Unacceptable pensions divide?

EdInvestor

What I mean is that in future you can see that funded Government final salary schemes might be able to cut their liabilities ( and thus the need to raise contributions from the taxpayer ) by giving the choice of removing the spouse's benefit: after all many people might be happy to have reduced contributions as they are effectively paying for something they will never use (because they are single) or for a benefit which will be swallowed by higher rate tax ( if their spouse is already well provided for in his/her own right.)

Offering a choice could be a win-win for both sides.

Milarky

EdInvestor wrote:

What I mean is that in future you can see that funded Government final salary schemes might be able to cut their liabilities ( and thus the need to raise contributions from the taxpayer ) by giving the choice of removing the spouse's benefit: after all many people might be happy to have reduced contributions as they are effectively paying for something they will never use (because they are single) or for a benefit which will be swallowed by higher rate tax ( if their spouse is already well provided for in his/her own right.)

Offering a choice could be a win-win for both sides.

That would be a sight! 300 MPs are gathered in Westminster Hall for a presentation on the future of their pension scheme. They have heard in advance there could be some 'bad' news. It turns out it's 'good' and 'bad'. The Treasury - feeling the heat from the public - has decided to 'cap' it's contribution to their pension scheme at 25% of salary. They have options: raise immediately their own contributions to 15% (wot? a 'disgrace'! 'whos in charge here?!'..) or leave it where it is and consider the benefits of simpler single-life annuities. The MPs have mixed emotions about this - understandably - they are humans not calculating machines after all - they thought 'pensions' were something that just came with the job. Now they are expected to sit down with advisors (whom they have no reason to believe) and 'decide' what is best for them as individuals. OoooH! this is all too difficult! My brain is starting to ache! But just as it looks as though some reflection on this sober state affairs is about to break out the division bell goes off - and they happily return their trenches (eh benches) in the House of Commons to vote the next round public spending for the NHS...

ReportInvestor

Sunday Telegraph Economics editor picks up the theme

Public affluence, private penury

"......the current cost [of public sector pensions] is around £20bn annually, equivalent to 5.5p on the basic rate of income tax.

But just look how the bill rises over the coming decades. By 2050, based only on public sector pension promises made to date – so not including those the state will make in the future – the cost more than quadruples, to almost £90bn a year.

As all the baby-boomer public sector workers retire, and the ranks hired by New Labour then reach for their slippers too, the price of these pensions simply spirals out of control....."

Liam Halligan goes on to argue that politicians are simply not being honest with the public about these off-balance sheet public liabilities.

## - But then, how can MPs & ministers be honest when the taxpayer is paying an extra 24% on top of their salaries into the MPs pension fund?

## - This sleight of hand continues to be possible because voters simply don't understand pensions.

conradmum

cheerfulcat wrote:

Many people will rely on the state pension to top up their private pensions; most company pensions are not anywhere near as generous as that for public sector employees. I don't think that those employees really understand that, which is why I would like to see their interests more closely aligned with those of the rest of us.

In any case, public sector workers' pensions, like the state pension, are paid by the taxpayer and are thus not comparable to either company or personal pensions.

Well, I can only speak from the viewpoint of an FE lecturer, and from the viewpoint of people on the pensions provided for the admin support where I work, but one of the attractions of the job is the pension scheme, because the pay doesn't compare well with private industry. A lot of local government workers are on very low salaries, too. I and others I know will also be relying on the state pension to top up our work pensions, good though they appear on paper. We will be working until our state pension kicks in like everyone else.
I don't understand your comment about how because they are paid by the taxpayer they are not comparable to company or personal pensions. I pay a percentage of my salary - I get a pension at the end of it. Sorry if it irks you that you pay for it out of your taxes, but to me I am employed by you, I sacrifice some of my salary and I expect to get a pension at the end of it, the same as everyone else.

cheerfulcat

conradmum wrote:

I don't understand your comment about how because they are paid by the taxpayer they are not comparable to company or personal pensions. I pay a percentage of my salary - I get a pension at the end of it.

They aren't comparable because company and personal pensions are not guaranteed. The underlying funds are dependent on the movements of the stockmarket. Public sector pensions are unfunded; they get paid no matter what.

Sorry if it irks you that you pay for it out of your taxes, but to me I am employed by you, I sacrifice some of my salary and I expect to get a pension at the end of it, the same as everyone else.

But you aren't employed by me. You are employed by the state, and I have to pay for it and yes, it does irk me that I may have to work into my 70s so that you can retire at 60.

