Public Sector Pension Strikes – A JOKE !

The_Angry_Jock

DCodd wrote: »

The problem with these figures is what you consider to be public sector employees aren't necessarily what are included within the "public sector figures".

RBS plc, Lloyds Banking Group plc, Northern Rock and all the privately funded 6th form colleges are now "Public sector".

Data manipulation comes to mind.

But then would that not be compensated by the 1,000's of staff working for just above minimum wage?

CLAPTON

Zelazny wrote: »

I go away for two days and this goes from a 3 page thread to a 10 page monster :-)



That calculator doesn't detail assumptions, and looking at the numbers they have to be assuming something funny. Putting £6.2k into the scheme each year for 46 years is a total of 285k. Adding investment returns at 5% over inflation gives ~£1m. The calculator gave a total of over £7m, which would require investment returns of ~11% more than inflation per year.

What's more likely is that they're assuming 11% and not taking inflation into account, which makes the results rather meaningless.

Whether or not you should include Employers contributions when calculating benefits is another question. Do you have the option to instead take that amount as pay? No. 14% is a heck of a lot, and could be considered part of the problem - the private sector workers don't want to pay for this sort of thing, when they're lucky to get 5% from their employer.

I'd also take issue with your statement that a not-for-profit is cheaper to administer than a for-profit. If the not-for-profit has all the money it can justify, then there's no reason to ever try to cut costs, or bring expenditure down. A for-profit has to reduce costs as much as it can so it can be more profitable, so in this case, I could easily see a for-profit as offering a better deal than a not-for-profit.

using a spreadsheet and working in todays money
and assuming

1. pay of 30,000
employee contribution of 10% i.e. 3k
employer contribution of 14 % i.e. 4.2k

2. assuming growth in real terms of 2.5% which is about the average growth in UK economy over the last 40 years

3. then after 46 years the fund will grow to be 647k in todays money

4. assuming annuity rate of say 4% for a 68 with index linking then that means a pension of 25,800 pa


of course if you make different assumption, particularly about growth and about annuity rates then the figures will be different
so eg. if growth were only 2% in real terms then the pension would be reduced to 22.5k pa

and so on

atush

I think I am bored now.

Where are all the peeps who want to cash in their pensions? Please come back!!!! ;-)

Zelazny

CLAPTON wrote: »

using a spreadsheet and working in todays money
and assuming

1. pay of 30,000
employee contribution of 10% i.e. 3k
employer contribution of 14 % i.e. 4.2k

2. assuming growth in real terms of 2.5% which is about the average growth in UK economy over the last 40 years

3. then after 46 years the fund will grow to be 647k in todays money

4. assuming annuity rate of say 4% for a 68 with index linking then that means a pension of 25,800 pa


of course if you make different assumption, particularly about growth and about annuity rates then the figures will be different
so eg. if growth were only 2% in real terms then the pension would be reduced to 22.5k pa

and so on

The very high employer's contributions are what people are complaining about. 14% on top of your pay is a heck of a lot.

For the record, I get £616k for (3), but it's close enough.

Consider then, if you work for 46 years, you'd be slightly better off if you took out a private pension (as the pension from the scheme would be £22.5k).

What if you work for them for 40 years (aged 28-68)? The employee+employer contributions plus increases of 2.5% over inflation gives a fund of £491k. At 4% annuity rate, that's a pension of ~19,600, against a pension of £20k from the scheme.

In fact, if you run the numbers, you find that with a 2.5% return over inflation, the scheme is better than a private provision for anyone with up to 41 years service. That's even including the very generous 14% employer's contribution.

Clearly this changes if you change the assumptions around investment returns. At 5% over inflation, a scheme pension is only better for up to 20 years of service.

If you strip out the employer's contributions, then the scheme pension is of course better than a private provision with returns at 5% over inflation, no matter how long your service.

DCodd

The_Angry_Jock wrote: »

But then would that not be compensated by the 1,000's of staff working for just above minimum wage?

Are there junior bank clerks on "just above minimum wage"?

