Incensed again

The_Angry_Jock

MoreOn wrote: »

Power, manipulation, mob mentality and abuse of the weak....

Is this the unions strike action your talking about?

dshart

hugheskevi wrote: »

I don't think it is sensible to talk of a deficit in anything other than the (funded) LGPS and MPs pension schemes.

All the unfunded schemes have statutory obligations to pay pensioner members, which is independent of any member contributions from today's members.

Today's members have nothing to do with historic accruals, so hypothecating their contributions makes no sense. To emphasise this point, if there hadn't been large cuts to the number of public sector workers, pension contribution receipts would be much larger, and hence there wouldn't be a 'deficit' or it would be smaller than it is. But that in no way means that existing levels of pension accruals are or are not justified.

Page 10 of this report suggests funding level of about 75%.

The country would not go bankrupt if it left public service pensions unreformed. Literally, they are therefore affordable. But that does not mean they are justified.

The Hutton Report showed expenditure on public service pensions declining as a share of GDP. That does not mean the current level of pension payments is justified (eg, the current level is higher than would have been forecast 5 years ago due to recession).

So reform is not based on them being unaffordable, aside from in a glib, sensationalist use of the term which doesn't actually mean anything, but about the extent to which the current level of generosity is appropriate.

Thank-you for the link to the document, it provided me with a better insight to the LGPS. One thing that struck me though was that although the LGPS was operated similar to a private pension scheme where the contributions are invested to cover future liabilities, the employees contribution rates are fixed but the employers have to pick up any slack in the system. They quote the current employer contribution running at 18% and likely to increase when the funds were revalued!!!

With employees contributions varying from 5.5% to 7.5% depending on salary this gives total contributions ranging from 23.5% to 25.5% of wages, which is higher than the contributions to other public sector pensions which average about 20.5% of wages. So they are more expensive for the government in the first place.

The advantage they have is that the funds are invested so there is some growth that offsets additional costs.

But although the LGPS may be the largest there are still many other public sector workers in other schemes which are PAYG, which means that current contributions go to pay pensions of people already retired. There is no pension fund just a liability to the employer to pay these pensions. And with people living longer and reductions in the workforce the money coming in each month from contributions (employer and employee) is insufficient to pay the pension obligations.

You say if they had not made cuts in public sector workers then it would not be an issue as more workers would pay in more which would mean sufficient to pay out pensions, but where does this end? More workers now means greater liabilities in the future as they retire, so how do we fund it then? Do we again increase the workforce? As it is many departments are overstaffed (I can hear the screams from the teachers and the nurses) the wage bill has been growing and eventually something has to be done about it.

You say the country would not go bankrupt if there was no reform to public pensions but you do not back the statement up with any evidence. The country like many others worldwide is heavily in debt and the only reason we are not in the same position as Greece now is that there is belief in international money markets that we can pay our debts. If we do not get control of our debts soon then that belief that we can continue to pay will evaporate and if we cannot get access to funds then the country will go bankrupt. I am not saying that public sector pensions alone are the cause of the debt, but they are one small part that needs to be addressed. Keep a close eye on Greece especially if they default and get kicked out of the Euro, public sector staff wages and pensions will not get paid and there will be chaos.

Old_Slaphead

dshart wrote: »

With employees contributions varying from 5.5% to 7.5% depending on salary this gives total contributions ranging from 23.5% to 25.5% of wages, which is higher than the contributions to other public sector pensions which average about 20.5% of wages. So they are more expensive for the government in the first place.

There is no reason to suspect that LGPS is more or less expensive than other public schemes - it's just that they are funded in different ways. The cost of funding FS pensions has been put at over 30% of salary by PwC.

The bulk of the over/underfunding on LGPS is recovered after 3 yearly reviews by adjusting the future employer contributions (usually upwards) and is based on matching assets to liabilities over (I think) 20 years.

With other public schemes - anything over the 20% (approx) covered by employee contributions and employer budgets drops out as an additional charge in that year to the taxpayer on a pay-as-you-go payment. Currently that seem to work out at around 3% (based on the Treasury reported cost of £3bn and an estimated payroll cost of £100bn).

