Pension abatement - where does the money go?

Frugal-not-tight

Quite a few people I know have their service pensions abated due to their employment in the sector. I don't want to get embroiled in the rights or wrongs of pension abatement, but I was curious as to where the abated funds go - it would appear they do not return to the individuals "pension pot". Does anyone know the answer to what, at first glance, smacks of pension theft?

hyubh

Frugal-not-tight wrote: »

Quite a few people I know have their service pensions abated due to their employment in the sector. I don't want to get embroiled in the rights or wrongs of pension abatement, but I was curious as to where the abated funds go - it would appear they do not return to the individuals "pension pot".

There was no 'pension pot' in the first place. If by 'service pension' you mean a civil service pension or an armed forces pension, then there isn't even a general pension fund - pensions are coming out of general taxation.

Does anyone know the answer to what, at first glance, smacks of pension theft?

Does it? When a senior local council officer is re-employed by one council following an early retirement at another, many a tabloid has screamed blue murder in the past. Abatement in general is however an increasingly old fashioned concept - it stems from the times when people weren't expected to move from job to job much, if at all, in which case drawing a pension was assumed to coincide with retiring completely.

seven-day-weekend

My husband's Teachers' Pension was abated due to him being re-employed. When he retired permanently his Pension was the same as it was if he hadn't have retired previously. His lump sum was the same as if he'd not previously retired, minus that amount which he had had already.

Hope this helps.

BobQ

The amount abated goes to the Treasury and is used to fund other public sector pensions. If there was a pension fund it would be retained in the fund. As the Government has decided to take the pension contributions (X) of most public sector workers and use them to fund existing pensions in payment (Y), and if X is greater than Y they keep the profit and if Y is greater than X they make up the difference; the money abated is available to pay other pensioners.

Abatement is the price that the recipient of the pension must pay for the option to draw a pension and continue working in the same organisation drawing further salary and earning further pension. The idea is that you cannot receive more from your employer in pension and salary than you would get from continuing to work and not taking the pension.

Abatement is archaic in this day and age but the original idea was to enable someone to semi-retire by being employed in a lower grade less stressful job, or to work part-time without profiting from it.

Frugal-not-tight

Thank you all for your answers. BobQ especially for your very informative input, I will appear most knowledgeable next time someone brings up the subject at work. :j