Pension Age Going Up and Strikes Public Sector

gadgetmind

DCodd wrote: »

According to the ONS there are still 1400+ active DB private sector schemes.

And what is their combined deficit? Last time I checked it was around £80bn, and asset prices have dropped since then. They are all also being forced to use legal fine print to reduce the value of the benefits, usually via changes to indexation.

http://uk.reuters.com/article/2011/12/05/uk-pension-deficits-idUKLNE7B400920111205

The_Angry_Jock

MikeR71 wrote: »

No of course not. But then again many of them believe investment bankers and company executives are more important than nurses and teachers.

Who are this "many" you're talking about? I beleive that "many" people think the exact opposite, but there is a limit to how much you can compensate several million people, on a continual basis, for eternity.

MikeR71 wrote: »

nurses and teachers who look after us and train our future generations.

Just about the entire population of the Earth does this, it's just that teachers and nurses have job titles and get paid specifically to do it. Now before someone gets on their soapbox I'm not suggesting we abolish these jobs, they're there to support everyone else, however they are not any more or less important than anyone else.

DCodd

gadgetmind wrote: »

And what is their combined deficit? Last time I checked it was around £80bn, and asset prices have dropped since then. They are all also being forced to use legal fine print to reduce the value of the benefits, usually via changes to indexation.

http://uk.reuters.com/article/2011/12/05/uk-pension-deficits-idUKLNE7B400920111205

Incorrect, the deficit includes the no longer active DB pension schemes, their deficit was £160bn but when revalued using CPI rather than RPI the deficit dropped to the £80bn mark suggested. However the active DB schemes are not in deficit. which is a powerful argument to maintain such schemes.

gadgetmind

DCodd wrote: »

However the active DB schemes are not in deficit. which is a powerful argument to maintain such schemes.

http://en.wikipedia.org/wiki/Survivorship_bias

"In finance, survivorship bias is the tendency for failed companies to be excluded from performance studies because they no longer exist. It often causes the results of studies to skew higher because only companies which were successful enough to survive until the end of the period are included."

hugheskevi

However the active DB schemes are not in deficit.

What data source are you relying on for this?

The Purple Book is the definitive data source, and the latest (2010) version shows open DB schemes to be 68% funded on a full buy-out level (Table 4.7, page 50).

Zelazny

The Pension Protection Fund releases regular updates on their estimates of the funding position of schemes that they may have to take responsibility for (generally DB schemes in the UK)

Latest report (end of November) said:

• The aggregate deficit of the 6,533 schemes in the PPF 7800 index is estimated to have increased over the month to £222.1 billion at the end of November 2011, from a deficit of £158.6 billion at the end of October.
• The funding ratio fell from 86.3 per cent to 81.9 per cent.
• Total assets were £1007.1 billion and total liabilities were £1229.2 billion.
• There were 5,390 schemes in deficit and 1,143 schemes in surplus.

full details can be found at : http://www.pensionprotectionfund.org.uk/DocumentLibrary/Documents/PPF_7800_december_2011.pdf

Bear in mind that this is calculating the funding level on the basis of having to provide PPF level benefits, which for members below NPA are around 90% of scheme benefits (100% for those over NPA, but for all members there are no further increases on pre 97 pensions in payment including GMP and increases on post 97 pensions in payment is restricted to the statutory minimum).

With only 17.5% of schemes in surplus on the PPF basis, less will be in surplus on a full buy-out basis. We can safely say that well over 80% of schemes are not funded on a buy out basis, and the figure may well be higher.

DCodd

gadgetmind wrote: »

http://en.wikipedia.org/wiki/Survivorship_bias

"In finance, survivorship bias is the tendency for failed companies to be excluded from performance studies because they no longer exist. It often causes the results of studies to skew higher because only companies which were successful enough to survive until the end of the period are included."

You could argue that for anything gadget, but the fact of the matter is that many of the private sector DB schemes were abandoned when those companies realised that the 10 year payment holiday they took came back and bit them on the proverbial. Had they not been so easily misled or short sighted, these schemes may well be more than affordable and Private sector employee would be looking at far more comfortable retirement.

