Moneysaving expert forum. :rotfl:

Success is not about doing.

Success is about having others do for you.

Now, stop posting on here, and go and do some meaningless work. After all, we are paying your wages.

Perfect_Choice

Well this Marklv character certainly knows how to insult people. Been away as I have a real job to do. It is always going to be an emotive issue in telling others that they have no choice but to look forward to a reduced pension benefit than they have had to date.

Public sector pension provision is a huge dinosaur to address, funding has to be reduced and a level playing field achieved with private sector workers of all general incomes who have already gone through the pain of realigning their pension provision for the future.

Very few people on final salary pension schemes are going to welcome that so I can understand their reaction at least, it just looks like some drop down to insults faced with the inevitable in my view.

Its not that the money purchase pension scheme model is poor generally (well from my perspective at least), its just that it is not as good as a final salary scheme (wouldn’t we all prefer but that is not the option now), but fundamentally final salary schemes are not affordable as a public sector option going forward in my view and as for those left in the private sector, it will be a matter of time before they end, where I expect a future company financial crises will force the change eventually.

Letshavesomerealism

This timely report is well worth a read.:money:

Its available on the TUC homepage titled, "Taxpayers spending twice as much on private sector fat cat pensions than on public sector pensions".

Here's the summary:-

Why public sector pensions are affordable and the real challenge
is the collapse of private sector pensions

There is a sustained attack on public sector pensions from business organisations,
right-wing pressure groups and opposition political parties. They say that public
sector pensions are unaffordable, unreformed and gold-plated.

· Public sector pension critics are right to say that public sector staff now get better
pensions than private sector staff, but this is because of the collapse of pension
provision in the private sector. The challenge is to provide decent pensions for all
by levelling up private sector pensions, not cutting those in the public sector.

· In 1967 there were more than 8 million pension scheme members in the private
sector and 4 million in the public sector. In 2006 the number of public sector
scheme members had risen to more than five million (largely because of the
inclusion of many part-timers), but the number of private sector members of
pension schemes had fallen to 3.6 million.

· In just three years between 2004 and 2007 there was a 25 per cent fall in the
number of private sector members of DB schemes. More than half of DB scheme
members in the private sector today are members of schemes that are closed to
new members. This means that while they can carry on building up a pension,
new staff can only join the replacement DC scheme.

· DC schemes have not filled the pensions savings gap. The big picture remains a
retreat by employers from providing pensions. Between 2005 and 2008 there
was a 5.1 per cent drop in the proportion of the working population in the
private sector in membership of a DB pension (18.6 per cent to 13.5 per cent).
But there was a much smaller increase in the membership of DC schemes with an
employer contribution of just 1.9 per cent (19.9 per cent to 21.8 per cent).

· The biggest pension gap is between top directors who have genuinely goldplated
pensions and everyone else. Members of the FTSE100 pay an average of
70 per cent of pay into final salary pension schemes.

· Most public sector schemes, including the major schemes for teachers, civil
servants, police, NHS staff and the armed forces, are unfunded pay-as-you-go
schemes, though the Local Government Pension Scheme (the biggest) and some
others are funded.

· Unfunded schemes have strict rules with employee and employer contributions
made as if the scheme was funded. They are valued using the same FRS17
approach as private sector schemes.

· Unfunded schemes can only be run where there is a guarantee of state continuity
that can ensure that pensions promises can be met into the future, but are
common in other countries. It makes more sense to see spending on public sector
pensions as the repayment of previous contributions lent to the state.

· Pensions schemes are very long term. Expressing the cost of future pensions
promises in unfunded schemes as if they all had to be paid today is a favourite
device of public sector pension scheme critics as it produces frighteningly large
numbers, but makes as much sense of expressing the cost of the next century of
the NHS as a bill that has to be paid all at once.

· A better way is to look at the cost of public sector pensions is as a future
proportion of GDP. Treasury estimates show a modest increase from 1.5 per cent
of GDP to 2 per cent by 2027 and then remaining stable.

· Another way of looking at the cost of unfunded public sector pensions is the net
annual cost -- the difference between pensions in payment and the income from
contributions. This is an affordable £4.1 billion or about 0.3 per cent of GDP for
the current year.

· This figure can vary sharply from year as it is the difference between two much
bigger numbers. While over time pensions (linked to prices) and contributions
(linked to public sector wages) will go up together, they can vary from year for
example if there is a blip in price inflation or a wage settlement that is less than
inflation. This doesn't mean that pensions are out of control.

· The cost of providing tax relief on pension contributions each year is much
greater than the net cost of public sector pensions. In 2007/8 tax relief cost
£37.6 billion -- almost ten times the net cost of unfunded public sector pensions.
This tax relief is heavily skewed towards the well off. 60 per cent goes to higher
rate tax payers and a quarter of tax relief -- nearly £10 billion a year -- goes to the
one per cent of the population who earn more than £150,000.

