NHS Pension

Old_Slaphead

Thicko2 wrote: »

http://www.direct.gov.uk/prod_consum_dg/groups/dg_digitalassets/@dg/documents/digitalasset/dg_196165.pdf

They banked the extra contributions in the 2011 budget going forward from 2012/13 onwards. Page 49 i think.

Now to be fair they are currently reviewing this.

Page 50 is good as well slaphead. The savings accruing from RPI to CPI - you'll like those:rotfl:

If you're referring to page 44 - doesn't say anything about LGPS members contribs not being paid into their scheme......remember their contribs don't go direct to Treasury like others.

The net effect of lower employer contribs will admittedly negate this but employer's share has been increasing for a number of years and there's supposed to be a cost sharing plan in operation. (nb and the Govt/taxpayer does underwrite the 23% scheme deficit anyway and the shortfall has been increasing)

Thicko2

http://www.lgcplus.com/briefings/people/pay/contribution-increases-yes-or-no/5028889.blog

Dear Slaphead

Some more evidence there, do you believe me now.

The plan was to reduce the grant to reflect the expected increased members contributions. It was cost neutral to the councils as their contributions were expected to fall.

So despite the employees contributions going up, the scheme did not benefit, it allowed the governement to reduce expected funding to LAs and for LA's to reduce their employer contributions.

FOR: It will benefit cash-strapped councils employers
LGE and others involved within the LGPS have been led to understand that the Treasury reduced the local government settlement by £900m on the understanding that councils would recoup that money by increasing contribution rates. As a result of this, employers are keen to see their contributions decreased, whether that is through increased employee contributions or some other means.

jamesd

Thicko2 wrote: »

Jamesd - you do not simply observe. You draw a conclusion that unions are telling their members to leave their pension schemes.

No, I didn't draw that conclusion. My view is that the publicity from the unions is causing members to come to the wrong conclusion, because the unions are trying to make the deal look bad.

Thicko2 wrote: »

I dont know what your old company was, was the pension scheme contributory or free.

It was a private sectors scheme so not free, the usual case. What it had was a really motivated and capable proponent who would work hard to persuade employees to join.

Thicko2 wrote: »

the unions are trying to protect their members terms and conditions, thats their job and role. Explaining how their benefits are impacted is important to this.

I agree. But I also see what looks like a negative side-effect of that in the posts here.

Thicko2 wrote: »

Agree on point 5, they are clearly comparing defined benefit vrs defined benefit. But is it best to compare apples and apples?

Only if the idea is to mislead members into thinking that they are getting a poor deal compared to the private sector, by presenting terms that are no longer generally available in the private sector. In particular, terms that are not available to members who get a negative view and choose to leave to the private sector or start a personal pension or ISA instead of the still good scheme that they have in the public sector.

Thicko2 wrote: »

How can a fact be misleading?

By asserting that it's comparable when it's really generally no longer available. It's easy to compare to things that you can no longer get but it's not helpful to do that if the idea is to give members a true picture of their situation and choices.

Thicko2 wrote: »

this was not leading to extra investment in the scheme but was being used for deficit reduction rather than funding the scheme.

Since the scheme appears to be in deficit and the Pensions Regulator requires action to reduce scheme deficits it seems possible that it was the pension scheme deficit. These schemes are likely to have deficits because of increased and increasing longevity, which increases the need to funds to pay for the long term obligation to pay out to current and future retirees.

You referred to page 49 of the Budget. 2.13 doesn't apply to the LGPS because it's a funded scheme, as you can see from the text it's about public sector schemes funded from future tax and other government revenues, often called unfunded when it's really an obligation placed on future tax payers.

jamesd

Thicko2 wrote: »

http://www.lgcplus.com/briefings/people/pay/contribution-increases-yes-or-no/5028889.blog Dear Slaphead ... Some more evidence there, do you believe me now.

Here's what that says:

"FOR: The government can’t afford the pensions bill

The Treasury wants the increase, set to be applied to all public sector pension schemes, to raise £2.8bn for the Exchequer and reduce the public sector deficit. Because the Treasury is responsible for covering the pension benefits and other costs not met by employee contributions, any increase in employee contribution means the Treasury pays less.

AGAINST: The Local Government Pension Scheme (LGPS) is different because it is funded

While the transaction - employees pay more so Treasury pays less - is relatively simple in the case of the unfunded schemes, it is not the same in the LGPS because the Treasury contributes nothing directly to the scheme. Pension benefits are paid for by employee contributions, employer contributions (which includes some central government funding) and the income from the estimated £125bn assets held by LGPS funds."

Observe that it says that the central government has been subsidising the LGPS (the "central government funding") and that the plan is to reduce the subsidy. That seems eminently reasonable for a scheme that's supposed to be self-financing.

For the ones funded out of future taxpayer obligations ("unfunded") it's of course fine for the increased member contributions to go to the exchequer because that's what will have to find the money to pay the future bills. That's also how NI for the state pensions work for all, whether in the public or private sector.

Old_Slaphead

Thicko2 wrote: »

Dear Slaphead

Some more evidence there, do you believe me now.

The plan was to reduce the grant to reflect the expected increased members contributions. It was cost neutral to the councils as their contributions were expected to fall.

So despite the employees contributions going up, the scheme did not benefit, it allowed the governement to reduce expected funding to LAs and for LA's to reduce their employer contributions.

FOR: It will benefit cash-strapped councils employers
LGE and others involved within the LGPS have been led to understand that the Treasury reduced the local government settlement by £900m on the understanding that councils would recoup that money by increasing contribution rates. As a result of this, employers are keen to see their contributions decreased, whether that is through increased employee contributions or some other means.

