Public sector pensions nearly over?

MumOf2

Marklv:

They target the smaller fry because we're dispensable. Senior support staff and academics/researchers are more valued by the University and we're always treated poorly in relation to them. A lot of University funding comes from the results of the Research Assessment Exercise (now re-named Research Excellence Framework) - the higher the rating for an individual/department/school/faculty/university, the higher the funding for the next 5 years. They hold onto academics and researchers with an iron hand to reduce the risk of their funding levels decreasing. The better ones would have no trouble obtaining posts at other Russell Group universities, and they can't afford to risk losing them.

Having said that, the small fry are only allowed to be members of a local University scheme whereas the othes are members of the national University-wide scheme. An individual University has less clout in the national scheme and members are vociferous and powerful in their lobbying for the status quo to be maintained. The small fry just don't have a voice at all which results in both our pension and general employment entitlements being eroded year on year so that the University can save more money to divert to keep higher paid members of staff on side.

They wouldn't even consider the fact that we need the defined benefits the most even though the other staff groups (particularly clinical) earn (relatively) huge salaries - monopoly money, some of them - and and enjoy every opportunity to put money aside for their retirement during their working life.

MumOf2

EdInvestor

marklv wrote: »

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.

Undoubtedly a major reason why D/C schemes are producing lower pensions is simply that employers are taking the opportunity to pay much less in.As long as costs are kept down there is no reason why they should not perform in the long term if they are properly funded..

roysterer

Please can someone now explain to me how the liability of a public sector Final Salary Pension is measured? I don't happen to believe that there is a true measurement due to the huge numbers of people concerned.
The reason (we are told) that these schemes are closing in the private sector is because the actuaries can look at the fund value, look at the amount of contributing members, look at the amount of differed Pensioners, look at the number of active pensioners, look at investment strategy, i.e. fixed rate bonds, annuities, equities, historical investment returns etc. They then tell the employer of the scheme what the shortfall or surplus (very unlikely) is, and what extra payments are needed to top up the scheme on top of there and employee (increased) contributions to ensure the fund is sustainable and can meet its liabilities.
Companies have to do a complete valuation every 3 years, The company I work for now does this annually to keep employees informed of the funding levels.
If the sums don't add up they tell us the scheme will be closed, all current benefits preserved will esculate up to a max of 2.5% or RPI per year up to NRD. All future pensions will be defined contribution of which the employer contributes a fraction of what they did in the Final Salary Scheme, with no more risk what so ever to the company. And we as employees can do nothing at all about it.
Yes I am aware that lots of companies took contribution holidays and allowed there pension funds to go into deficit of which we are now having to pay the price for there short sighted greed.
What happens in the public sector? rob Peter to pay Paul? Increase Taxation?
I'm intrigued to know what mechanism is used to measure the cost and liabilities to meet its current and future needs.

Spirit_2

roysterer wrote: »

Please can someone now explain to me how the liability of a public sector Final Salary Pension is measured? I don't happen to believe that there is a true measurement due to the huge numbers of people concerned.
I'm intrigued to know what mechanism is used to measure the cost and liabilities to meet its current and future needs.

I believe that until quite recently (about 7 - 10 years) the 'notional fund' had little time or attention given to it. Periodic valuations by the Government Actuaries were used to set the employers contribution.

As long term forecasting has got better more attention has been given to the public sector liabilities that are stacking up.

For balance private sector businesses have only had to account for their long term pension liabilities for about the last 10-15 years.

bigheadxx

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.

If what you are saying is true then there would be no need to close Final Salary schemes because they are "paid for by the employee and the employer on the basis of 1 occupational pension per employee." However because life expectancy has increased and the pension funds to pay these pensions have been underfunded these schemes are closing so that the risk is transferred to the employee and not borne by the employer.

This is the crucial difference between the public and private sector. The state is underwriting every public sector workers income, for the whole of their retirement, which could easily be 40 years. In the private sector you assume the risk yourself and make decisions that will significantly affect your quality of life in retirement.

A private sector final salary fund will have many more people drawing a pension from it than it would have anticipated 20 or thirty years ago and therefore the ratio of people paying in to those drawing out has been shown to be unsustainable hence the closure of such schemes.

sammyjammy

marklv wrote: »

And yet more money could be saved by reducing the huge amounts of office space that many office based public sector workers have and replacing it with 50% desks only - i.e. 'hot desking' which would need to be booked in advance. These workers should be encouraged to work two days a week from home - perfectly possible in this day and age. Bingo! There you are - billions saved quite easily.