If your really interested (or just sad) go the your local council website which publishes the annual pension fund accounts and quarterly valuations. Makes for interesting bed time reading.

dshart

Old_Slaphead wrote: »

There is no reason to suspect that LGPS is more or less expensive than other public schemes - it's just that they are funded in different ways. The cost of funding FS pensions has been put at over 30% of salary by PwC.

The bulk of the over/underfunding on LGPS is recovered after 3 yearly reviews by adjusting the future employer contributions (usually upwards) and is based on matching assets to liabilities over (I think) 20 years.

With other public schemes - anything over the 20% (approx) covered by employee contributions and employer budgets drops out as an additional charge in that year to the taxpayer on a pay-as-you-go payment. Currently that seem to work out at around 3% (based on the Treasury reported cost of £3bn and an estimated payroll cost of £100bn).

If your really interested (or just sad) go the your local council website which publishes the annual pension fund accounts and quarterly valuations. Makes for interesting bed time reading.

My point was that even though the LGPS appears fully funded, it is in actual fact fairly similar to the other public sector schemes where additional calls are made on government funds. This may be the same as final salary schemes in the private sector but these are few and far between now and very seldom open to new entrants.

It basically comes down to the question as to why private sector final salary schemes were closed. And the answer is that they became unaffordable, which is the same we have now with public sector schemes. They are unaffordable and need to change and come into the real world.

NAR

Final salary schemes closed to new entrants to the Civil Service 4 or 5 years ago.

Koicarp

dshart wrote: »

My point was that even though the LGPS appears fully funded, it is in actual fact fairly similar to the other public sector schemes where additional calls are made on government funds. This may be the same as final salary schemes in the private sector but these are few and far between now and very seldom open to new entrants.

It basically comes down to the question as to why private sector final salary schemes were closed. And the answer is that they became unaffordable, which is the same we have now with public sector schemes. They are unaffordable and need to change and come into the real world.

But then the employer contributions are just that, are you suggesting there should be no employer contributions?
Regarding final salary- I would have thought the LGPS will be forced to go career average as soon as it asks for increased employer contributions as it has done in the past.
I see no problem at all with career average, and I don't get the impression the unions are too bothered about fighting it as most low and middle earners will gain.

Old_Slaphead

NAR wrote: »

Final salary schemes closed to new entrants to the Civil Service 4 or 5 years ago.

But many existing employees will still continue to benefit from them for the next 35 years.

Are career average schemes uplifted by CPI ? If that's the case, many employees with a 'flat' salary profile (ie no promotions throughout their career) may well be better off.

bilbo51

In response to my post "Tell me how this country pays its way", MoreOn said:

MoreOn wrote: »

power, resources and effective processes... discuss...

Would you care to put that random selection of words into a sentence that, well, makes sense?

dshart

Koicarp wrote: »

But then the employer contributions are just that, are you suggesting there should be no employer contributions?
Regarding final salary- I would have thought the LGPS will be forced to go career average as soon as it asks for increased employer contributions as it has done in the past.
I see no problem at all with career average, and I don't get the impression the unions are too bothered about fighting it as most low and middle earners will gain.

I am not suggesting that there are no employer contributions, but that these contributions should be fixed so there is not additional calls on funding from government. In the private sector the employer contributions in most new schemes tend to be fixed and vary from company to company. These contributions combined with the employees contributions pay for the pension. If the pension return is poor there is no possibility of the worker going back and asking the employer to increase the contributions.

Koicarp

dshart wrote: »

I am not suggesting that there are no employer contributions, but that these contributions should be fixed so there is not additional calls on funding from government. In the private sector the employer contributions in most new schemes tend to be fixed and vary from company to company. These contributions combined with the employees contributions pay for the pension. If the pension return is poor there is no possibility of the worker going back and asking the employer to increase the contributions.

It looks as if they are going to be "capped" from what I'm reading in all these letters and web pages.
Slaphead, yes uprated by cpi.