Public sector pensions nearly over?

marklv

bumpoowee wrote: »

As much as I would love a final salary scheme, I just don't think they are sustainable. You can't realistically expect to pay somebody 2/3 or whatever of their FINAL salary (which is probably above the average salary for somebody in the company) for 20, 30 years plus after they retire without taking 50%+ of their wage while they are working to pay for it.

People aren't going to accept a 50%+ pay cut neither are employers going to stump up this cash, as they will just look elsewhere (think non-UK) if anybody tries to force it on them.

I don't know exactly what the best way for pensions to work should be, however some sort of national scheme or legally mandated employer provision in between what most of the private sector have and what the public sector have would be something to aim for, perhaps a DCS where the employer or government puts in up to 10% of matched contributions and maybe 5% contribution even if the employee puts in nothing. I know the government are proposing something like this already but it doesn't go far enough or address the unsustainability of existing government DB schemes.

The schemes are not sustainable in their traditional format, but they can be sustainable with some changes, such as making them based on career average salaries, limiting indexation and removing the widow's pension, as well increasing member contributions.

If you are going to have acceptable defined contribution schemes you realistically need at least 20% contributions between employer and employees. Otherwise the returns will be paltry. One example of a good defined contribution scheme is the one currently in place at Barclays, where the bank puts in 23% of an employee's salary.

bendix

marklv wrote: »

One example of a good defined contribution scheme is the one currently in place at Barclays, where the bank puts in 23% of an employee's salary.

More evidence of marklv not knowing what he's talking about.

Barclays have told employees that this scheme is no longer affordable and is planning to close it to both existing and new members.

Old_Slaphead

marklv wrote: »

One example of a good defined contribution scheme is the one currently in place at Barclays, where the bank puts in 23% of an employee's salary.

Not correct - in return for 3% contribution the employer guarantees a minimum pension 'pot' equivalent to 20% of salary earned over period of employment. Employee takes annuity risk.

Far better than most private schemes but as Barclays obtains most of it's money from small businesses and private account holders (but not me) then it can afford it.

marklv

bendix wrote: »

More evidence of marklv not knowing what he's talking about.

Barclays have told employees that this scheme is no longer affordable and is planning to close it to both existing and new members.

No, you twit, Barclays is closing its final salary scheme. This is a new defined contribution scheme. Engage brain before opening mouth! :mad:

marklv

Old_Slaphead wrote: »

Not correct - in return for 3% contribution the employer guarantees a minimum pension 'pot' equivalent to 20% of salary earned over period of employment. Employee takes annuity risk.

Far better than most private schemes but as Barclays obtains most of it's money from small businesses and private account holders (but not me) then it can afford it.

The guarantee is only an absolute minimum, as the investment returns can be much higher. And they still contribute 20% of salary + 3% if the employee matches it.

MumOf2

Haven't read the whole thread (at work, and will be until late this evening), but would just like to add that certain support staff (up to, say, £28k) at the University where I work have lost their defined benefit final salary scheme at the same time as having to pay a higher percentage contribution into the scheme which replaces it. There have been several changes over the past 10 years, all of which have resulted in us paying more and more for less and less benefit with each change.

New staff can only join a defined contribution scheme.

Higher scale support staff and all academic staff have retained their defined benefit final salary scheme.

MumOf2

marklv

MumOf2 wrote: »

Haven't read the whole thread (at work, and will be until late this evening), but would just like to add that certain support staff (up to, say, £28k) at the University where I work have lost their defined benefit final salary scheme at the same time as having to pay a higher percentage contribution into the scheme which replaces it. There have been several changes over the past 10 years, all of which have resulted in us paying more and more for less and less benefit with each change.

New staff can only join a defined contribution scheme.

Higher scale support staff and all academic staff have retained their defined benefit final salary scheme.

MumOf2

Hmmmm. Interesting. I wonder why they've picked on the small fry and let the senior staff off the hook. I would probably have done the opposite, as it's the low paid who need the defined benefit scheme the most.

DVardysShadow

bigheadxx wrote: »

A few years ago (maybe 20 or thirty) generous pensions, both public and private were sustainable because there were more people in work and paying taxes than people claiming a pension. Now and into the future this is not the case and the private sector is acutely aware of this because it has to make money. The public sector, which has a budget to spend and does not have to make a profit, needs to get real on this issue.

I don't buy this at all. This is the kind of muddle headed thinking which has allowed the rich to take pensions away from the little people.

We are talking about occupational pensions here. Occupational pensions are paid for by the employee and the employer on the basis of 1 occupational pension per employee. So 20 or 30 years ago, if there were more people in work, the would have been potentially more occupational pensions. But nowadays there is still no more than 1 occupational pension per employee.

marklv

DVardysShadow wrote: »

I don't buy this at all. This is the kind of muddle headed thinking which has allowed the rich to take pensions away from the little people.

We are talking about occupational pensions here. Occupational pensions are paid for by the employee and the employer on the basis of 1 occupational pension per employee. So 20 or 30 years ago, if there were more people in work, the would have been potentially more occupational pensions. But nowadays there is still no more than 1 occupational pension per employee.

Absolutely. The number of people retired and working has no bearing on occupational pensions because these are based on investment funds that invest the contributions of both employer and employee.

bumpoowee

DVardysShadow wrote: »

I don't buy this at all. This is the kind of muddle headed thinking which has allowed the rich to take pensions away from the little people.

We are talking about occupational pensions here. Occupational pensions are paid for by the employee and the employer on the basis of 1 occupational pension per employee. So 20 or 30 years ago, if there were more people in work, the would have been potentially more occupational pensions. But nowadays there is still no more than 1 occupational pension per employee.

Yeah I agree, the issue bighead highlighted was relevant to state pensions though (which needs addressing too! the pathetic 'we will raise the retirement age by 3 years over the next 50 years' doesn't even come close).

The occupational pension issues that I am aware of (there may be others I haven't realised) are life expectancy significantly increasing and lack of investment returns on the money paid in, partially due to Gordon 'pension thief' Brown and his £5bn a year raid.