Tick! Already policy in Jobcentre Plus.

treliac

DH works for a major food company and belongs to a good final salary pension scheme. Pays heftily into it but the benefits are excellent. It clearly can still be achieved if the will is there to support employees' financial security in retirement.

DVardysShadow

bigheadxx wrote: »

If what you are saying is true then there would be no need to close Final Salary schemes because they are "paid for by the employee and the employer on the basis of 1 occupational pension per employee." However because life expectancy has increased and the pension funds to pay these pensions have been underfunded these schemes are closing so that the risk is transferred to the employee and not borne by the employer.

This is the crucial difference between the public and private sector. The state is underwriting every public sector workers income, for the whole of their retirement, which could easily be 40 years. In the private sector you assume the risk yourself and make decisions that will significantly affect your quality of life in retirement.

A private sector final salary fund will have many more people drawing a pension from it than it would have anticipated 20 or thirty years ago and therefore the ratio of people paying in to those drawing out has been shown to be unsustainable hence the closure of such schemes.

This is a different argument to the one you made earlier.

Pension schemes are not PAYG, so the ratio of people paying in to those drawing is irrelevant. The funds to pay any pension should all be entirely in place at the time the pension is first drawn.

Let me help you here. The argument you are wanting to put is that people live longer, so there is more capital required. This is true and it would not be difficult to increase contributions form both employer and employee to cover this. But, what has happened is that in the early 1990's many companies took an employer's contributions holiday in the first stage of a process to take pensions off the little people. Now they are whining and snivelling hypocritically because they are having to make up the shortfall arising from their contributions holiday - note that in the early 1990's it was well known that life expectancy was increasing, but strangely it was no problem to take employers contributions holidays. Secondly, of course, the government took a cut of the pensions pile.

So look at ti this way. There was plenty of money once to fund final salary pensions. Then the institututional shareholders took a cut and then the government took a cut, then all the little people said "oh dear, giving us pensions is too expensive, we will go away and make excuses for the big institutions and government, rather than admit we have had the wool pulled over our eyes and our pensions stolen, because we don't want to look stupid".

I am angry at shareholders and government for what has happened. But I reserve most anger for the people who are most hurt by it meekly saying "oh well it was to expensive"

fg22

EdInvestor wrote: »

Undoubtedly a major reason why D/C schemes are producing lower pensions is simply that employers are taking the opportunity to pay much less in.

That is the main reason but not the only one. Collective pension schemes will always be more efficient than everyone having there own little pot.

bigheadxx

DVardysShadow wrote: »

This is a different argument to the one you made earlier.

Pension schemes are not PAYG, so the ratio of people paying in to those drawing is irrelevant. The funds to pay any pension should all be entirely in place at the time the pension is first drawn.

Let me help you here. The argument you are wanting to put is that people live longer, so there is more capital required. This is true and it would not be difficult to increase contributions form both employer and employee to cover this. But, what has happened is that in the early 1990's many companies took an employer's contributions holiday in the first stage of a process to take pensions off the little people. Now they are whining and snivelling hypocritically because they are having to make up the shortfall arising from their contributions holiday - note that in the early 1990's it was well known that life expectancy was increasing, but strangely it was no problem to take employers contributions holidays. Secondly, of course, the government took a cut of the pensions pile.

So look at ti this way. There was plenty of money once to fund final salary pensions. Then the institututional shareholders took a cut and then the government took a cut, then all the little people said "oh dear, giving us pensions is too expensive, we will go away and make excuses for the big institutions and government, rather than admit we have had the wool pulled over our eyes and our pensions stolen, because we don't want to look stupid".

I am angry at shareholders and government for what has happened. But I reserve most anger for the people who are most hurt by it meekly saying "oh well it was to expensive"

I am not changing my argument, I am adding to it becaause you dont understand it. Final salary pension schemes are a collective pot and companies have had to make up massive shortfalls and make increasing contributions because of longer life expectancy and a shortfall in funds due to the financial crisis. BPs contribution to its FS scheme was £360million last year

FS schemes that have been closed to new entrants ie BP, are currently run for the benefit of staff that have already retired. In BPs case the scheme is 115% funded at present so there are no current funding issues but research suggests soaring liabilities in the future. BP will still have to make contributions to this fund even though there will be no new members so the funds to pay a pension are NOT in place before a FS pension is drawn so your argument makes no sense.