· Turning unfunded public sector DB schemes into DC schemes would result in a
big bill for tax payers as they would have to pay the full cost of current pensions
in payment. Employee and employer contributions, currently used to help pay
pensions, would go instead into a fund to pay future pensions.

· The mean average public sector pension is £7,000 but the majority of public
sector pensioners have pensions under £5,000, with women on even less. The
average local government pension in payment to women is £1,600.

· There are comparatively few large pensions in payment in the public sector, and
even top public sector pensions are much less than ‘fat-cat’ director pensions.
Unlike in much of the private sector, top public servants are in the same pensions
schemes as their staff.

· Public sector pensions have been renegotiated. New joiners in most schemes
have a standard pension age of 65 -- which has always been the case in the Local
Government scheme. In many schemes a novel cost sharing element has been
included that means the cost of unexpected increases in longevity will be shared
by employee and employer.

· A good pension helps compensate better paid public servants for earning a lower
salary than they would in the private sector. Highly skilled workers in the public
sector earn 5.5 per cent less than they do in the private sector.

· But low paid public servants largely do better than their equivalents in the private
sector as they earn above the minimum wage and have access to a pension.
Unskilled workers in the public sector earn 7.2 per cent more than they do in the
private sector. Only one in five private sector employees earning between £100
and £200 has an employer sponsored pension, compared to 70 per cent in the
public sector.

· The average pay of public sector staff is higher than that of the private sector,
but this is not new and was true under the last government. It is a consequence
of taking large numbers of low paid jobs out of the public sector through
privatisation and contracting out, and putting them in the private sector.

EdInvestor

Letshavesomerealism wrote: »

· The cost of providing tax relief on pension contributions each year is much
greater than the net cost of public sector pensions. In 2007/8 tax relief cost
£37.6 billion -- almost ten times the net cost of unfunded public sector pensions.
This tax relief is heavily skewed towards the well off. 60 per cent goes to higher
rate tax payers and a quarter of tax relief -- nearly £10 billion a year -- goes to the
one per cent of the population who earn more than £150,000.

Quite right.High rate pension tax relief should be phased out - it is a completely unjustified perk for the well off levied at huge cost to the public purse.

Old_Slaphead

Letshavesomerealism wrote: »

This timely report is well worth a read.:money:

Its available on the TUC homepage titled, "Taxpayers spending twice as much on private sector fat cat pensions than on public sector pensions".

Here's the summary:-

Why public sector pensions are affordable and the real challenge
is the collapse of private sector pensions

There is a sustained attack on public sector pensions from business organisations,
right-wing pressure groups and opposition political parties. They say that public
sector pensions are unaffordable, unreformed and gold-plated.

· Public sector pension critics are right to say that public sector staff now get better
pensions than private sector staff, but this is because of the collapse of pension
provision in the private sector. The challenge is to provide decent pensions for all
by levelling up private sector pensions, not cutting those in the public sector.

Agreed - but as this is not likely to happen shouldn't ther at least be parity between what's available



· In 1967 there were more than 8 million pension scheme members in the private
sector and 4 million in the public sector. In 2006 the number of public sector
scheme members had risen to more than five million (largely because of the
inclusion of many part-timers), but the number of private sector members of
pension schemes had fallen to 3.6 million.

Rubbish - 700,000 extra public sector jobs have been created since 2000 (ONS stats)


· In just three years between 2004 and 2007 there was a 25 per cent fall in the number of private sector members of DB schemes. More than half of DB scheme members in the private sector today are members of schemes that are closed to new members. This means that while they can carry on building up a pension, new staff can only join the replacement DC scheme.

· DC schemes have not filled the pensions savings gap.

Agreed - but it's about time we stopped using this DB/DC jargon..it's confusing.
DB = Final Salary = Virtually obsolete tio new members / Increasingly being stopped for existing members.
DC = you take all risks. Sometimes employer will make a contribution but if stockmarket goes t*** up then that's your problem.

The big picture remains a retreat by employers from providing pensions. Between 2005 and 2008 there was a 5.1 per cent drop in the proportion of the working population in the pivate sector in membership of a DB pension (18.6 per cent to 13.5 per cent).
But there was a much smaller increase in the membership of DC schemes with an employer contribution of just 1.9 per cent (19.9 per cent to 21.8 per cent).

If employers have open-ended pension funding problem this will need to be reflected in the amount they charge "at the factory gate". Will consumers pay this (it will add to inflation) or will they buy cheapo imports instead (doesn't take rocket scientist to figure that one). Employers need to keep costs down to stay competitive & in business

· The biggest pension gap is between top directors who have genuinely goldplated pensions and everyone else. Members of the FTSE100 pay an average of 70 per cent of pay into final salary pension schemes.

Agreed - this is a SCANDAL nb not just FTSE100 check out your local mutual BS !

· Most public sector schemes, including the major schemes for teachers, civil
servants, police, NHS staff and the armed forces, are unfunded pay-as-you-go
schemes, though the Local Government Pension Scheme (the biggest) and some others are funded.

