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Public sector pensions - cpi instead of rpi
in Pensions, annuities & retirement planning
113 replies 29.7K views
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Generous public sector pensions have always been justified as a acknowledgement that certain public servants receive relatively low pay. Given the pay rises that many have had in the past 10 years that is now no longer the case for the majority.
IMO final salary schemes should only be contined for those public sector workers on below 90% of the current average wages (as determined by the ONS). Above that, employees should be moved onto DC schemes with the employer (taxpayer) contributing the average paid by employers in the private sector (probably somewhere in the region of 5% ??).
Clearly accrued benefits should be preserved.
The average pension of the public sector workers (taking the higher paid who earn some disgustingly high amounts) is around £4000 per year - hardly "gold plated".
The current CONDEM Government Cabinet Contains 18 millionaires - so they are not bothered about the majority of Civil Servants who earn £15,000 - £16,000 per year.
As I earn around 61% of average wage, and I am by no means on the lowest grade/amount I agree.
It affects a large number of people who have already retired on the understanding that their pension would be uprated with RPI. Some of these will face real hardship in the years to come.
They could easily have devised a scheme which protected those with a small pension.
Average pay is about £25k. That is above all of the first 3 grades of the civil service, which comprise most of the workers. So the idea that they've had generous pay rises is somewhat dubious.
They are now facing a pay freeze as they are "lucky" to be in the public sector (whilst the banks give out £millions in bonuses); Coverseley they are also being told that they should be treated more like the private sector in terms of pensions. It's a strange idea that those who opted for safe, prudent pensions should pay the price of succesive government's attacks on private pensions, but both main parties have worked a nice trick here.
The tories loosened the regulation of pensions when funds were doing well - they allowed contribution holidays for employers and allowed them to take money from pension funds.
labour took tax after tax from private pensions.
In essence they bled private sector pensions dry.
Now, rather than attacking the government, private sector employees are turning on the public sector, asking for them to be bled dry too. Divide and conquer.
What the £4000 'average' doesn't tell you is the average length of service required to accrue this amount.......ie it's around 14 years....the lump sum payment and the fact that many pensions are payable from age of 60.
Anyone with 40 years service will receive a considerably higher amount.The figure is also distorted by the many part timers who only accrue part of a pension for each year worked.
For someone not benefiting from a 'gold plated' pension worth £4k pa - to receive this amoun they would have to have built up a pension fund of around £100,000. Using the same 14 year employment period that's equivalent to making pension contributions of around £6000pa (or around 25% of their annual salary).
You have evidence of this of course?
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The effects on those who've already retired and are on small pensions will be minimal - ie approx £10pa on a pension of £1000. RPI includes mortgage and housing costs which, in general, do not affect pensioers as much.
Figures from the ONS show that average public sector pay is now around £25000pa - higher than average private sector pay and reversing the position of 10 years ago. Many 'front line' staff ie teachers, police, nurses are on more than the national average pay.
Many public sector workers have benefited from a 3 year paydeal from 2007 while private sector employees have 'benefited' from pay cuts, pay freezes and P45s
100% of the employees at my local authority do not get these.