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Civil service pensions review

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  • I suggest you look at your local council's end of year financial statements and tell me who is going to pay for their pension shortfall of millions..including paying for index linking..no its not jealousy..I want parity across the board as is beginning to happen to some degree from now.Ah that old chestnut about public service employee's earning a low wage..it does not wash anymore.
  • hugheskevi
    hugheskevi Posts: 4,499 Forumite
    Part of the Furniture 1,000 Posts Photogenic Name Dropper
    edited 26 September 2010 at 5:17PM
    I also take issue with the fact that public sector pensions, like the State Pension, in fact, are unfunded. I don't like this model as it is just delaying debt for future generations and I think this is unfair.
    It actually wouldn't make much difference with regards to future generations whether the pensions are funded or unfunded whilst there is a Government deficit and the pensions are Defined Benefit.

    If they are funded, this just means a higher level of total borrowing than would be the case if they were unfunded, as the Government has to borrow more to put money into the pension scheme than would have been the case if it was unfunded. It is future generations who will be paying that off/servicing the debt.

    In the unfunded system, the Government is effectively borrowing money from the public sector workers with pensions, and repaying them when they draw the pension. Again, it is future generations who will be meeting the debt just in another way (via tax in the future to pay pensions, rather than tax in the future to service total borrowing).

    If the pension system is funded Defined Benefit, then this means the Government is bearing the risk of investment returns. Which effectively means the Government is borrowing to invest.

    It would be rather perverse for the Government to issue gilts only to put them in a pension fund - that would just be the same as an unfunded system, with a lot of red-tape and money being pushed around, so you wouldn't expect the funded pension scheme to contain gilts. Which means that the Government would be borrowing money to invest in risky assets.

    I'm not sure the role of Government should be to speculate on risk-bearing investments :D
  • CLAPTON
    CLAPTON Posts: 41,865 Forumite
    10,000 Posts Combo Breaker
    final salary scehmes cost about 25% of the person's salary; the amount paid directly by the employee is generally around 6% although it varies quite a bit

    to say 25% isn't affordable makes no real sense; what matters is the overall bill for emplying some-one

    a huge benefit of the schemes is that all the 'investment risk' falls on the employer and not the employee

    it would seem to me that all pensions ought to be indexed linked as any ordinary person has no control whatsoever on the level of inflation

    within the public sector the 'early retirement' option is routinely abused; many retiring in their 50's on spurious redundancy grounds and hence starting their penision early without acturial reduction
  • AnonymousForObviousReason
    AnonymousForObviousReason Posts: 461 Forumite
    Part of the Furniture Combo Breaker
    edited 26 September 2010 at 6:22PM
    BTW I'm not saying there should be no review or changes made, but need to be in moderation.
    I suggest you look at your local council's end of year financial statements and tell me who is going to pay for their pension shortfall of millions..including paying for index linking..no its not jealousy..I want parity across the board as is beginning to happen to some degree from now.Ah that old chestnut about public service employee's earning a low wage..it does not wash anymore.

    No low wages doesn't wash any more but it did a few years ago when they were substantially lower compared to private sector, especially if you add a bonus. As I pointed out, when the economy suffers the public sector looks like a better place to be.

    I work in a college, there is already a shortage of people that can do my job (a year wait to recruit is not unusual), so the only option will be to pay me (or my successor as I'll go to private sector for the money) more.

    The college can raise the money, it'll be done by charging 19+ learners the maximum allowed (minimum 1,350 per year for full time, excluding exam, material and administration fees but likely to be around 1,600). Employers that get a much reduced fees now for training will have to pay (there goes a few employees).

    We'll probably be stopping courses for special needs adults (as these are done at a loss and with a lot of staff volunteered time) - just let social services deal with the cost, we'll have to look at what we can charge our 16-18 learners, can't do tuition fees but there are other things that can be passed along (including donations for popular courses). And finally the money the local council pays to teach school children will be ramped up (wonder where that cash will come from).

