Public Sector Pension Strikes – A JOKE !

hugheskevi

Even if they closed all tax loopholes and collected every penny in tax owed and there was no tax avoidance, it would still not get away from the fact that public sector pensions are paying out more than they take in and require additional funding from government.

Even if the Government closed down every single public sector pension scheme tomorrow, it would still not get away from the fact that public sector pensions are paying out more than they take in and require additional funding from the government.

Looking at cashflow terms is pointless - you have a set of historic obligations which you have to pay regardless, and a set of income from today's pension contributions. How the two relate to each other is of no greater interest than how the cost of public service pensions relates to income from TV licences, aside from a superficial similarity.

But at the end of the day there is a net deficit and this is what needs to be sorted out.

No it is not.

The best way to sort out this deficit is to employ more public sector workers to increase pension contributions. That would be counter-productive in the long-term though.

You should be fighting for the other sectors to contribute as much as you do so there is no overall deficit.

Let's say that due to rapid technological advances, it was possible to reduce the number of NHS staff by 80% and still deliver the same level of service.

By this logic, we should then be arguing that the 20% of remaining staff should contribute 5 times as much for their pension, so there is no overall deficit.

It is notable that the people arguing here all tend to be from the NHS and teachers schemes where employee contributions are relatively higher, but we do not appear to hear from people who are only contributing 1.5% to their schemes.

What is the difference between someone who receives a remuneration package of £50,000 and all are in the same pension scheme:

1. Has a salary and employer NICs of £40,000 and employer contributions of £10,000
2. Has a salary and employer NICs of £45,000 and employer contributions of £5,000
3. Has a salary and employer NICs of £50,000 and employer contributions of £0
4. Has a notional salary of £50,000 and salary sacrifices £10,000 of it, leaving a salary of £40,000 and employer pension contributions of £10,000

They are all identical in cost, but person 1 benefits from a non-contributory scheme, person 2 pays member contributions of 11%, person 3 pays member contributions of 20% and person 4 notionally doesn't pay any member contributions whatsoever, but in reality pays 20%.

I don't see why I should pick on person 1 for having an overly generous scheme, when I am quite happy about persons 2,3 and 4 just because the composition of their overall remuneration is different, but equal in overall magnitude?

dshart

DCodd wrote: »

I'm sorry dshart but you are fixated on "balancing the books" for the pensions scheme. It is the aim of the Government to guide the general public down this route to deflect the public attention from the Government's obligations.

It matters not a jot if the "figures" say that there is a deficit in some of the schemes because that deficit is the result of the agreed remuneration package and therefore not a deficit at all but defered earnings, rightfully claimed by the employee but wrongfully spent by this and previous Governments. This is the reality that the Government wish to deflect your attention from. In the Private sector that would equate to theft.

I may be out of date and very open to be corrected here, but if a private occupational pension scheme suffered such a theft, is it still the case that the employees can seek compensation upto 90% of the loss and would that still be the Government that underwrites that compensation?


For the record, I'm in accounting, employed within the Construction industry, not PS at all.

Well I would have thought with you being in accounting you would understand the fixation with balancing the books.

You say the deficit is the result of an agreed renumeration package and that may be so, but havent the government agreed that accrued benefits are maintained and the changes apply from when the new conditions come into affect? Just because it was agreed previously doesnt mean it must continue.

This is the reason that nearly all private sector schemes are closed to new entrants and are being phased out. The companies cannot afford the uncertain liabilities of such schemes. As usual the public sector lags behind the private sector when it comes to change and they are eventually realising that the defined benefit schemes carry with them a liability that is difficult to quantify.

One thing I do agree with people on is to not believe that the issue of public sector pensions will not be visited again for 25 years. As long as the country has a growing debt all avenues will be explored to reduce that debt and it doesnt matter who is in power they will have to do something about it. This will affect more than public sector pensions, I firmly believe before I retire they will also make the state pension means tested.