Most banks offer £15K-22K for junior clerks and cashiers, Thats £7.50 - £10.50 an hour.

Old_Slaphead

Zelazny wrote: »

In fact, if you run the numbers, you find that with a 2.5% return over inflation, the scheme is better than a private provision for anyone with up to 41 years service. That's even including the very generous 14% employer's contribution.

Clearly this changes if you change the assumptions around investment returns. At 5% over inflation, a scheme pension is only better for up to 20 years of service.

If you strip out the employer's contributions, then the scheme pension is of course better than a private provision with returns at 5% over inflation, no matter how long your service.

Don't forget that with most private provision, those nice fund managers will be helping themselves to 1-2%pa so, for the average punter, achieving any growth above inflation will be an achievement.

CLAPTON

Zelazny wrote: »

The very high employer's contributions are what people are complaining about. 14% on top of your pay is a heck of a lot.

For the record, I get £616k for (3), but it's close enough.

Consider then, if you work for 46 years, you'd be slightly better off if you took out a private pension (as the pension from the scheme would be £22.5k).

What if you work for them for 40 years (aged 28-68)? The employee+employer contributions plus increases of 2.5% over inflation gives a fund of £491k. At 4% annuity rate, that's a pension of ~19,600, against a pension of £20k from the scheme.

In fact, if you run the numbers, you find that with a 2.5% return over inflation, the scheme is better than a private provision for anyone with up to 41 years service. That's even including the very generous 14% employer's contribution.

Clearly this changes if you change the assumptions around investment returns. At 5% over inflation, a scheme pension is only better for up to 20 years of service.

If you strip out the employer's contributions, then the scheme pension is of course better than a private provision with returns at 5% over inflation, no matter how long your service.

what is needed is a proper strategy for pensions for all the people both in the public and private sector.
unfortunately the government has deflected discussion about the awful private sector schemes (with some honourable exceptions of course) by concentrating all the hate onto public sector pensions

of course 14% is a lot but that should be seen as part of the salary and the salary adjusted accordingly.

In my view all salaries should by law be quoted as a 'remuneration package' which includes all benefits (pensions, health insurance, bonuses, cars etc etc ) so that's its all transparent

in many ways it might be best if public sector were given a 14% pay rise and then pay the full cost of their pension
however this goes against the government policy of making all employers providing some pension from 2012

The_Angry_Jock

DCodd wrote: »

Are there junior bank clerks on "just above minimum wage"?

Most banks offer £15K-22K for junior clerks and cashiers, Thats £7.50 - £10.50 an hour.

When I worked as a cashier it was just above minimum wage with top ups through commission. But that's beside the point because their all still making far less than 100k which still compensates for that % earning over 100k, doesn't it?

DCodd

The_Angry_Jock wrote: »

When I worked as a cashier it was just above minimum wage with top ups through commission. But that's beside the point because their all still making far less than 100k which still compensates for that % earning over 100k, doesn't it?

No, the figures of 0.6% Public and 0.4% Private are just for the people earning £100k+ so what other people earn is not relevant. However transfering the Banks into Public sector increases the % for Public sector and reduces the % for the Private sector for the comparison. This also applies to average earnings as well.

dshart

I find it amazing that people are using figures of current salary and contributions and plugging those figures into calculators and coming up with figures that give pensions better than they are getting in the public sector schemes and then using this as an argument for things to remain the same.

The fact is people usually start on lower salaries at the start of their career and thus their contributions are lower. Over the years wages generally rise so contributions rise with it, although inflation eats into that a bit. People also get promotions and earn bigger salaries so they contribute more. So you cannot use a salary of say £30000 and work the figures out for 40 years as this in no way approximates reality.

What they also fail to take into account is that if those sums of money were invested in a private pension there are also management charges that eat heavily into profits with the overall effect of reducing returns. So just applying a return of 5% over inflation is wrong.

If the figures were as stated then I am sure you would have seen a push by public sector workers and the unions for the money to be invested in private pensions. The simple fact remains that public sector pensions have been and will still remain good value for money even after the changes and no one giving correct advice would ever advise someone to opt out of a public sector pension.