Public Sector Pension Strikes – A JOKE !

WhiteHorse

dunstonh wrote: »

Unions present all public sector workres as Nurses, teachers etc. Even Ed Millibod did it in last week's PMQs.

Yes, interesting how Millibrandt and others play on the 'ahhhh' factor.

Moby

howee wrote: »

and?

lol

Shall I post a link from Lord Hutton stating that this pension deal may be too generous?

If we did attack and tax this famous 1% do you recon it would fill the gaping black hole also know as the defecit in which the current public sector pensions account a big % of?

Lets have some 'real world' thinking please

What do you mean 'and'....he's telling you that the problem lies elsewhere! and raiding public service pensions to pay for the mess they created is a tad unjust! In any event everone knows Lord Hutton is a tory patsy and was wheeled out this weekend to state the Govmt case as part of their media spin after last week.

I find it amazing how a poster on here knows so much about the level of our national debt and is so certain about the means of how we can pay it off and is so so knowledgeable about the waste of the public services.......because it takes two bin men....no less to empty his bins!:rotfl: So many generalisations are being used to express a prejudice....dressed up as a pursuit of 'fairness'.

Speaking from my experience of life in good old blighty over the last 30 years or so I'll say this....there were a lot of people making a lot of money in this country in the 90's and early 2000's....cash in hand, tax avoidance, share dealing, etc and lots of people in 'professions' designed to assist others to achieve these objectives. You know what I mean.... people who know the cost of everything but the value of nothing selling 'financial products' and earning vast amounts of commission on them. In my view we are unhealthily dependent on such areas and when the markets crashed and the boom ended we were very exposed ....more than most countries in fact. When are we going to back to prioritising real values and real jobs, proper industries and proper public services to support our lifestyle? Germany has the right balance, is a good example and shows how it can work. This debate has become vindictive and small. The objective of the thread seems to have been to harangue others and the thing that is so annoying about that is the hypocrisy of those who believe they 'understand' the situation and what we need to do is slash this and that, cut jobs etc etc....not thinking for a moment about the human cost of what they believe.

Zelazny

MikeR71 wrote: »

Zelazny,

My point was that the importance of the job that people do should be taken into account. We are told that bankers deserve their pay and bonuses because they do importamnt jobs, right? My point is that teachers, nurses, careworkers, policemen, firemen all do important work, and for me far more important than many in the private sector. So let them have a comfortable enough life to be able to concentrate on their job rather than worry about how they put bread on the table after they have paid all the bills.

Most people on the shop floor who work for minimum wage do so for big corporate companies like Tesco and other big chain stores. It is disgusting that they are paid what they are paid in my view. But that doesn't mean we should downgrade the role of those I listed in the public sector in order to achieve equality and fairness. This neither fair nor achieves equality.

No, actually bankers deserve their pay because they make money for their employer, who then decides to reward them. There's nothing about "deserves" in there at all - it's a simple commercial transaction.

It's all well and good saying that people "deserve" more money - but taking shop floor staff as an example: would you be willing to pay more for your groceries so that they get more money? Maybe you would, but most people wouldn't.

Backbiter wrote: »

The 30k figure quoted above to illustrate the public sector worker's contribution to paying off the deficit is nowhere near the truth.

A teacher aged 40, with 18 years of service (based on 3 years at Uni + one year post-grad teaching course), would have been looking at (at today's values) a pension of £17500 at age 60, with a lump sum of £52k. (Based on 38 years of contributions of £7.5k a year, the pot would have been £285,000, which with typical growth over that period would yield a pot of £560k, enough to pay a pension of £21k, with spouse benefits (but no lump sum). In reality, as I'm sure people are aware, the money is not invested, so there is no real growth).

The changes mean they will be paying £100 extra a month for the next 26 years, or £31000 more.
Working until 66 will mean they will lose 6 x £17500 of annual pension, or £105,000.
Based on the RPI to CPI change, which will cut the value of their pension by 15%, they can expect to lose (if they live to 86), 15% of 20 x £17500, or 15% of £350,000, which is £52k.

So the 40 year old teacher will contribute, in today's values, £188,000 to paying off the deficit.
Younger teachers will contribute vastly more, some well over £300k.

The major problem with this is the figure of £7.5k contributions per year. Looking at the pension you've quoted (and additional cash), you're basing it on the 80ths scheme so they have 38/80 years service, giving a pension of £17.5k means a salary of £36.8k. £7.5k a month is therefore contributions of 20%, which is a heck of a lot more than they are paying.

The teacher pays 6.4%. That the employer pays a further 14% is the problem that most people are expressing here - that's a lot! If the teacher were not in the scheme, they'd get:

Investing 6.4% of £36.8k for 38 years gives a pot of (assuming returns at 4% over inflation) ~£206k.
Under the old basis, they'd get a pension of £17.5k and a lump sum of 52k, total value ~£582k (assuming 3.3% annuity rate for a 60 year old, 50% spouse pension and increases in payment) - of which the taxpayer has had to contribute £376k (if the employer conts had been invested, which of course they weren't).

Under the proposed new basis the conts go up by 3%, NRA goes to 66, accrual goes to 60ths and the additional tax free cash is removed. If the whole of the teacher's service was on this new basis, they'd have an effective pot of (again assuming returns at 4% over inflation) ~£310k after 38 years service. Now we can either assume (i)that they retire immediately (so they would have started 6 years later than in the previous example so as to avoid having to work out actuarial reductions), (ii)that they then leave their benefits deferred for 6 years or (iii) that they work an additional 6 years (as you seem to assume in your example, without taking into account the additional benefits accrued).

