public sector pension worries

mikeb222

Like most people in the public sector. I am extremely concerned with the government and media's attack on our pensions.

I believe that lies and deceit are being used to scaremonger the public so that radical cuts can be made to every pension scheme (apart from the MP's own pension of course)
For example, a recent front page news item was "local councils £360 million black hole pension scheme"
On investigating I found that this black hole would only occur if all the current employees claimed their pensions now, which of course, they could not do. Its a bit like saying the country would go bankrupt if eveyone stopped paying their taxes..
On contacting the local pensions office I was told that in fact, their was a surplus in their scheme from what they receive to what they pay out in pensions, and that the last financial year that surplus was £125 million.
This sort of scaremongering is now common practice. The tax payers alliance are constantly using similar tactics to destroy public sector schemes.

They also hit out with headlines about how much tax the average Joe pays for Public sector pensions, usually something like £400 per year per person. But if the average income is say £23,000, they pay out about £5000 in tax anyway, thats without national insurance, which is basically another tax of 10%.

I have paid 11% into my scheme for 20 years and I am jolly well entitled to a decent pension. I estimate that at todays rate I have paid £68,000 into my own pension.
It's not my fault that our pension funds were never invested and that the taxpayer pays for them.
It's also not my fault that the banks were bailed out by the taxpayer for £850 billion just because they gambled their-sorry-our money away.
Imagine what sort of investment a 5% return would have made should I have invested in a private scheme.

I simply don't understand why the tax payer thinks I do a decent enough job to give me a wage but not a pension. Something is very wrong with our society!

datostar

Police or Fire on the old scheme? I don't think any other public sector scheme comes anywhere near that 11% contribution.

Andy_L

He could be an MP :-)

novice-saver

mikeb222 wrote: »

I have paid 11% into my scheme for 20 years and I am jolly well entitled to a decent pension. I estimate that at todays rate I have paid £68,000 into my own pension.

In the last 20 months I've put in excess of £30,000 into a DC pension, and will get less than £2,000 Per Annum back with limited index linking.

Talk about a decent pension?

Old_Slaphead

mikeb222,

A few comments on your posting:

Why do you believe there are "lies and deceit" being used?

Local councils ‘black hole’ is estimated at £50bn not £360 million. Birmingham City alone allegedly has a shortfall of £1bn.

Councils schemes like others have suffered poor investment returns and increased pensioner longevity. There’s a valuation every 3 years – the last one in 2007 showed a funding shortfall of around 20%. The next one in 2010 will show a much greater shortfall have equities have fallen around 10% over the period. Admittedly not all liabilities need to be paid out straight away so the shortfall will be spread over many years however new liabilities are accruing so things will only get much worse. If not now major changes in public schemes will eventually happen no matter what the posturing of members, unions & Labour Party.

The fact that current receipts exceed payout should not give too much comfort – that’s because there are far more active members than pensioners as employment levels (and pension liabilities) have been racked up over the last decade. Staffing cannot increase forever and when members retire and there are cutbacks this position will go into reverse meaning the scheme has to draw on assets. Eventually there will not have enough to pay pensions as it’s overall assets are much lower than liabilities. Similar to a PONZI scheme really. For another analogy – it’s like having a big credit card debt – the fact that you pay the minimum monthly amount keeps everyone happy however the interest and debt continues to increase but you’ll never afford to repay it....while you can keep paying the minimum amount then who cares ?

The current estimate of public pension liabilities is Government £770bn others £1trillion+ this works out at around £30,000 per working person. Annually it’s increasing at around £35bn or £1200 per worker.

You’ve paid £68,000 into your scheme what do you expect back? From your figures I’d guess your pay is around £40,000 – if you retired now you’d expect 20/80 ie £10,000pa + a tax free lump sum of £30,000. With a life expectancy of 25 year that gives over £300,000 return – not bad for 20 years. Just imagine what you’d get if/when you’d worked 40 years...around £600,000 for an outlay of just a fraction! Darn sight better than most in the private sector can expect but they’ll have to pay for most of it (or their children & grandchildren)

It’s not most peoples fault that the banks needed to be bailed out – and let’s face it that wouldn’t have been needed if the public and government hadn’t been so greedy & gullible and encouraged conspicuous consumption and asset inflation. The government was quite happy for the uncontrolled banks to make huge profits so’s they could firehose the tax revenues it generated into the public sector. FWIW most ‘experts’ suggest the maximum cost of the banking crisis will be £130bn.Expensive but not £850bn - that was the cost of 'worst case' bank guarantees - but most will not be needed.

Many people do a decent job but unfortunately the Labour Government set out to destroy private provision at the expense of vast and unaffordable expansion of the state. The chickens are coming home to roost.

Old_Slaphead

Further report in today's Telegraph to highligh the issues being faced by the pension's timebomb.

http://www.telegraph.co.uk/news/newstopics/politics/7915195/Council-staff-face-later-retirement-to-fill-40bn-pension-fund-black-hole.html

£360million shortfall mikeb222 ? - if only.

CLAPTON

Old_Slaphead wrote: »

Further report in today's Telegraph to highligh the issues being faced by the pension's timebomb.

http://www.telegraph.co.uk/news/newstopics/politics/7915195/Council-staff-face-later-retirement-to-fill-40bn-pension-fund-black-hole.html

£360million shortfall mikeb222 ? - if only.

sadly the article adds nothing to understanding or quantifying the issue

so it says - average pension is 3,000.... so how much do we want to cut this by?

pickles says 'town hall pensions cost hundreds of pound to every household'..... so what is the right amount?

investment returns haven't produce hoped for returns... is that a temporary problem or do we except declining returns in the future

denham says that the cash flow is positive.. another random comment

the audit commission says there is a funding gap but over what period? action needs to be taken ..but what sort of action

snowqueen555

I can't even join my employers pension scheme because its closed to new people. How depressing is that?

My only other option is a stakeholder pension, and to recieve the same amout of constribution as my other coworkers who are on the scheme I have to pay some 4-5 times more just for the same amount.

Its just made me very bitter

Old_Slaphead

CLAPTON wrote: »

sadly the article adds nothing to understanding or quantifying the issue

so it says - average pension is 3,000.... so how much do we want to cut this by?

the audit commission says there is a funding gap but over what period? action needs to be taken ..but what sort of action

The average is a meaningless figure (I've seen numbers quoted from £2500 to £8000) unless it's related to the number of full time equivalent years pension earned.

I think the way forward will be a combination of things ie increased contributions, lower accruals, later retirement age, and capping of inflation uplifts.

CLAPTON

Old_Slaphead wrote: »

The average is a meaningless figure (I've seen numbers quoted from £2500 to £8000) unless it's related to the number of full time equivalent years pension earned.

I think the way forward will be a combination of things ie increased contributions, lower accruals, later retirement age, and capping of inflation uplifts.

my point is that the whole article is meaningless as it just posts a random selection of odd 'facts'

I see no logic in capping inflation uplifts as this simply encourages the government to let inflation run ahead

Old_Slaphead

CLAPTON wrote: »

my point is that the whole article is meaningless as it just posts a random selection of odd 'facts'

Agreed - unfortunately that's symptomatic of much 'lazy' financial journalism these days. Many also seem to misquote or get things/figures completely wrong for the sake of a story.

Even more worrying is Denham's observation that so long as there's more money going in than coming out then everything's ok.
Bernie Madoff eat ya heart out!

I see no logic in capping inflation uplifts as this simply encourages the government to let inflation run ahead

That's the point - it reduces overall cost & allows Gov't to inflate the debt away