Unacceptable pensions divide?

jem16

wotsthat wrote:

It could be argued that nurses and teachers are underpaid and undervalued but to say that they are low paid is a perception rather than fact.

It was you that inferred it

wotsthat wrote:

I'm also rather annoyed by the inference that the public sector has the copyright on crappy low paid jobs when this isn't the case. If I was a nurse or teacher I'd be a bit peeved about this.

seven-day-weekend

novice-saver wrote:

No.

But it's not bad either.

Another factor which hasn't been mentioned is reduction in pension payment for early retirement (not including poor health).

The DB scheme I'm in currently reduces by about 7% per year, and at 6 years early the pension paid is 66% of what I'd get if I claimed at NRA without any more years service.

Both the LA schemes I've looked at seem to have no reduction.

I am in the Local Government Pension Scheme (deferred pension because no longer working).

The earliest I can take my pension is at 60. If I do this I lose about a third of both the lump sum and the annual pension (sorry, I can't find the exact figures). The normal retirement age is 65.

My husband has lost a quarter of his teacher's pension by taking it five years early.

wotsthat

It was you that inferred it

Sorry it wasn't - you did by saying you were just a 'lowly' teacher and would 'only' get £15,000/ year pension - your words not mine. The only person here inferring that you have a crappy low paid job is you - I value the work that teachers and other public sector workers do.

jem16

wotsthat wrote:

Sorry it wasn't - you did by saying you were just a 'lowly' teacher and would 'only' get £15,000/ year pension - your words not mine. The only person here inferring that you have a crappy low paid job is you - I value the work that teachers and other public sector workers do.

Thank you for your appreciation.

I did say "lowly" but meant as in ordinary class teacher, as opposed to promoted post. I shall choose my words better next time so as to avoid confusion.

However I didn't say "only" - I merely said it wasn't "deluxe". The reality is that I won't get the maximum owing to a break in service to bring up my children. It will be more like £10,000.

EdInvestor

The maximum pension I can get as a lowly teacher is £15,000 if I were to retire tomorrow. Not exactly deluxe, is it?

It is and it it isn't.The cost of providing this pension would be 400,000 pounds for a manand more for a woman, because she is likely to live longer.

Ten years ago, the cost of providing this 15k pension would have been only around 150,000 pounds.But such has been the huge jump in the cost of pensions that this sum of money would now only buy our woman the basic state pension of 85 pounds a week.

See the massive difference?

This is where the problem lies.As mentioned it relates to the switch from the high inflation/high interest rate environment to the opposite, and to the hugely increased cost of guaranteeing an income for life.

None of this is anyone's fault of course (unless you want to blame the actuaries for getting it wrong about how long we are going to live or Gordon for curing high inflation and bringing down interest rates).Certianly it's not individuals' fault.It's a "structural" economic problem.The average public sector employee will have no idea whatsoever that the cost of providing his pension has increased by 150%+ over the past 10 years.

The problem will have to be solved of course, that's obvious.The question is, how?It's hard to see an easy way out because all pensions of the old guaranteed annuity or final salary type are now so expensive that no-one can afford to provide them any more - not companies and not the Government.

This means people will have to go the non-guaranteed hard way, which involves learning how to manage their money, how to invest it, and how to deal with risk.They don't like this idea of course, but the choice is basically this: have a no-risk, but very low guaranteed pension OR invest your money, pay attention, take (calculated) risks, and hopefully retire well-off.

For many years people (not just public servants) were offered effectively a free lunch: very low or nil risks (allegedly) combined with high returns. (Both F/S pensions and With Profits products offered this).But it was a false promise: the risks were much higher than claimed (as endowment policyholders,Equitable and pension windup victims know to their cost) and the benefits were dependant on a rising stockmarket, as the black holes in pension funds now attest, and earlier death than now looks likely.

In the public sector, quite a bit of the ballooning cost is based on too many expensive bells and whistles being added, with little regard for the cost: in that sense the problem is actually probably easier to solve, as social change will have meant some of the bells and whistles ( eg spouse's pensions)are no longer necessary, and thus costs can be cut fairly easily.

