Could index linking of existing public service pensions be removed?

Ian_W

scotsbob wrote: »

Let us say a teacher is 45 years old and has been a member of the teachers pension scheme for 20 years. Now one solution for the government would be to buy her out. Give her a lump sum now and she gives up all rights to her index linked pension.

I could see a lot of people in public service being tempted by a lump sum and being too short sighted to realise what they were giving away.

Given the state of public finances ... the buy-out money comes from where?
Far more likely that that the 20yrs is honoured but future service is treated differently though AFAIK current legislation requires all occupational pensions to provide an RPI link but with a limited max - is it 2.5%?

dasherman

Ian_W wrote: »

current legislation requires all occupational pensions to provide an RPI link but with a limited max - is it 2.5%?

It's currently 5%.

hugheskevi

but with a limited max - is it 2.5%?

dasherman wrote: »

It's currently 5%.

It was the lesser of 5% or RPI with a collar at 0% for accruals between April 1997 and April 2005 for occupational defined benefit pensions.

For accruals since April 2005 the statutory minimum was lowered to the lesser of 2.5% and RPI with a collar at 0%.

This is the minimum requirement, schemes are free to uprate by more should they wish and many retained the lesser of 5% or RPI with a collar of 0% uprating or other rules.

CLAPTON

Debt_Free_Chick wrote: »

This is a very fair point, as it shows that (certain) changes need the agreement of all the Unions that represent all the workers - in the Civil Service, at least.

Having said that, this ruling only affects those who might be due a payout under the redundancy terms in the future. There is no suggestion that payouts already made would be clawed back, which is more akin to the OP's question.

I don't dismiss your macro-view though - just that it's not absolutely correlated with the OP's question.

Regards

well yes and no

as I understand the ruling, the judge allowed a judicial review to go ahead; he didn't rule on what the law was

and he didn't say that parliment can't change the law either

CLAPTON

Hmm, in the sense that they can repeal previous legislation but not really since one of those EU treaties we never voted on, 'cos they weren't really altering anything, requires UK law to comply with EU law. So only sovereign up to the point that they comply with Europe, so that'll be a half- sovereign parliament then!;)[/QUOTE]


arguable

Debt_Free_Chick

CLAPTON wrote: »

and he didn't say that parliment can't change the law either

No doubt that Parliament can change the law ...but can pension rights already accrued be changed ...?

For occupational pension schemes established under trust, there is law that specifically prohibits this - and usually a clause in the trust deed too.

For public sector schemes established under statute, I don't know. I rather suspect there is a similar protection for accrued rights, but I can't be bothered to look up the Superannuation Act of 1972 and then track through all the amendments made since then

molerat

The current system will and must change as it is totally unaffordable in its current form. I don't think accrued rights can be changed and it would be unfair to do so. Many company pensions have changed from DB to DC over the years retaining any previous rights, I know mine did. As for consultation it has pretty much been "this is what is happening, get used to it", why should the public sector be any different. A good look also needs to be taken at retirement ages and early retirement, how some get away with it is unreal.

(Speaking as a current in payment public sector pensioner, I have got my cake and I want to be able to afford to carry on eating it)

Debt_Free_Chick

molerat wrote: »

The current system will and must change as it is totally unaffordable in its current form. I don't think accrued rights can be changed and it would be unfair to do so. Many company pensions have changed from DB to DC over the years retaining any previous rights, I know mine did. As for consultation it has pretty much been "this is what is happening, get used to it", why should the public sector be any different. A good look also needs to be taken at retirement ages and early retirement, how some get away with it is unreal.

(Speaking as a current in payment public sector pensioner, I have got my cake and I want to be able to afford to carry on eating it)

Switching the public sector to DC would increase costs though - as well as paying the pensions to those retired, contributions would also have to be paid to the DC pots for current employees. At present, the contribution paid to pensions for current employees is "nil".

Ignore all the press hype about £1 trillion deficits in public sector pensions. The pensions aren't funded so deficits are irrelevant.

If there are savings in expenditure in the public sector, they won't be found in pensions.

hugheskevi

molerat wrote: »

The current system will and must change as it is totally unaffordable in its current form.

Is this an assertion, or based on evidence you could reference?

Expenditure on public sector pensions is forecast to be stable at between 1.5%-2% of GDP over the next 50 years. Compare that to expenditure on State Pensions of over 6% p/a

Pensions are a part of total remuneration. So isn't your argument in fact that public-sector workers are over-remunerated, not over-pensioned? What is the relevance of what proportion of remuneration is paid in the form of pension and what proportion is paid in the form of salary and other things?

Not that I disagree with you, but the arguments really are more sophisticated than simply saying the private-sector has moved away from a particular type of pension it finds difficult to provide due to the uncertain costs it comes with, and so the public sector must also change. Not least because private sector DB schemes are funded but public sector are not. Hence, changing the public sector to DC will mean that money to fund pensions has to be found upfront, in addition to continuing to pay pensioner members. That is a lot of extra cash to find given the economic situation.

Debt_Free_Chick

molerat wrote: »

The current system will and must change as it is totally unaffordable in its current form.

Arguably, it's not - as the Government can always raise taxes to pay for all the Nation's expenditure on public services, including the pay and benefits for public servants.

This is a fundamental difference between private and public sector pensions. In the private sector, employers can become insolvent so pension schemes are established as separate vehicles, purely to ringfence the funds. Having a separate scheme simply provides security.

This isn't necessary in the public sector as future Governments simply raise taxes - or cut other services - in order to pay pensions (and salaries and other benefits) to public sector employees.

Yes, promises of pensions are building up today with the cost having to be met by future generations, but that's always been the case. In the same way, there are many other "issues" being created today for which future taxpayers will have to pay the bill. It's simply the way it is, IMHO.