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

datostar

21Twinkle wrote: »

What concerns me is what will happen to existing receivers of pensions (I am 47 years old and am on an ill health retirement pension from civil service)
Will they try to claw money back from me - or once receiving a pension - am I safe ?

You'd need to look closely at the conditions of the pension as to what happens if the condition giving rise to your ill-health pension gets better. There have been cases of medically retired police officers being made to take their jobs back or have the pension stopped as they have been deemed fit for duty again - albeit usually in injury cases. Also, recently. some police authorities have attempted to drastically reduce pension payments when the medically retired have reached state pension age on the grounds that payments intended to compensate for loss of earning power are no longer needed as there is no longer any need for the person to work.
I'd be keeping a close eye on this kind of thing, especially in the current climate of hostility to public sector pensions.

Andy_L

Velcro_Hotdog wrote: »

Out of interest how many police officers, fire fighters, prison officers etc actually work in that role right up until retirement? Lots of comments on here about not being able to do the job up until age 68 but I have never meet a 60 year old fire fighter.

That's because they can currently retire at 55 with a full pension (or earlier depending on specific of age & service)

JamesU

jamesd wrote: »

Old Slaphead added up the money paid each year under each rate. The calculation is correct: after 20 years the RPI increase will have resulted in total payments 7% more than the CPI increase.

So if I was receiving a final salary pension of £100/wk right now, but 20yrs ago the index had been switched from RPI to CPI, is it also reasonable to say that I would be receiving £87/week instead? (assuming the 13% reduction in the pension over the period and assuming an average RPI/CPI differential of 0.7%).

JamesU

Old_Slaphead

JamesU wrote: »

So if I was receiving a final salary pension of £100/wk right now, but 20yrs ago the index had been switched from RPI to CPI, is it also reasonable to say that I would be receiving £87/week instead? (assuming the 13% reduction in the pension over the period and assuming an average RPI/CPI differential of 0.7%).

JamesU

Absolutely correct

Butti

Old_Slaphead wrote: »

Difference between RPI & CPI has been 0.7%pa

Year 1 lose 0.7% year 2 1.4% year 3 2.1% etc.......to year 20 14%

The average is therefore 7%pa

The same process is to be applied to Housing Benefit which means it will start to not cover some parts of the country over time, infact large parts of the country.

B

JamesU

Old_Slaphead wrote: »

Absolutely correct

Have just checked your figures (just in case!) and for sure if you take out the annual amount that is compounded annually the difference between RPI and CPI is indeed 7% (7.5% if one wants to be pedantic ).

So two rationales depending on how one wants to see things regarding the switch from RPI to CPI (with the difference between RPI and CPI at only 0.7%):

The first is over 20 years there is a cumulative loss of 7% of the pension income taken during that 20 year period. Some OPs may be happy with looking at things in this manner.

Alternatively, after 20 years the annual pension value is 13% less, and this can be understood more easily in today's terms as a cut from e.g. a £100/wk pension to a £87/wk pension, a £200/wk pension to a £174/wk pension etc.

JamesU

jamesd

datostar wrote: »

Also, recently. some police authorities have attempted to drastically reduce pension payments when the medically retired have reached state pension age on the grounds that payments intended to compensate for loss of earning power are no longer needed as there is no longer any need for the person to work.

That makes sense, though it's surprising that all aren't doing it routinely. It's completely standard for income replacement policies in the private sector to end at the normal pension age, though they have to be purchased at extra cost, not as part of any pension benefits. This is a different thing from compensation for a work-related injury, though. That should be unrelated to pensions, just to the compensation appropriate for the injury and the additional costs of living with it.

jamesd

JamesU wrote: »

So if I was receiving a final salary pension of £100/wk right now, but 20yrs ago the index had been switched from RPI to CPI, is it also reasonable to say that I would be receiving £87/week instead? (assuming the 13% reduction in the pension over the period and assuming an average RPI/CPI differential of 0.7%).

It's reasonable to say that your income after 20 years of that is lower by that much. It's not reasonable to say that you have lost 13% because:

1. After 20 years the total amount of money received is only 7% less, not 13% less.

2. Over the 20 years life expectancy at birth has increased from about 75 to about 82 (see page 11). That's 7 more years.

3. So after retiring at 55 with RPI you'd be dead after having received £27990.

4. With CPI and the work on life expectancy you'd be alive after having received £26065 and could expect to carry on collecting the pension for another 7 years. 7 more years of payments puts you way ahead in the money paid out deal.

5. With CPI and retiring five years later you're still ahead by the extra years of life and also in money terms because it takes less than 1.4 years to make up the difference in money paid out and you still have two more years. You'll have worked longer but still have had the full seven extra years to enjoy life, even if only a couple are after retirement.

6. Life expectancy continues to rise so the deal is really better than those.

The £100 to £87 switch after 20 years is the one that someone trying to mislead with statistics would use to make the change seem worse than it is. To try to explain it properly you have to allow for the life expectancy changes.

I doubt that many of those who signed up earlier are aware of just how good a deal Hutton has suggested by not making them split more of the benefit of the extra years of life, instead letting them keep most of it for accrued years.

ffacoffipawb

Old_Slaphead wrote: »

Difference between RPI & CPI has been 0.7%pa

Year 1 lose 0.7% year 2 1.4% year 3 2.1% etc.......to year 20 14%

The average is therefore 7%pa

The average is 0.7% pa, not 7% pa !!

Robert_Tycelyn

I will use the weekend to catch up with all the postings.

Just one big question from me - I am a 52 yr old teacher - will I still be able to retire when I'm 60 or will I have to go until I'm 65?