We can blame the banks and successive governments for the state we are in now but that does not change anything as the same situation exists in most western nations where there is massive debt. America may sit in the background and say Europe needs to get its act together, but they are in an even worse state, its just that no one can afford to stop lending to them.

dshart

Hugheskevi, you say that even if they closed every public sector scheme today there will still be the deficit because of the historic obligations. Yes this is correct but those obligations would eventually die away (pardon the expression), which would leave no deficit and no obligation. In the next paragraph you argue that the way to reduce the deficit is to employ more public sector staff and here you agree that this will be counter productive in the long term, I assume this is because you realise that there will be increased liabilities due to the larger workforce. So when considering both options, which is better for the long term reduction in government liabilities?

I am not for a second saying that public sector pensions should be scrapped, but I am saying that the final cost of them should be known up front the same as private pensions. The employer and employees make contributions and these should be invested to give a return which pays out the pensions without additional government money.

As for the comment on contributions yes I agree with what you say, but how come people still argue that their pensions are fully funded when there is a deficit. Where is the deficit coming from? because as far as I am concerned a fully funded scheme should mean that there is no additional call on money from government.

Herzlos

DCodd wrote: »

If you really want parity between the public sector and private sector and have the defined benefits pensions reduced or removed, are you prepared to remove the defined salary of the public sector and align those salaries with the private sector?

Will you pay a teacher the equivalent of a teacher in the private schools and provide equal benefits?

Will you pay the doctors and nurses the equivalent to their private sector collegues?

Will you allow the public sector, bonuses and pay rises negotiated on an individual basis?

Will you allow the public sector the same legal rights to take their employer to court over breach of contract and at the same time' remove that employers ability to change the law for their own benefit?

Probably no for the first 4 and not possible for the last one, hence the strikes.

Exactly this.

Public sector pensions are better than private sector to make up for the pay gap. If you want to make the public sector pensions match up with private sector, you're going to have to pay the public sector wages to match (backdated, of course, since the pension has been part of their compensation from when they started employment), and is that going to be any cheaper than honouring their pension contracts?

dshart

Herzlos wrote: »

Exactly this.

Public sector pensions are better than private sector to make up for the pay gap. If you want to make the public sector pensions match up with private sector, you're going to have to pay the public sector wages to match (backdated, of course, since the pension has been part of their compensation from when they started employment), and is that going to be any cheaper than honouring their pension contracts?

Read the article I posted a link to in post #297, it gives an insight into differences between public and private sector pay and although it may be countered that it is hard to do like for like comparisons and how certain sectors skew the figures, in general for majority of the lower paid workers the public sector get paid more. It is only when you get to the more highly qualified people that the private sector takes over in wages. So the whole argument that the better pensions are to make up for pay is moot.

The advantage of public sector employment has over the private sector generally tends to be more job security, although this too has been eroded in recent years partially because the push for higher wages.

DCodd

dshart wrote: »

Well I would have thought with you being in accounting you would understand the fixation with balancing the books.

You say the deficit is the result of an agreed renumeration package and that may be so, but havent the government agreed that accrued benefits are maintained and the changes apply from when the new conditions come into affect? Just because it was agreed previously doesnt mean it must continue.

This is the reason that nearly all private sector schemes are closed to new entrants and are being phased out. The companies cannot afford the uncertain liabilities of such schemes. As usual the public sector lags behind the private sector when it comes to change and they are eventually realising that the defined benefit schemes carry with them a liability that is difficult to quantify.

One thing I do agree with people on is to not believe that the issue of public sector pensions will not be visited again for 25 years. As long as the country has a growing debt all avenues will be explored to reduce that debt and it doesnt matter who is in power they will have to do something about it. This will affect more than public sector pensions, I firmly believe before I retire they will also make the state pension means tested.

We can blame the banks and successive governments for the state we are in now but that does not change anything as the same situation exists in most western nations where there is massive debt. America may sit in the background and say Europe needs to get its act together, but they are in an even worse state, its just that no one can afford to stop lending to them.

I'm quite pedantic in my requirement to balance the books:) But I like to balance the books correctly and that is the difference.

From my limited knowledge, the private sector schemes could have been affordable, it was just the Government backed gross mismanagement of those schemes that killed them off. Basicaly if the scheme was big enough then the scheme survives today (from what I can see?).

