Public sector wellcome to the real world

Starship9

Here are mine:

Dept: Defra
Position: Senior Exec Officer
Ann Salary £40K
Total Qualifying Service: 33 years

I've just taken early retirement at 51 years old:

Final wages increased by £3K = PILON payment
Lump sum £50K (tax free)
Pension (index linked, for life) £17K per annum

I'll be wanting to find some part time / casual work in due course to get a little more income but we have no mortgage and modest outgoings so it's not a bad deal.

I'm just so glad to be out of it and having secured my pension now this has all kicked off - of course it's been brewing for ages.

dori2o wrote: »

I have no problem psting my job details

Department? HMRC
Position? Contact Centre- Taxes
Hours per week? 37
Annual Salary? £18k
latest pension projection- assuming 35 years service £5987 PA. (This includes 6 years pension contributions transferred in from old private sector employment scheme- BAE Systems)
Contribution? 3.5%
What bonuses do you get? NONE
What favourable conditions do you get? 25 days annual leave, plus bank 10.5 days bank holiday.

jamesd

For a fixed pension spending pot, yes, career average is better for most employees than final salary because it shifts some of the money that would have gone to the ones who end up highly paid to those who have more normal careers.

If wage inflation happens then the employer either has to increase the pot of pension money or reduce pensions somehow. Wage inflation is typically about RPI+1% so whether it's final salary or career average both the pay and pension pots can be expected to increase.

atush

leveller2911 wrote: »

Am I right in thinking that anyone with earnings under £15k a year won't be affected?.

My brother in law is a Paramedic, he is 50 yrs old and I believe he will retire in 5yrs time on a full pension which is wrong . Why can't he carry on working till 67 like I will have to in the Private sector?.He is paid very well, he has had about 2 years off work with football and Judo injuries all on full pay and there are many like him who take all the sick days they are "entitled" to , so the Public sector need to look a little closer to home to see where much of the blame lies.

It makes my blood boil when we hear how certain public sector workers can retire at 55 when on the other hand a Bricklayer,Carpenter,steel worker,farm Labourers etc are expected to retire at 67 when they work outside come rain or shine and are lucky if they get 4 weeks holiday a year whereas your average teacher gets 13 weeks a year for Jollies.Now if they worked 3 of those 13 weeks for training etc it still leaves 10 wks a year for holidays........

A Voice of reason who is actually related to someone with one of those fab 1.5% pensions PS pensions. Not to mention the wise words above by Wearside.

we pay 26% of salary into pension plus are saving extra but I can't see how we will be anywhere near half current salary.

Moby

atush wrote: »

A Voice of reason who is actually related to someone with one of those fab 1.5% pensions PS pensions. Not to mention the wise words above by Wearside.

we pay 26% of salary into pension plus are saving extra but I can't see how we will be anywhere near half current salary.

'Voice of reason' Lol....he's asking his Brother -In -Law Paramedic to work until he's 67 and saying its the same as a manual worker.....unbelievable! Just remember this when your asking a 67 year old fire fighter to climb the ladder and save your family from the burning house So many simplistic comparisons being made!

atush

He can do dispatch or drive. Not every job in the police is a bobby on the beat, not every job in the fire service requires climbing a ladder.

Andy_L

atush wrote: »

He can do dispatch or drive. Not every job in the police is a bobby on the beat, not every job in the fire service requires climbing a ladder.

Except that those sort of jobs now tend to be filled by (cheaper) civillian suport workers rather than coppers/fire fighters

grizzly1911

atush wrote: »

He can do dispatch or drive. Not every job in the police is a bobby on the beat, not every job in the fire service requires climbing a ladder.

Yes but you only need 1 dispatcher for every 20/30 + "active" workers. Also do you want to be paying someone top dollar to be doing that sort of work?

I think is also a bit misleading to say they can retire at 55 or whatever. They can't retire until state retirement age, that is when they get their state pension that they have contributed to as well.

Average Joe in the street who hasn't contributed anything to a separate pension provision will not be able to get state pension until state pension age.