(i) Value of contributions after investment returns: ~£310k
Total benefits payable = 38/60 x £36.8k = £23.5k pension.
Value (assuming annuity rates for a 66 year old with 50% spouse pension and increases in payment of 4%): ~£587.5k.
Taxpayer contribution: ~£277.5k

(ii) Value of contributions after investment returns with 6 years deferred: ~£391k
Total benefits payable = 38/60 x £36.8k = £23.5k pension.
Value (assuming annuity rates for a 66 year old with 50% spouse pension and increases in payment of 4%): ~£587.5k.
Taxpayer contribution: ~£196.5k

(iii) Value of contributions after investment returns with 44 years service: ~£415k
Total benefits payable = 44/60 x £36.8k = £27k pension.
Value (assuming annuity rates for a 66 year old with 50% spouse pension and increases in payment of 4%): ~£675k.
Taxpayer contribution: £260k

So the benefits paid by the taxpayer are dropping from ~£376k to between ~£196k and ~£277k.

The teacher is definitely worse off than they were before, but they're still a lot better off than if there was no pension scheme.

hugheskevi

Under the proposed new basis the conts go up by 3%, NRA goes to 66,

This person has a State Pension age (and hence NRA) of 67, and most likely 68 or more when they actually get there.

If the whole of the teacher's service was on this new basis, they'd have an effective pot of (again assuming returns at 4% over inflation) ~£310k after 38 years service.

Isn't there an implicit assumption here that the individual receives salary increases exactly in line with average earnings. Especially for higher earners, you would expect individual earnings to increase above average earnings.

So the benefits paid by the taxpayer are dropping from ~£376k to between ~£196k and ~£277k.

It would be helpful to separate out the contribution coming from contracted-out rebate, as well as employee and employer contributions.

Zelazny

hugheskevi wrote: »

This person has a State Pension age (and hence NRA) of 67, and most likely 68 or more when they actually get there.

So re-run the numbers. I've put my spreadsheet away for now :-)

hugheskevi wrote: »

Isn't there an implicit assumption here that the individual receives salary increases exactly in line with average earnings. Especially for higher earners, you would expect individual earnings to increase above average earnings.

Actually, for simplicity I've not modelled increases at all, so the default assumption is that the salary increases in line with inflation. To model increases in excess of inflation will actually lower the contributions by more than it lowers the benefits, as the earlier contributions have a lot more weight in the total pot than the earlier benefits do as a proportion of the total, and with increases > inflation the earlier salary will be proportionally lower.

hugheskevi wrote: »

It would be helpful to separate out the contribution coming from contracted-out rebate, as well as employee and employer contributions.

If we're going to do that, we'd probably want to cover pension tax relief as well. I just threw the numbers together relatively quickly to give people an idea. The idea being that yes, the teachers will be a lot worse off than they were before, but still a lot better off than with no scheme at all.

DCodd

Zelazny wrote: »

No, actually bankers deserve their pay because they make money for their employer, who then decides to reward them. There's nothing about "deserves" in there at all - it's a simple commercial transaction.

.

I understand what you are saying but in the same way as many people wish to see the public pensions become "affordable", people want the Bankers pay to reflect the same criteria.

While a banker may have been "making money" for their employers, the crash has wiped off future profits for many years to come, yet the pay is still huge. The only reason that the the Banks can pay these salaries and bonuses is the intervention from the state (for state read taxpayers). If the banks really did reward profitable investment then there would be lower salaries and no bonuses until the banks were clear of state debt.

I personally have little problem with performance related bonuses for bankers but the public's view is that they owe more than they make and so the Banks are still rewarding poor performance.

CLAPTON

bankers are making monay for themselves certainly not for the owners i.e. shareholders

Lloyds ahsre price 10years ago about £8 and dividends about 4%
share price now £0.22 dividend zero

so I'ld be happy if bankers income was linked to shareprice and dividend

Zelazny

DCodd wrote: »

I understand what you are saying but in the same way as many people wish to see the public pensions become "affordable", people want the Bankers pay to reflect the same criteria.

While a banker may have been "making money" for their employers, the crash has wiped off future profits for many years to come, yet the pay is still huge. The only reason that the the Banks can pay these salaries and bonuses is the intervention from the state (for state read taxpayers). If the banks really did reward profitable investment then there would be lower salaries and no bonuses until the banks were clear of state debt.

I personally have little problem with performance related bonuses for bankers but the public's view is that they owe more than they make and so the Banks are still rewarding poor performance.

I agree. The banks failed, and should have been allowed to fail. They would have had to perform some sort of Debt-for-Equity swap to keep on trading, and that would accurately have punished them for the risk taking.

By bailing the banks out, the government endorsed and even encouraged them to keep on just the way they had been.

The other point that needs to be considered is that not all banks needed government help. People at RBS, Northern Rock, etc should perhaps have had a pay/bonus freeze as they were bailed out, but those at banks like HSBC took no money, so the government should leave them alone, in my opinion.

MikeR71

Aren't you guys missing something? The money we are asked to pay in increased contributions does NOT go into the pension pot. FACT.

Le73Uq86Uv

MikeR71 wrote: »

Aren't you guys missing something? The money we are asked to pay in increased contributions does NOT go into the pension pot. FACT.

Thats the problem, they want the public sector to bail out the country and not hit the tax exiles or bankers and the like.

Now if they put all the past payments from public sector workers into a public sector pension scheme and all new money was to fund pensions then I think most public pension people could see the real truth and if they were paying enough or not.

As far as i have seen the Government won't even give the unions the figures to backup the governments point that they are not affordable, and infact lots of other stats say they are already.

And why did we bail out banks?

I hope we don't do it again, after all Virgin was waiting to buy a bank and could have saved us billions.