MSE News: Public sector pension benefits should be cut – report

bilbo51

real1314 wrote: »

The poster has completed 28 years service, for which they are being told they will get £7k a year. On the basis of a complete package, what do you think?

Well, to get that payout (in my private sector pension pot) I would have to have saved up something of the order of £100,000. So if 80% has been funded by the employer (or taxpayer) I think gold plated is quite a good description. Very few private sector employees get free BUPA by the way - the grass isn't quite as green as you seem to think..

RichandJ

chris_m wrote: »

IIRC that wasn't so much choice as a legal requirement - I don't think companies are allowed to run a big surplus in their pension schemes otherwise it could effectively become a tax avoidance scheme that happens to pay pensions out as well.

Correct. During the 80s/90s schemes could not run a surplus of more than 105% of estimated liabilities. Sponsoring employers therefore had to take a contributions holiday on pain of tax penalties.

ldale

I have been working as a psychiatric nurse in A&E for many years. Tis a tough old job at times. Can you imagine me restrianing folk when I am shuffling around on my zimmer frame when I am in my 60's!!Lol
I have stuck it out in the NHS earning an average salary believing that I would at least get a decent pension. The amount of times I have worked late and not got paid, come in on my days off and not got paid. I have been tempted into the private sector with the lure of better salaries, tempted abroad to a better salary and standard of living but didn't leave because of my NHS pension. The cherry on the cake too is that I am not expected to live long into my retirement either because of the toll on the body that shift work takes.
I have never striked in my life but if all the changes go through I will be the first to protest.
I can understand that the final salary scheme is not sustainable and agree that changes have to be made but I will not be happy to pay more, get less back and work longer and then pay 40% tax on what I do get.

JamesU

ldale wrote: »

I have been working as a psychiatric nurse in A&E for many years. Tis a tough old job at times. I have stuck it out in the NHS earning an average salary believing that I would at least get a decent pension.
I can understand that the final salary scheme is not sustainable and agree that changes have to be made but I will not be happy to pay more, get less back and work longer and then pay 40% tax on what I do get.

I did not realise people in the NHS on an average salary paid 40% tax.

JamesU

ldale

40% tax on our pension and lump sum I believe.

jamesd

There's no chance that you would pay 40% tax on all of your pension. Only for the part over the higher rate tax threshold, if any. I haven't seen anything to suggest that there will be any tax to pay on a pension commencement lump sum and there certainly isn't on any in normal pension schemes, whatever their type.

jamesd

JamesU wrote: »

For somebody with a deferred pension aged 48, in 20 years time at a retirement age 68, because of the switch from RPI to CPI the value of the pension on retirement will be reduced by 13%. So in today's terms, instead of e.g. receiving £100/wk a pension of £87/week will be received.

If it's increased by CPI that's correct but misleading because it's ignoring the increase in life expectancy that the employer has delivered and will deliver in the next twenty years. It's not all gain or all loss, it's loss in one place and gain in another.

The person who is 48 will benefited greatly from the increase in life expectancy their employer has delivered. It's entirely reasonable for their employer to expect the costs of that added life expectancy to be shared.

JamesU wrote: »

Furthermore, with respect, I do not think it is correct to reason and justify these reductions in pension value because of cost-benefits due to increased life expectancy or issues of affordability. As far as the retired and deferred pension members are concerned, they entered into a contract for a final salary pension on the basis that it is will be paid annually with index linking until death with no caveats attached.

Close, but not quite. They did it while both parties were expecting that to be for the number of years of life expectancy prevalent at the time.

Now you're expecting to punish the employer for having delivered the wonderful benefit of more years of life by expecting them (and hence all tax payers) to both deliver the increased life expectancy and pay all of the costs for it. I don't know about you but I prefer not to punish people who are giving me extra years of life, it's exactly the opposite of the incentive I want them to have!

JamesU wrote: »

For existing employees whose contracts can be re-negotiated and either accepted or declined (with protection of accrued rights to that date) there may be a more reasonable case to discuss points such as 2-6.

It's certainly easier for current employees but all employees are benefiting from increased life expectancy, not just the ones currently in service.

We're going to see more of this, affecting us all, whether in the public or private sector. The changes so far and the changes int his proposal don't really look sufficient to cover the situation when all of the baby boomers have retired and the smaller younger than boomer generation is paying the bills. the private sector, switching to defined benefit schemes, has done more work on it but there's still more likely to happen with the state pensions.

It'd be nice to just agree with you but the life expectancy change is what's driving all of this. It's not something that can be ignored and it's something that's a big benefit to all of us, even if we happen not to live to the full extent of the gain (since with any life expectancy, some die early, some later).

I'm passionate about pensions myself but I simply don't think it's unfair or unreasonable to expect both parties to share the costs of living longer.

Andy_L

Stargazer57 wrote: »

What's a bit of a mystery is why the Unions are happy to join the clamour saying Final Salary = good, average Salary = bad. I thought they were meant to be on the side of the downtrodden.

Unions should be on the side of all their members equally regardless of relative salary.

However I suspect they think that the gov will use the change to career average to reduce the benefits to all rather than just share out pensions more equitably between different employees

Andy_L

Butterfly_Brain wrote: »

My DH is a site agent at a lower school and his wage is less than £14,500 pa he pays a big pension contribution in comparison to his wage. How is he supposed to pay anymore in when he is on a breadline wage as it is. :mad:

Seeing as how pension contributions are %age based it will be the same contribution in comparison to his wage as anyone else in the scheme (possibly less depending on which one he's in as some tier the rate so higher earners contribute a higher %age than those at the bottom)

Andy_L

ldale wrote: »

40% tax on our pension and lump sum I believe.

The lump sum is tax free. The pension is taxed as if it were income so, unless your total income is over ~£38k it will only be subject to 20% tax