Public Sector Pension Strikes – A JOKE !

DCodd

dshart wrote: »

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.

I agree that the Unions have a political agenda as well, a situation that tends to fan the flames of any dispute. I also agree that there are many sets of figures that can be banded around to "prove" one point or another. However this is a numbers issue and the rational behind these propsed cuts are entirely based on data sets and so the figures are, in this case the be all and end all.

The ONS report on Private DB pension schemes indicates that the only DB schemes in the Private sector in 2010 that were showing a surplus are, ironicaly the 1400+ active ones, with the closed ones (being the majority) showing a deficit. However that deficit has gone from £148bn to £68bn due to the change from RPI to CPI. Which suggests that the change from RPI to CPI and an increase of contributions for all to 6.8% (LPGS level) would suffice in the Public Sector, especially if the Government maintained their contributions at 14.1%. Just to draw a comparison, the average employee contribution in the active DB private pension schemes is less than 6% and employer contributions over 15%.

StevieJ

UglyMug wrote: »

Raising the State pension and reducing these Public Sector Pension would be a good start.
I didn't notice any Public Sector worker going on Strike when it was suggested their State Pension was increased by £40 per week.

Do you actually believe that someone on a full public sector pension is going to receive £40 a week more from the state pension?

Credit-Crunched

Well, I read this article, then read an e-mail from my employer placing me on notice of redundancy.

Needless to say my sympathy for their already generous (relative) working conditions, stabilty and benefits has reduced some.

Guys wake up, cuts being made all trhough the private sector and they are far more severe than making your work an extra 3 years or congtribute an extra 3% to your pension.

I would gladly swap those 'cuts' for the situation I am in.

I don't wish bad upon anyone, just please before you moan, look out of the window at those around you.

StevieJ

dshart wrote: »

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.

The employer in my Private DB scheme has taken pension holidays of around 15 years since 1990, I dare say they are not alone, no wonder that Private schemes are now unaffordable :eek:

hugheskevi

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.

It would eventually die away, but it would take about 100 years, during which time there would a 'deficit' each and every year.

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?

That's right (and for avoidance of any doubt, I am not arguing that there should be higher public sector employment, just that if there were, it would mean a lower pension 'deficit').

As to which is better, if the sole objective is to reduce long-term government liabilities then the optimal outcome is likely to be a phased cut in pensions.

An immediate abolition isn't desirable, as you would see a wage reaction (ie higher salaries). Those in turn would lead to an increase in final-salaries, in turn increasing liabilities.

My guess (and it is nothing more than that) would be that moving initially to a system not based on final salary, then later moving to nothing at all would be the optimal way to reduce long-term liabilties. Coincidentally, that is consistent with Govt. plans, although I don't for a second think that is their motive.

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.

In principle I agree. In practice, the inevitable consequence of this is higher Government borrowing, as they have to pre-fund the obligations whilst also paying out the historic unfunded liabilities.

In theory, that shouldn't matter much, especially when gilt yields are low (ie borrowing cheap). The solvency of the country isn't affected, as markets know the Govt. has the unfunded obligations anyway.

I can see the argument that it wouldn't be good to have something like double the national debt (the rough value of public sector pension pension liabilities) on the official balance sheets. That isn't an area of expertise for me, so I defer to those with better knowledge on the consequences of that.

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.

People are generally ignorant about pensions, and this is an area that unions exploit (normally I am very sumpathetic to unions, and don't agree with a lot of the accusations levied against them about misleading members to opt-out on this board, but on this point there is bad information).

Pension knowledge amongst public sector is woeful - it is awful amongst the whole population. Hardly anyone does their own research, and gets badly misled by both Govt and union arguments. Given both are arguing about the 'deficit' in unfunded pensions by looking at annual cash-flows, it isn't surprising folk latch on to it, despite it being an irrelevant concept.

Public sector workers are a call on the public purse. They may or may not represent good value for money but they are a drain on the exchequer.

The cost of total remuneration is the key question, ie, is any individual public sector worker over-remunerated on the basis of their skills/qualification. Whether their remuneration is given either in cold hard cash (salary) or a future promise (pension) is of little interest, as long as the level of remuneration is both known and appropriate.

So rather than ask whether pensions are too generous, it should be asked whether remuneration is too generous.

The answer to that is that in general, low-paid public sector workers outside of London and the south-east are over-remunerated, largely due to national wage bargaining.

Higher up the qualification scale and in London, public sector workers are under remunerated relative to private sector.

From a personal perspective, I am relaxed about the extent of pension provision whilst there is movement in and out of public sector - let the labour market decide the rates, if public sector is struggling to recruit I don't beleive pensions are too generous. That isn't the case now, suggesting there is a case to review remuneration (which could include pensions).

I am more bothered about the guaranteed nature of pension benefits than their level - the private sector doesn't have access to guarantees except at prohibitive rates, and that is what I see as the key unfairness.

cyclonebri1

StevieJ wrote: »

The employer in my Private DB scheme has taken pension holidays of around 15 years since 1990, I dare say they are not alone, no wonder that Private schemes are now unaffordable :eek:

My employer was the same. took a pension "holiday" for 12 years before the scheme was closed to new members, is still taking the same holiday today in the existing closed scheme.

And it still holds water.

Does that show the company could not afford the scheme, no , of course it doesn't, it shows it wasn't costing them anything other than admin.

But what it does show is that they saw the writing on the wall and wern't prepared to pay the cost of it

What was the earlier thread|? "Welcome to the real world public sector"?????

Ygor

dshart wrote: »

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. Maybe they are just keeping their heads down and praying the arguments of others get the government to change so they can keep their miniscule contributions.

At the last review, civil service pension scheme had £97.7bn in the SCAPE account against liabilities of £96.6bn

Employer contributions were reduced to use up (some of the) the £1.1bn surplus.

Koicarp

dshart wrote: »

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.

The government is in prime position to know and manipulate future pension costs, as it sets public service pay rates, staff numbers and pension contributions. The current pay freeze coupled with increased contributions, which could have been done under the cap and share agreement we already have if they would value the schemes, shows that they can take control.
I keep on answering your points around the deficit by stating that the armed services pension scheme is 1.8bn in debt, yet you don't comment. So to ask you directly, a large chunk of the deficit is coming from the armed services scheme, who should put that 1.8bn in?

Chickenbrain2009

Totally agree

dshart

Koicarp wrote: »

The government is in prime position to know and manipulate future pension costs, as it sets public service pay rates, staff numbers and pension contributions. The current pay freeze coupled with increased contributions, which could have been done under the cap and share agreement we already have if they would value the schemes, shows that they can take control.
I keep on answering your points around the deficit by stating that the armed services pension scheme is 1.8bn in debt, yet you don't comment. So to ask you directly, a large chunk of the deficit is coming from the armed services scheme, who should put that 1.8bn in?

Are you saying that the deficit in public sector pensions is down solely to the armed services scheme? If so then they should bear the brunt of the changes. But I am sure it is not just the armed services.

The government may be able to take some measures to manipulate future pension costs and that is what I believe they are trying to do with the proposed changes, but as with all DB schemes it is hard to work out the true cost as there are so many variables in the equation and the liabilities extend so far into the future. The government may set pay rates, staff numbers and pension contributions but in all these matters they are opposed by the unions who are fighting for higher pay, less job cuts and higher pensions. I'm not saying they shouldnt fight for these things, but it means that these are not totally under the government control as they have to negotiate.