I see no move by the Government to force employers to reduce benefits for the DB, fully funded private schemes, so why the need to do this to the fully funded Public sector schemes? As for the private sector schemes in deficit, it is the responsibility of the employer to meet their obligations to the scheme members and as you say, the same applies to the public sector versions. Where the difference lays is that if the Government impose this changes wholescale across the public sector, it will be a non reversable pay cut for the entire Public sector as the Public sector have the defined Salaries that the private sector do not.

The timing of this is very relevant, with the public mood being very open to such cuts. The reality is that the figures used by the Hutton report (based on figures from GAD and ONS) are hugely subjective. They forecast an average GDP growth rate of 2% over the next 50 years, when in fact taken over any 50 year period the average growth rate is never less than 2.33% (that 0.33% makes a very substantial difference). There are other anomalies that "edge" the figures towards the desired results also.

It's a Political agenda fuelled by a public's gut reaction, with consequences that are far reaching and mostly negative that I take the most issue with.

zygurat789

hugheskevi wrote: »

Even if the Government closed down every single public sector pension scheme tomorrow, it would still not get away from the fact that public sector pensions are paying out more than they take in and require additional funding from the government.

Looking at cashflow terms is pointless - you have a set of historic obligations which you have to pay regardless, and a set of income from today's pension contributions. How the two relate to each other is of no greater interest than how the cost of public service pensions relates to income from TV licences, aside from a superficial similarity.



No it is not.

The best way to sort out this deficit is to employ more public sector workers to increase pension contributions. That would be counter-productive in the long-term though.

Counterproductive, wouldn't ponzi be a better description?

DCodd

zygurat789 wrote: »

Counterproductive, wouldn't ponzi be a better description?

Now there is a can of worms waiting to be opened.

zygurat789

All we need is a bout of quantitativly eased inflation and final salary schemes will be grossly underfunded and the employers will have to stump up. Many have seen this coming and have closed their final salary schemes before they are bankrupted by them. Only the government persists because they don;'t have to pay only the taxpayer.

dshart

DCodd wrote: »

I'm quite pedantic in my requirement to balance the books:) But I like to balance the books correctly and that is the difference.

From my limited knowledge, the private sector schemes could have been affordable, it was just the Government backed gross mismanagement of those schemes that killed them off. Basicaly if the scheme was big enough then the scheme survives today (from what I can see?).

I see no move by the Government to force employers to reduce benefits for the DB, fully funded private schemes, so why the need to do this to the fully funded Public sector schemes? As for the private sector schemes in deficit, it is the responsibility of the employer to meet their obligations to the scheme members and as you say, the same applies to the public sector versions. Where the difference lays is that if the Government impose this changes wholescale across the public sector, it will be a non reversable pay cut for the entire Public sector as the Public sector have the defined Salaries that the private sector do not.

The timing of this is very relevant, with the public mood being very open to such cuts. The reality is that the figures used by the Hutton report (based on figures from GAD and ONS) are hugely subjective. They forecast an average GDP growth rate of 2% over the next 50 years, when in fact taken over any 50 year period the average growth rate is never less than 2.33% (that 0.33% makes a very substantial difference). There are other anomalies that "edge" the figures towards the desired results also.

It's a Political agenda fuelled by a public's gut reaction, with consequences that are far reaching and mostly negative that I take the most issue with.

Private DB schemes are in majority of cases not affordable and hence the reason for closure, the main reason as I can see is the unknown future liability of the schemes. This is the same now for the public sector schemes, you could argue now that they are affordable as payments are being met, but what of in the future? despite all the figures that can be thrown around we do not really know what the true future cost of these DB schemes are.

If the country was a private business the scheme would have been shut down long ago. Any shareholder in a company would not want to see company profits being used to support such a scheme where there were undefined liabilities. In the country the whole population are the shareholders and it should be no different. If there was no black hole in the country's finances then there may be some justification to continue with such schemes but sadly this is not the case.

I agree there is also a political agenda behind it but this applies to both the government and the unions and the problem is both sides are playing on that and avoiding the real issue. The country's finances require sorting out and it will take some tough decisions to do it. The option if we do not sort it now is that it will haunt us for a long time to come and the measures required to rectify it will be a lot tougher to stomach.