Gut-busting inflation

Rollinghome

Old_Slaphead wrote: »

The average MPs pension may 'only' be around £16,000 but as it relates to just 10 years service it's pretty darned good.

But not quite as good as the £700,000 a year pension Fred Goodwin walked away with after 8 years as CEO of RBS. I'm not sure I'd see the pensions sometimes awarded in the private sector as being a particularly good example to the public sector.

I'm not going to consider the proper rewards for MPs or anyone else but it makes no sense to look at pension entitlement as being seperate from the entire remuneration package.

Old_Slaphead

Rollinghome wrote: »

I'm not going to consider the proper rewards for MPs or anyone else but it makes no sense to look at pension entitlement as being seperate from the entire remuneration package.

Indeed - if the justification for good public pensions was as a deferred salary payment for years of lower pay in public service then continuation would be justified. For the last decade that hasn't been the case so future accruals should be stopped and replaced with a DC scheme.

pqrdef

jimjames wrote: »

In the last 10 years we have been through 2 of the largest stock market crashes in living memory yet now the FTSE Index has virtually recovered where it was 3 years ago having been through one of the worst recessions since 1930s.

So are businesses more profitable now than they were in 2000 and 2007, or have we had two warnings that this market level is unsustainable?

pqrdef

jimjames wrote: »

Visible risk tends to be much easier for people to comprehend. 25% drop in the stock market in a few months vs 25% drop in the value of savings over 10 years due to inflation. One is very clear to see, the other is invisible and often ignored.

Well it's not like cash is the only thing that's subject to inflation, whereas all those fund performance tables and charts are showing performance in real terms. If we're making comparisons, let's inflation-adjust everything or nothing.

pqrdef

GeorgeHowell wrote: »

What is completely untenable is some sectors of the economy having decent pensions funded out of taxation, and the others sectors, many of which do not, paying for it.

Might as well complain that public sector wages are paid out of taxation. If you want to have a public sector, it can't be "untenable" that you pay the people who work in it.

Not all public sector pensions are pay-as-you-go. Many were supposed to be fully funded, or so we were told when the employers (taxpayers) were taking contribution holidays.

A contribution holiday is basically the employer (taxpayer) skimming off a supposed surplus (derived partly from employee contributions, including AVCs).

The unions went along with those holidays because (as was carefully explained at the time) it was a two-way street, and if the pension fund subsequently fell into deficit, the employer (taxpayer) was committed to fix it. Of course only fools would rely on a promise like that.

pqrdef

Linton wrote: »

What GB did was to remove what was arguably a subsidy to pensions that did not for example apply to ISAs. For ordinary rate tax payers dividends are taxed at 10%, but it is assumed that the 10% has already been paid within the companies tax. So it is effectively an arbitary somewhat imaginary figure. Nevertheless for many years pensions were given a refund of the 10% dividend tax.

Which results in the same money being taxed twice, because the pensioner pays tax on the pension when he gets it, with no credit for tax already paid on the dividend component.

So no, this doesn't put pensions on the same basis as ISAs, quite the reverse. With an ISA you don't pay tax because the money has already been taxed. A pension is fully taxed because it's paid from untaxed funds. Except it isn't.

Linton wrote: »

The FTSE100 has an average dividend of about 3%, so if pension funds invested in the FTSE (which they dont particularly) it would make 0.3% annual difference.

This is irrelevant. What matters is the lost income as a fraction of the income, not as a fraction of the capital.

GeorgeHowell

Rollinghome wrote: »

I find it extremely odd for anyone to suggest that while public sector remuneration is publicly funded that the pensions that are an integral part of that pay package should somehow not be.

You apparently want to see state control of private sector pensions and presumably state control of the contract every employee enters into with an employer. That’s quite a step. Perhaps you're confusing “everyone's own good” as you put it with your own good.

I assume you worked in the private sector because at the time you thought it offered you better prospects and pay than the public sector and aren't claiming you were unfairly excluded in some way. The choice was yours. Now, belatedly, you seem to think you made the wrong choice. Perhaps you didn’t understand at the time the advantages of lower remuneration in return for a public sector pension not dependent on the vagaries of the stock markets. The idea that the private sector needed an excuse to reduce their pension liabilities seems a pure flight of fancy.

If you now find yourself with an inadequate pension I’ve every sympathy for you and everyone in a similar position. But I’m afraid it’s for us all to make these career decisions and it’s pointless to blame others if we get them wrong or to envy those who get them right. We can’t expect to be nannied all our lives.

As it happens I am fortunate to qualify for a decent pension so I do not have a particular, personal axe to grind on this. I am looking at it from the point of view of the much-derided greater good.

Now that pay in the state sector is generally on a par with the private sector that is presumably for the most part not a significant factor in career decisions. However it also makes it indefensible to a reasonable person that taxpayer-funded state sector pensions should be so much more generous and safe than most of those in the private sector. In the past remuneration was generally better in the private sector, though a lot of other factors did, and still do, enter into most people's career decisions.

I did not of course say that either state sector pay nor pensions should not be state funded, but only that a level playing field, job for job, between the state and private sectors should apply.

To what extent the decimation of private pensions would have taken place without the Labour's government's clear signal that such action was okay with them is a matter of speculation. Nevertheless, clear signal there most certainly was.

talexuser

One thing I can't understand about this argument put forward by government - we can't afford state pensions, unemployment benefits, sickness benefits, road repairs, cancer treatments, snow ploughs, blah blah blah...

Yet overnight we have ~8 billion spare to lend to the Irish at 5% (is that the figure I read?)

Are we borrowing at much less than 5% so making a profit, or if Ireland went bust would we lose much more output/value in export jobs etc so it is a gun to the head scenario?

The whole thing seems like a smaller version of the bank bailout, print money to buy bad debt. Yet for 30 years we've been told you can't just print money without earning it because inflation follows as night follows day..... bringing subject back to o/p.

opinions4u

talexuser wrote: »

One thing I can't understand about this argument put forward by government - we can't afford state pensions, unemployment benefits, sickness benefits, road repairs, cancer treatments, snow ploughs, blah blah blah...

Yet overnight we have ~8 billion spare to lend to the Irish at 5% (is that the figure I read?)

Are we borrowing at much less than 5% so making a profit, or if Ireland went bust would we lose much more output/value in export jobs etc so it is a gun to the head scenario?

The whole thing seems like a smaller version of the bank bailout, print money to buy bad debt. Yet for 30 years we've been told you can't just print money without earning it because inflation follows as night follows day..... bringing subject back to o/p.

Perhaps there are part-state owned British banks with failing assets in Ireland. Keeping the Irish economy ticking over is cheaper than full nationalisation of RBS and taking an even bigger share in LBG.

http://uk.reuters.com/article/idUKTRE6AA1P520101111

Rollinghome

GeorgeHowell wrote: »

I did not of course say that either state sector pay nor pensions should not be state funded, but only that a level playing field, job for job, between the state and private sectors should apply.

So bonuses similar to those taken by bankers going to public sector workers and pay rises at the top to match the 23% enjoyed by FTSE 100 directors during the 2009/10 financial year. It’s an interesting idea.