Public Sector Pensions - Are they really so bad?

Zelazny

ViolaLass wrote: »

I've just put the contribution figures for teachers' pension into the Hargreaves Lansdown pension calculator to try to see what they would get if that money were invested in a 'normal' work pension scheme. With a starting salary of £21k, employee contributions of 6.4% and employer contributions of 14.1%, I end up with about £17200 a year (I'm 27, assuming retirement at 68).

In comparison, the calculation done for teachers would be something like:

41/60 x (half final salary)

Let's assume I become an AST (Advanced skills teacher) and reach £50k (I don't know whether this is a realistic figure, in today's money, for me to reach and I'm happy to be corrected).

Anyway, that salary would then give me a pension of 41/60 x 25 = £17k, which seems pretty comparable to me. Am I missing anything other than the possibility that a teacher working that long might reach a higher salary?

Edit to add that all figures given here are in today's money.

Out of interest, why have you used half of the final salary? The calculator at http://www.teacherspensions.co.uk/resources/pension_calculator.htm would seem to suggest a pension of service / 60 x final salary (giving a pension of £34,166 per year for a final salary of £50k and 41 years service).

It does appear that if you have service prior to 1 January 2007, you accrue pension at 80ths instead of 60ths, but you have a normal pension age of 60 instead of 65, so the benefits are roughly equivalent (a discount of 25% for retiring 5 years early is about right). The only difference is that those who have service prior to 1 January 2007 also get a lump sum added of 3 x annual pension.

Andy_L

Zelazny wrote: »

Out of interest, why have you used half of the final salary? The calculator at http://www.teacherspensions.co.uk/resources/pension_calculator.htm would seem to suggest a pension of service / 60 x final salary (giving a pension of £34,166 per year for a final salary of £50k and 41 years service).

Just to confuse the issue typical public sector schemes have 2 versions, an older one with 1/80ths accrual plus a 3x lump sum and a retirement age of 60 and a newer scheme with 1/60ths, no (automatic) lump sum and an NRA of 65.
Personally I only like to consider the 2nd one as its the one avaliable to new joiners and, in most schemes, future service for existing employees. Plus not having a lump sum makes number crunching easier

calrest

This public sector with pensions becomes a really bad utopia for the European Union. The current trend doesn´t suppose positive expectations.

Radiantsoul

calrest wrote: »

This public sector with pensions becomes a really bad utopia for the European Union. The current trend doesn´t suppose positive expectations.

No idea what this means.

ViolaLass

Zelazny wrote: »

Out of interest, why have you used half of the final salary?

I've re-read the information I got that from and I think I misunderstood what they were telling me. In other words, you're right. (If I didn't dislike smilies so much, I would put one here). That certainly explains why teachers' pensions are so revered.

Intoodeep

As another aside, a point that appears not to be troubling many commentators.........what about instead of looking forwards, looking back at the legions of Public sector Employees who in the 80's/ 90's took advantage of early retirement policies....ie. say someone retired at 55 in 1985 and are now 80 (easily feasible)......25 years of payouts.
I wonder how much someone like that would have actually paid into their scheme and how much us, the long suffering tax payer has shelled out ?
And what is the total liability for Pension payouts as such in these circumstances let alone the future payouts which are mind boggling enough.