Tim_L

There is definitely a growing resentment in the private sector about the very generous pension provisions available in the public sector.

Private sector employees are facing a double squeeze. If defined benefit pensions are still available at all, companies are asking employees to increase contributions - in my case I am seeing a rise from 5% of salary to 15% over the next 18 months. Other employees are being put onto defined contribution or stakeholder schemes, so they have to save much more themselves to get equivalent benefits.

There's nothing in principle wrong with this: all of us have to get out of the mindset that pensions are provided for us and understand that we have to provide our own pensions.

However what is galling is the other half of the squeeze, which is that council tax is increasing astronomically - more than doubling in 10 years - essentially to fund excellent defined benefit schemes for public sector employees. And unlike us, public sector employees are not being asked to increase contributions or reduce benefits to anything like the same extent, if at all. This means I am having to fund the increased costs of pensions both for myself (which I don't mind) and for the 20% of the workforce who work in the public sector and who have a far better deal than me. And I mind this quite a lot.

No-one in government will stand up to the public sector unions, who apparently continue to believe that the "fat cats" in the private sector can afford to pay for the benefits of their members, so we're pretty much stuck with this state of affairs. Public sector employees, as has been said, do seem not to realise how valuable these benefits are, and also have an odd sense of absolute entitlement to them.

Of course benefits such as the minimum income guarantee are also coming from the tax take, and these provide positive disincentives to save for oneself.

EdInvestor

I think we'd better cut back the public sector pensions and then equalise the salaries between public and private sector immediately, so there is no difference in treatment, don't you?

Then the public sector workers can compete in the property market for homes on the same basis as everyone else, rather than take second best because they can't afford a decent mortgage beause of low salaries and high pension contributions.

That will mean that counscil tax will go up in the short term to pay for the pay rises and of course house prices will go up because of the increased demand.Taxes might have to rise as well as there will be less money going into the "pay as you go" schemes for the pensions of those who have already retired.

But in the end there won't be any unfairly rich pensioners funded by the taxpayer.

OK?

Andy_L

cheerfulcat wrote:

Quote:
Originally Posted by Hereward
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.ONS.

Bit of an apples & oranges comparison

"The occupations with the highest earnings in 2006 were ‘Health professionals', (median pay of full-time employees of £1,038 a week), followed by ‘Corporate managers’ (£688) and ‘Science and technology professionals’ (£662). The lowest paid of all full-time employees were ‘Sales occupations’, at £259 a week."

Since the public sector doesn't employ "sales occupations", whilst the NHS is the majority employer of "Health Professionals" medians are going to be skewed.
You have to compare like for like jobs which is difficult as the private sector are far less forward in publishing their pay ranges, not to mention their higher use of bonus & perks (eg Health Insurance & company cars)

deadparrot

I'm not convinced the pay divide between private and public sector is that great anymore, once you cut out the top 1-5% earners, who lets face it should not be too worried about pension benifits, then the rest of us are pretty much equal these days.

But the issue I wanted to bring up is the minimum wage, if the argument that public sector workers earn less is to hold true in future, then shouldn't there be two minimum wages? one for private and one for public? Raising the private min wage would be economical suicide, dropping the public sector minimum wage political suicide, so we're stuck with a single min wage.

Over the comming years, this will act as a mechanism to cause both private and public sector wage structures to converge, any difference between the sectors will only exist at the top end of pay scales, unskilled, semi skilled, and skilled workers in both sectors will earn a rate based on the single minimum wage.

Given this, pensions and other benifits given to public and private sector workers will also need to converge, if we're to reamin equals.

ReportInvestor

deadparrot wrote:

But the issue I wanted to bring up is the minimum wage

Start a new thread

if the argument that public sector workers earn less is to hold true in future

Speculative and not relevant to this thread. It has also been argued that they currently earn more.

Let's just all accept that they are more comparable than in the medium term past.

then shouldn't there be two minimum wages? one for private and one for public?

On second thoughts don't bother starting another thread as it will be a complete waste of time.