Those in the private sector who have contributed to a separate pension often have the ability to "retire" early too on the schemes that have been running long term.

grizzly1911

CLAPTON wrote: »

just for interest

your total pension payments will be approximately
18,000 x 3.5% x 37 = 23,326 gross before tax relief

to buy an indexed linked pension of 5987 pa at say 65 would cost about 170,000

no judgement is being made here merely the comparison between contributions and benefits

The illustration isn't necessarily correct. If matched against a private sector scheme there would likely be employer contributions and a degree of compound growth over the 37 years making the pot closer to 90K. Still less than the required figure I will agree but not quite.

Also from an actuarial point of view the public sector pool is a fairly big captive one so should be "cheaper" to operate.

Also don't forget on current levels income tax will be paid out of that pension and VAT , more than likely. In addition this level pof pension will probably lift them out of potential "benefit" payment so the gap does close.

In addition by making the employee pay more in now, tax revenue will be lost on the contribution.This doesn't justify the pension it just points out that the gap isn't as wide as suggested in the post.

Zelazny

dori2o wrote: »

I have no problem psting my job details

Department? HMRC
Position? Contact Centre- Taxes
Hours per week? 37
Annual Salary? £18k
latest pension projection- assuming 35 years service £5987 PA. (This includes 6 years pension contributions transferred in from old private sector employment scheme- BAE Systems)
Contribution? 3.5%
What bonuses do you get? NONE
What favourable conditions do you get? 25 days annual leave, plus bank 10.5 days bank holiday.

This doesn't sound quite right to me.

Given that the worst of the government schemes gives at least 80ths, 35 years service should net you at least: 35/80 x 18000 = 7875 p.a. with a normal retirement age of 60, unless they're using a considerably lower salary or you're in a DC section.

I note that there is a civil service pension that operates under DC - the Partnership pension account. The employer will match contributions up to 3% (so in your case, they'd give 3%) plus the employer puts in an amount equal to a percentage of your salary based on your age, as follows:

Under 21     3%
21-25        4.5%
26-30        6.5%
31-35        8%
36-40        10%
41-45        11.5%
46+          12.5%

Which starts off being ok, but gets a lot better as you get older.

grizzly1911 wrote: »

The illustration isn't necessarily correct. If matched against a private sector scheme there would likely be employer contributions and a degree of compound growth over the 37 years making the pot closer to 90K. Still less than the required figure I will agree but not quite.

Also from an actuarial point of view the public sector pool is a fairly big captive one so should be "cheaper" to operate.

Average employer contributions in the private sector is about 6.1%, which you get more of in the civil service DC pension as long as you're at least 26 years old (source: http://www.statistics.gov.uk/cci/nugget.asp?id=1278) or in fact 21 and contributing at least 1.6% of your salary.

Plugging in 6.1% contributions from employer and 3.5% from employee for 37 years, assuming returns at 2% over inflation gives a pot of about 93k, as you've said. It may in fact be fairer to give a higher projection of returns - if the long term returns are 3% over inflation (not unreasonable) then the pot becomes 114k, and if we use 4% then we get £141k.

On the other hand, consider someone working 35 years to 60, contributing 3.5% of their own salary and getting the civil service rates listed above from employer (including match of up to 3%). Assuming returns at 2% over inflation, we get a pot of 147k, at 3% over we get 175k, at 4% over we get 210k.

I'm guessing they're using 3% over inflation for their projection, giving the pot size of 175k, so the correct comparison would be a pot of 114k in the private sector (comparing like for like). So in this case, the public sector isn't quite so well off as people make out, only getting 50% more than the average in the private sector...

Zelazny

grizzly1911 wrote: »

Also from an actuarial point of view the public sector pool is a fairly big captive one so should be "cheaper" to operate.

It should be, but the problem is the people running it...

See for example http://www.guardian.co.uk/society/2006/dec/14/publicservices.politics

Guardian wrote:

For Post-it notes the cheapest price Whitehall could find was £4.41 for a pack of 12, while some departments paid as much as £10.55 - 139% more expensive. Yet the Guardian found that even the best price could easily be beaten: at Chartered Supplies in central London, for example, a pack of 12 unbranded notes costs £1.75 - less than half what the most price conscious bureaucrats are paying.