I might add that you seem to have no idea how generous your pension scheme is compared to company and private pensions. Most people do not have the luxury of a defined benefit pension - only ~15% of people in private sector employment, compared to nearly 90% in the public sector. And the " less pay, more pension " argument is a red herring; public sector employees are on the whole better paid than private sector.

Hereward

cheerfulcat wrote:

They aren't comparable because company and personal pensions are not guaranteed. The underlying funds are dependent on the movements of the stockmarket. Public sector pensions are unfunded; they get paid no matter what.

This isn't quite true, from what I have been managed to discover Public Sector pensions are also invested in the stock market, and like all other pension sechems if there is a short fall then all contributors have to pay more.

But you aren't employed by me. You are employed by the state, and I have to pay for it and yes, it does irk me that I may have to work into my 70s so that you can retire at 60.

Again, not strictly true. If enough peolpe felt that they could get the services that they want from the Private Sector, at a price that they are willing to pay, then they could easly vote for a party that would abolish those services in the Public Sector. As the majoriy in the UK don't think this yet, then effectively all Public Servants are employed by you.

I might add that you seem to have no idea how generous your pension scheme is compared to company and private pensions. Most people do not have the luxury of a defined benefit pension - only ~15% of people in private sector employment, compared to nearly 90% in the public sector. And the " less pay, more pension " argument is a red herring; public sector employees are on the whole better paid than private sector.

Can I enquire to where you get your figures for Public Vs Private sector pay from? From what I can tell the majority of Public Servants earn less than most Private Sector workers. There may be a few senior positions that pay more in the Public Sector than in the Private Sector, but then if you compare Director's pay to that of shop floor workers you get the same results.

conradmum

cheerfulcat wrote:

They aren't comparable because company and personal pensions are not guaranteed. The underlying funds are dependent on the movements of the stockmarket. Public sector pensions are unfunded; they get paid no matter what.

But you aren't employed by me. You are employed by the state, and I have to pay for it and yes, it does irk me that I may have to work into my 70s so that you can retire at 60.

I might add that you seem to have no idea how generous your pension scheme is compared to company and private pensions. Most people do not have the luxury of a defined benefit pension - only ~15% of people in private sector employment, compared to nearly 90% in the public sector. And the " less pay, more pension " argument is a red herring; public sector employees are on the whole better paid than private sector.

I don't know what you mean by 'guaranteed'. Did you not notice the recent attempt by the Government to change the terms of our pensions despite the fact that we had signed up to them on the basis of those terms? As it is they have been changed, not to force us to take them at 65 as the Government wanted, thank goodness, but the terms are not 'guaranteed' as you put it, at all.
Any future government could turn around and say, sorry, the taxpayers can't afford to pay you the pension we promised - hard cheese.

If you are so irked by the apparently fantastic benefits that the public sector pensions pay do the sensible thing and go and work in the public sector yourself. In fact, why aren't you?
I am 41, am educated to post-graduate level and have several professional qualifications. If I were to work full time my salary would be £29,000. And I am on the highest lecturing scale. Many of my colleagues are older than me and their pay scale tops out at £25,000. Without the very good pensions provision you would get far fewer people wanting to do these jobs.

EdInvestor

Funded vs unfunded pension schemes

Not all public sector pension schemes are unfunded, though most are.This means that instead of having a pile of money invested to eventually pay out each pension, the scheme is operated on a "pay as you go" basis, where the working members' contributions pay the pensions of those who have retired.In theory this shouldn't cost the taxpayer anything as long as there are enough current employees vs retired ones.

Unfunded scheme examples:

Civil service
NHS
Teachers
Armed forces
Judges

Funded scheme examples

These are where the employee and employer put money into a pot which is then invested over the long term and used to pay out the pensions of those retiring. If there is a shortfall in investment returns, or people start living longer, more money might have to be contributed, leading to a need to raise more taxes or reduce costs/services in other areas.

All the local authority (council) schemes
Firemen
Police
MPs
University teachers

In addition there are certain Government guarantees covering pensions for people in the now privatised former nationalised industries.

Remnants of this area usually have funded schemes eg Royal Mail.

clairehi

cheerfulcat wrote:

yes, it does irk me that I may have to work into my 70s so that you can retire at 60.

Well why dont you take a job in the public sector if its so wonderful, then you can retire at 60 too.

I dont know why you waste your time being jealous of other people's situations. It has absolutely no bearing on your life whatsoever!

EdInvestor

Am I right in thinking there is a new public sector deal where the retirement age moves from 60 to 65, but the pension scheme terms are improved from 1/80th to 1/60th, with no real net change in cost to the employer?