    We can all see cuts that can be made which don't apply to us. I dislike my tax money being spent on maternity leave and other child related benefits. Stop those and ensure only those that can pay for the choice will have kids, reducing tax burdens on us all and the massive costs to employers. (BTW I'm not actually suggesting this seriously would happen just an example).
    CLAPTON wrote: »
    within the public sector the 'early retirement' option is routinely abused; many retiring in their 50's on spurious redundancy grounds and hence starting their penision early without acturial reduction
    Yes, I wouldn't object to this being increased. But you can't do NOW you need to give notice.
    Santander are awful - mission in life is to warn people since 17-Sep-10, 18-Sep-10 realised one of thousands.
  • Well don't complain when you find that no one wants to teach your kids, fix your broken bones, police your street, put out the fires or fight your wars. AND your council cuts back the services to pay higher wages and starts providing bonuses to make up for the drop in pensions.

    Public sector generally pays worse but offers more stability in jobs, longer holidays and better pensions. I notice jealousy only reared it's green head when the economy took a downturn, when the economy was good there was no complaints about how much nurses and the like earned after 40 years working.

    I would agree with the sentiment, except that it's not altogether true. The absolutely huge rise in public expenditure over the last 15 years has generally not made any of these vital services better.

    It has gone into so-called 'community police' with no powers, leaving real policemen free to do tiresome paperwork in more peace. It has gone into significantly higher salaries, and many more bureaucrats in the Health Service.

    Taking into account salary, benefits, pensions, job security, working conditions, then a public sector job is far more lucrative than an 'equivalent' private sector job these days.

    Give any council £100K more money. It will recruit some new non-jobber 'Diversity Co-ordinator' (or whatever) and use the rest to 'up' the salaries of CEO and other managers. Now take £100K OFF the same council, and it will sack three bin-men. I would much rather them 'undo' what they did with the extra money.

    A small example. Watch these 180 Quangos get killed/merged, and then try to notice any diminution in the quality of life for the population. There will be none.
  • TREVORCOLMAN
    TREVORCOLMAN Posts: 1,001 Forumite
    edited 27 September 2010 at 5:54AM
    What the daily wail doesnt tell you is that the vast majority of public sector workers are paid far less than the national average. But of course this doesnt sell papers.

    A relative showed me their pension statement the other day.

    For 23 years service forecast is:

    £3k per year pension and £10k lump sum - not what I would call gold plated!
    I am NOT a mortgage & insurance adviser - or anything to do with finance, that was put on by the new system I dont know why?!
  • I would just like to point out that at least one public sector Pension Scheme, Local Government, IS funded.
    (AKA HRH_MUngo)
    Member #10 of £2 savers club
    Imagine someone holding forth on biology whose only knowledge of the subject is the Book of British Birds, and you have a rough idea of what it feels like to read Richard Dawkins on theology: Terry Eagleton
  • bendix
    bendix Posts: 5,499 Forumite
    What the daily wail doesnt tell you is that the vast majority of public sector workers are paid far less than the national average. But of course this doesnt sell papers.

    A relative showed me their pension statement the other day.

    For 23 years service forecast is:

    £3k per year pension and £10k lump sum - not what I would call gold plated!


    And yet the Office for National Statistics has pointed out time and time again over the last year that when pension contributions are taken into account, the average public sector worker earns significantly more than the average private sector worker.

    At what point are we going to lose this fantasy of low paid public servants and richkid private sector employees?
  • Old_Slaphead
    Old_Slaphead Posts: 2,749 Forumite
    Part of the Furniture 1,000 Posts Combo Breaker
    edited 27 September 2010 at 12:04PM
    A relative showed me their pension statement the other day.

    For 23 years service forecast is:

    £3k per year pension and £10k lump sum - not what I would call gold plated!

    The lowest pay in PS is around £6.50ph. Assuming 1/80th accruals that gives £3600pa. Add in an annuity from the lump sum would give close on £4000pa for 23 years service.

    That's for the LOWEST paygrade - virtually all PS employees get more than that.

    The average PS pension (including annuitised fixed sum) is closer to £7,000pa for 23 years service (over £10,000 for 40 years). Many can take pension from 60 and have a significant degree of inflation proofing - which are major benefits.

    For someone in private sector - a pension fund in excess of £200,000 (ie 40 years at £5000pa contribution) would be required to give similar benefits
  • I would just like to point out that at least one public sector Pension Scheme, Local Government, IS funded.

    I think "partly funded" would be a more accurate description.

    At this year's revaluation I would suggest that the pension assets will be equivalent to around 70% of the liabilities - ie a current underfunding of around 30% (we shall see soon!)
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