That is the downfall of both the Private sectors and public sectors, the desire for short term gain over longterm sustainability. It is more prevalent in the Public sector purely by design i.e. 5 year terms for Governments etc, but the private sector gladly followed suit. The private sector employee effectively rolled over and accepted that their money/pension rights had been transferred to the wealthy employer / shareholder. However the Public sector employee, realising that there was no such "wealthy employer" or shareholder to appease, stood up and said that they wouldn't take the hit for the financial mess of the "financial experts". The private sector employee (of which I am one) is now demanding that the Public sector employee be as short sighted as we were.

It is all speculation, the deficit, the longer retirement, the lower returns for Annuities etc etc. All guess work, nothing more.

Zelazny

DCodd wrote: »

You could argue that for anything gadget, but the fact of the matter is that many of the private sector DB schemes were abandoned when those companies realised that the 10 year payment holiday they took came back and bit them on the proverbial. Had they not been so easily misled or short sighted, these schemes may well be more than affordable and Private sector employee would be looking at far more comfortable retirement.

That's not entirely how I heard it. The way I heard it was that the payment holidays were at least partly enforced by the government. When the economy was booming, a lot of companies wanted to put extra money into their pension scheme. This had two advantages:
(i) It meant that they paid less tax (as pension contributions were taken off before corporation tax was calculated)
(ii) It meant that if profits dipped, they could stop paying in for a little while.

Thus, it became common practise to top up the pension fund in good years, so you could avoid making payments in bad years. The government looked at this and realised that if payments were the same in all years they'd get more tax revenue, and in 1988 decided to start taxing any surplus in the fund. Obviously this led to companies reducing the surpluses.

I seem to recall that the calculation of what would be considered surplus was based on the cost of providing ongoing pensions, rather than on a buy-out basis, so as companies reduced their surpluses, they made it so that the pension schemes were underfunded on a buy-out basis. Many schemes reduced their funding to the MFR (minimum funding requirement) which was woefully inadequate to purchase benefits if the sponsoring employer should go bust.

The contribution holidays were solely used to reduce the surplus in the schemes and thus to avoid tax.

If the tax on surplus had never been introduced, then companies would still be using pension funds in order to pay slightly less tax, and everyone would be better off:
Employers would be less likely to go bust when the market takes a turn for the worst as they could stop paying into their pension fund
Employees would be reassured that even if their employer did go bust, there would probably be sufficient money in the fund to pay their pension
The Government would have a stronger economy with less businesses going bust and workers that were better provided for.

MikeR71

You all keep dodging the issue. Most public sector pension pots are kept independently and are in credit. In addition they can adequately meet their pay outs for many years to come. For example, my sector manages its own pension pot which is over £300 million in credit and the forcast is that it can meet all its future obligations and pay outs without even having to increase retirement age or contributions. Most other public sector pensions are in exactly the same position.

What the government wants to do is bring all these pots into one and use the surplus to pay off the deficit, mainly caused by the private sector companies and banks which we already bailed out once.

Is public sector pensions generous? Generous compared to what? Compared to private sector? Yes they are. But the solution is not to punish the public sector workers for this but rather find a solution to the miserable pension offered in mots private sector jobs. Believe me, cutting public sector pensions (which are affordable - don't believe the propaganda) does not help those in the private sector one jot. It stirs their sense of revenge and vilification to make them feel better that there will be more poor old folk in the future but that's just how sad and vengeful we have become as a nation.

Andy_L

MikeR71 wrote: »

Most public sector pension pots are kept independently and are in credit. In addition they can adequately meet their pay outs for many years to come. For example, my sector manages its own pension pot which is over £300 million in credit and the forcast is that it can meet all its future obligations and pay outs without even having to increase retirement age or contributions. Most other public sector pensions are in exactly the same position.

Most public sector schems do not have a pot. They are paid for out of current employer & employee contributions with any shortfall/excess made up by/returned to the treasury. Some (eg the NHS) currently pay out less than they take in whilst others (eg the Civil Service) don't. However thats an effect of demographics & recent recruitment/redundancy states.
The only major scheme that is funded is the Local Gov Scheme (although that is sub-divided into individual schems) with a few other niche schems (MPs &, IIRC, the University lecturers scheme)