Public Sector Pensions Reform: Report issued

MikeJones_2

‘In 1951, most men working in manual jobs would not have lived long enough to claim the then-new basic state pension. Now, life expectancy for men and women is around 80, and people reaching the age of 65 are living almost another 20 years on average. In 50 years’ time, life expectancy at 65 could reach 30-35 years. Certainly for individuals who retire at 60 – not unusual in the public sector – many people could spend longer retired than working.’

That’s a quote from the Executive Summary from
- Reforming Public Sector Pensions: Solutions to a growing challenge by the Public Sector Pensions Commission (pdf-92 pages)

I've placed it here rather than on the CPI/RPI thread so that the contents of the Report may be discussed separately, if anybody wishes to share any views or opinions.

It’s an in-depth document full of detail and it cites ‘six key problems with the present unfunded public sector pension arrangements’:

• Lack of transparency
• Large unfunded liabilities
• Large annual costs
• Disparity with the private sector
• Inequity within schemes
• Outsourcing of government services.

I don’t think I’m the only one to think this is going to end in tears, judging by how it is being reported in the Press today.

Another excellent document for all sorts of reasons has been published today. Anyone interested in how the Basic State Pension has increased can see the details on pages 12 and 13. Quite a revelation for anyone considering whether to buy a level or indexed annuity at retirement. See:
- Abstract of Statistics for Benefits, NI Contributions and Indices of Prices and Earnings (Office for National Statistics)

Hope these are useful?

Mike

I work in the field of Pension Education and Pension Guidance in the UK. I am a member of the Specialist Pensions Forum as well as being a Voluntary Adviser for The Pensions Advisory Service. I work with scheme members, employers, trustees, scheme administrators and advisers on most things to do with employer sponsored pension schemes. The views expressed by me in this thread are my personal opinions. You should seek professional advice from an appropriately experienced and qualified adviser. I am not an IFA.

daveyjp

One key problem with the current private sector system - there is no obligation for employers or employees to pay anything towards their retirement.

Does the report consider this aspect and the amount of my taxes which go into paying pension credits for those who unlike me decided not to invest their salary into a pension?

MikeJones_2

Hi daveyjp,

daveyjp wrote: »

One key problem with the current private sector system - there is no obligation for employers or employees to pay anything towards their retirement.

To some extent that will change with effect from 2012 with the introduction of new legislation that will mean all employers must provide a workplace pension scheme operating within a minimum prescribed standard.

Employees will be automatically enrolled in their employer's scheme, but will have the choice to opt out.

The problem here is that the minimum contributions will, once fully phased in, be a total of 8% of employees pay (between a lower and upper limit) made up from employer, employee contributions and tax relief.

It started out as Personal Accounts and has morphed into the National Employment Savings Trust (NEST)

Mike

I work in the field of Pension Education and Pension Guidance in the UK. I am a member of the Specialist Pensions Forum as well as being a Voluntary Adviser for The Pensions Advisory Service. I work with scheme members, employers, trustees, scheme administrators and advisers on most things to do with employer sponsored pension schemes. The views expressed by me in this thread are my personal opinions. You should seek professional advice from an appropriately experienced and qualified adviser. I am not an IFA.

Old_Slaphead

MikeJones wrote: »

Hi daveyjp,
The problem here is that the minimum contributions will, once fully phased in, be a total of 8% of employees pay (between a lower and upper limit) made up from employer, employee contributions and tax relief.

Won't this effectively be a stealth tax as a significant number of low paid contributors are unlikely to build up a sufficiently large fund to result in a pension payout of more than the current rate of pension credit?

hugheskevi

Won't this effectively be a stealth tax as a significant number of low paid contributors are unlikely to build up a sufficiently large fund to result in a pension payout of more than the current rate of pension credit?

They will have Basic State Pension and SERPS/State Second Pension as well as NEST income.

Any income over Basic State Pension isn't withdrawn pound for pound in Pension Credit.

And if their private pension funds are below £18,000 they can trivally commute and take them as a lump sum.