The Treasury may (or may not) have negated the extra pension contribs by fiddling around with the grants. Maybe the grant would have needed to be reduced anyway - who knows.

My point was that ostensibly the extra employee contributions go into the scheme and not to the Treasury (for deficit reduction).

There was supposed to be cost sharing in LGPS from 2012 and the employers share has been/continues to go up so I don't see any issue with commensurate employee increases - they've always been on the agenda - deficit or no deficit.

Thicko2

JamesD - Yes of course central government funds some of LA services, we are not talking about money here that goes direct from the treasury into the pension scheme as identified as not happening in the first pararaph.

It is an intepretation of yours that translates this 'subsidising'. It is not.

It is recognisins that the fact the LAs recieve central goverment grants for specific services, of which they use to fund staffing, including an element for there employee cost of pensions, as part of the service they are asked to provide.

My point of this discussion was the fact that the increased employee contributions as mooted by the government, were not actually going to increase the funding of the scheme, the only funded scheme in the public sector.

The central government grants were planned to be reduced to reflect the proposed increases in member contributions. De facto - the scheme was not going to be in a better position due to increased member contributions. These were to be offset by lower employer contributions. That was the issue i am raising.

The real question as i think you quite rightly allude to is what is the appropriate employer contribution rate. This requires a discussion of the entire benefit packages, contractual expectationsagainst some long term pay freezes already in place and other factors.

I think the real interesting part of this link is the unintended consequences of the impact of increased employee contributions versus more people opting out of the scheme and the potentially damaging impacts that this will have on schemes sustainability. The issues identified in this article suprised me with the potential scale. I thought that this maybe particularly more so for the unfunded schemes in existance. GPs removing their £120m a year contributions was rather spooking me.

Thicko2

Old_Slaphead wrote: »

The Treasury may (or may not) have negated the extra pension contribs by fiddling around with the grants. Maybe the grant would have needed to be reduced anyway - who knows.

My point was that ostensibly the extra employee contributions go into the scheme and not to the Treasury (for deficit reduction).

There was supposed to be cost sharing in LGPS from 2012 and the employers share has been/continues to go up so I don't see any issue with commensurate employee increases - they've always been on the agenda - deficit or no deficit.

Slaphead - The Treasury did - the evidence is there for all to see. The net benefit to the treasury was reduced grants - hence defecit reduction.

I agree with you entirely on the risk share issue. Also with the principles that employees from that point onwards carry the full risk of the scheme being sustainable under such an agreement. I am not fully au fait with the LGPS but if i was a union who negoitiated the risk share say pegged at 14 employer contribution and 7% employee. I would then be thoroughly !!!!ed off when 5 years later the goal posts are moved to 11% and 10%, and it does not improve 1 iota the scheme's underlying financial position.

Zelazny

Thicko2 wrote: »

I think the real interesting part of this link is the unintended consequences of the impact of increased employee contributions versus more people opting out of the scheme and the potentially damaging impacts that this will have on schemes sustainability. The issues identified in this article suprised me with the potential scale. I thought that this maybe particularly more so for the unfunded schemes in existance. GPs removing their £120m a year contributions was rather spooking me.

I think you're right, but there are two things to consider:

(i) You're getting large amounts of free money if you stay in the pension scheme. Perhaps slightly less than you used to, but it's still better than nowt (which is what you get if you do opt out).

(ii) For a funded scheme, it doesn't matter if everyone does opt out. That's the whole point of having the fund. If everyone opted out of LGPS tomorrow, they'd have about 77% of the money that they needed to pay everyone's benefits for as long as they live (see my link in the earlier post). The government would likely make up the rest if it had to, but that's still years off.

If only 40% opt out, they'll still have 77% of what they need. There will be less members left to get the extra money needed from, so things may in fact get a bit worse for those that do remain (but it will still be free money, and better than 95+% of those in the private sector can get).

For the unfunded schemes, lots of people opting out would cause problems. Personally, I'd quite like to see it happen, as I don't think government should be able to run up these massive liabilities. All pension schemes should be funded, and the fact that the government could cream off a few billion of extra revenue by not funding most public sector schemes (and still promising incredible benefits - they don't care, they won't have to pay for it) is something that should be stopped.

Thicko2

i) i agree in the whole. But bearing in mind not everyone takes up the schemes currently many would be foolish enough to opt out if they have to pay more simply out of the personal circumstances and affordability concerns versus the rising household budgets and current income freezes. GPs are a curious example as they are the employers and the employees. They will be paying on current proposals a total 28% contribution. I reckon they could do better in a SIPP.

ii) for ar a funded scheme from a narrow perspective you are of course right. Potentiallly there are wider impacts that will impact the public purse with additional longer term benefit payments in old age.

I think it might also impact upon the investment strategy of the LGPS , turning it into potentially a massive equitable life with profits fund full of fixed interest investments rather than growth stock. However over the last 10 years may well be a safe place to be!

From these unfunded scheme could they afford a mass opt outs and demands for their the CETV to be paid into a private scheme?

If only i could recive my CETV, based on RPI and and not CPI, a guarantee of 14% employer contribution. I would do this as i have last faith when an equitable solution was reached in 2008 and i do not think affordability has changed since then as referenced in OBR and Hutton.

Koicarp

This is my union's response to the latest government proposals: http://www.rcn.org.uk/newsevents/news/article/uk/rcn_responds_to_dh_consultation_on_pensions

I doubt many of my colleagues have ever seen it as it hasn't been sent out to us and the rest of my team seem to use the web for facebook.
One final point on the unions, the RCN has NEVER had a strike, in fact we have never had a vote considering strike action, although just after labour came in back in 1997 we did vote to drop the RCN's "no strike" clause.