· Unfunded schemes have strict rules with employee and employer contributions made as if the scheme was funded. They are valued using the same FRS17 approach as private sector schemes.

· Unfunded schemes can only be run where there is a guarantee of state continuity that can ensure that pensions promises can be met into the future, but are common in other countries. It makes more sense to see spending on public sector pensions as the repayment of previous contributions lent to the state.

· Pensions schemes are very long term. Expressing the cost of future pensions
promises in unfunded schemes as if they all had to be paid today is a favourite device of public sector pension scheme critics as it produces frighteningly large numbers, but makes as much sense of expressing the cost of the next century of the NHS as a bill that has to be paid all at once.

· A better way is to look at the cost of public sector pensions is as a future
proportion of GDP. Treasury estimates show a modest increase from 1.5 per cent of GDP to 2 per cent by 2027 and then remaining stable.

· Another way of looking at the cost of unfunded public sector pensions is the net annual cost -- the difference between pensions in payment and the income from contributions. This is an affordable £4.1 billion or about 0.3 per cent of GDP for the current year.

· This figure can vary sharply from year as it is the difference between two much bigger numbers. While over time pensions (linked to prices) and contributions (linked to public sector wages) will go up together, they can vary from year for example if there is a blip in price inflation or a wage settlement that is less than inflation. This doesn't mean that pensions are out of control.

· The cost of providing tax relief on pension contributions each year is much
greater than the net cost of public sector pensions.

This argument is immaterial. Everyone (including public sector) gets tax relief but the Gov't gets it back when pensions are paid (and taxed).
Public sector pensions are costing between £30bn and £50bn pa (you choose). That's approx 8% to public spending


In 2007/8 tax relief cost
£37.6 billion -- almost ten times the net cost of unfunded public sector pensions.
This tax relief is heavily skewed towards the well off. 60 per cent goes to higher
rate tax payers and a quarter of tax relief -- nearly £10 billion a year -- goes to the
one per cent of the population who earn more than £150,000.

· Turning unfunded public sector DB schemes into DC schemes would result in a
big bill for tax payers as they would have to pay the full cost of current pensions
in payment.

Agreed - when public sector pensions are reformed, tax relief should be restricted to standard rate

Employee and employer contributions, currently used to help pay
pensions, would go instead into a fund to pay future pensions.

· The mean average public sector pension is £7,000 but the majority of public
sector pensioners have pensions under £5,000, with women on even less. The
average local government pension in payment to women is £1,600.

Because most are part time - what is the private sector equivalent pension for part time women (probably NIL)?


· There are comparatively few large pensions in payment in the public sector,

How many are there in private? Maybe the Gov't show tax ALL pensions of £50,000+ at a higher rate. Most of private sector don't benefit if their bosses are on the gravy train.


and
even top public sector pensions are much less than ‘fat-cat’ director pensions.
Unlike in much of the private sector, top public servants are in the same pensions schemes as their staff.

· Public sector pensions have been renegotiated. New joiners in most schemes
have a standard pension age of 65 -- which has always been the case in the Local Government scheme. In many schemes a novel cost sharing element has been included that means the cost of unexpected increases in longevity will be shared by employee and employer.

Public servants will still have retirement at 60 for the next 35 years. Most of us will need to go to 68 or beyond


· A good pension helps compensate better paid public servants for earning a lower salary than they would in the private sector. Highly skilled workers in the public sector earn 5.5 per cent less than they do in the private sector.

Rubbish - ONS stats show that "on average" public sector earns more thn private.

· But low paid public servants largely do better than their equivalents in the private sector as they earn above the minimum wage and have access to a pension.
Unskilled workers in the public sector earn 7.2 per cent more than they do in the private sector. Only one in five private sector employees earning between £100 and £200 has an employer sponsored pension, compared to 70 per cent in the public sector.

· The average pay of public sector staff is higher than that of the private sector, but this is not new and was true under the last government. It is a consequence of taking large numbers of low paid jobs out of the public sector through privatisation and contracting out, and putting them in the private sector.

Well they would say that wouldn't they - I have to say that this is usual union propaganda (I had read this report before).

It's about affordability, for heavens sake and the wealth & wellbeing of all UK citizens and not just their precious members.

Even the unions can't afford to continue their own FS schemes.

Even Vince says they cost too much !!!

In the interests of impartiality - perhaps the following should be read alongside the TUC report...

http://business.timesonline.co.uk/tol/business/economics/article5063030.ece



My comments in purple.

ffacoffipawb

EdInvestor wrote: »

Quite right.High rate pension tax relief should be phased out - it is a completely unjustified perk for the well off levied at huge cost to the public purse.

Fair enough, but then don't levy higher rate tax on pensions in payment (i.e. no higher rate threshold for pensions in payment) - otherwise why put £80 (net grossed up to £100) extra into a pension to get an extra £60 (£100 less 40% tax) out? It would be pointless. Like this government.