How big should my pension pot be ?

Paul_Herring

DB = Final Salary = Virtually obsolete tio new members / Increasingly being stopped for existing members.

I think you missed a disclaimer there. It's virtually obsolete in the private sector.

marklv

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.

· 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.

Thank you for posting this excellent information! It completely demolishes the DailyMailarguments posting on this thread for the last few days. I know for a fact that I could earn another 15% by taking the same job in the private sector, but I like the public sector ethos (and my 30 days a year of holiday).

marklv

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.

This is something I don't agree with. Pension contributions - even those of the better off - should never be subjected to income tax.

Paul_Herring

marklv wrote: »

Thank you for posting this excellent information! It completely demolishes the arguments of the Daily Mail-reading cretins who have been posting drivel on this thread for the last few days. I know for a fact that I could earn another 15% by taking the same job in the private sector, but I like the public sector ethos (and my 30 days a year of holiday).

I smell sock-puppets.

bendix

Paul_Herring wrote: »

I smell sock-puppets.

LOL . . Of course. Poor old marklv, being reduced to posting 'excellent arguments' from the TUC website, and then replying to say that it demolishes all our arguments.

It would be laughable if it wasn't so pathetically desperate.

On a side note, I see today that seven doctors and nurses have been suspended for participating in a Facebook related craze prank. The rights and wrongs of the suspension aren't important, but it seems the relevant hospital managers are stating vociferously that the suspension (which has no reported time limit) will have no impact on patient care at all.

Which begs the question . . . .

Harry_Powell

Paul_Herring wrote: »

I smell sock-puppets.

This is unfair because you can't prove the allegation, it could very well be that mark has created an AE to support his case, it could equally be true that he hasn't. I'm always being accused as being a 'sock puppet' due to the fact that I joined a month or so before a regular poster left, I have a similar posting style and because I often quote his stuff (my bad, but sometimes I think "well, if you can't beat em, join em"). It's a bit wearing though after a while, I have to say, especially when you've put together a debate busting post that cannot be beaten, for some illiterate to respond with "well, you used to be 'so and so' and he was a meany".

As far as Letshavesomerealism'spost, all we have to do is point out that unions are closing their own final salary schemes because they can't afford them, which totally undermines any argument they have about them being affordable. Frankly, how they can promote public sector FS schemes anymore without blushing is beyond me.

marklv

Paul_Herring wrote: »

I smell sock-puppets.

And I smell a rat..........

bendix

marklv wrote: »

And I smell a rat..........

Are you going to answer Harry's point about how the TUC is claiming final salary pensions for those in the public sector while unions are closing their own, or not?

Because until you do, what little credibility your argument holds on this forum will diminish even further.

Old_Slaphead

marklv wrote: »

Thank you for posting this excellent information! It completely demolishes the arguments of the Daily Mail-reading cretins who have been posting drivel on this thread for the last few days. I know for a fact that I could earn another 15% by taking the same job in the private sector, but I like the public sector ethos (and my 30 days a year of holiday).

I thought you were a serious poster intent on having a reasoned debate - clearly I was wrong and you're just a wind up merchant.

You present no cogent arguments for support your view (as have many other posters when discussing this topic on other threads) so, in the words of Dragons Den..."I'm Out".

Paul_Herring

Harry_Powell wrote: »

This is unfair because you can't prove the allegation,

Of course *I* can't prove it. It would also need one of the moderators on here to see if (e.g.) they have any IP addresses in common. (But, of course, it still wouldn't prove anything for sure.)

However, I find it highly strange for someone in their first message here to post something, as if they'd been here all along, to support a contentious point of view, then for the other person who also supports that point of view to reply saying "well done that man!"

I also find the choice of user-name a bit 'on-topic.' ('Fit for purpose' is possibly another way I'd phrase it.)

All speculative I agree, but along with the logical fallacies being used, and the casual use of insults, when nothing constructive can be felt to be added, I personally believe* the behaviour to have a high correlation with sock-puppetry.

* You are, of course, free to believe otherwise