Makes my blood boil

agarnett

Why are you deflecting the real issues now, hyubh and others? Where's that balanced executive summary covering chronological history of typical private sector pensions I asked for, hyubh?

Seriously, the comments section at the foot of the following October 2015 Telegraph article are a far better read than the show put up by the assorted beneficiaries of public sector pensions here on MSE -

http://www.telegraph.co.uk/finance/personalfinance/pensions/11923158/Government-planning-7bn-assault-on-gold-plated-final-salary-pension-schemes.html

In those comments someone says there is the currently UK liability for public sector pensions running at £1,000BN. I can hardly get my head around such. Is that really the size of it? I take it someone has calculated a kind of Cash Equivalent Transfer Value of the current estimate of deferred benefits plus the cost of paying retirees who have already retired? That's one alternative way which actuaries sometimes use to value private sector DB scheme liabilities i.e. what it might cost as a one off premium to transfer the entire liability to an insurance company?

It is a mind boggling number bearing in mind none of the tax we all pay is being salted away to pay the deferred bit!

So we are around 65M men women and children in the UK. Divide £1000BN by 65M and you get about £15,000, but that's not a useful number. Let's take an informed guess at how many of the 65M might be of working age. I'm guessing say 30M. £1,000BN would mean each one of the working population shoulders a current liability to public sector pension schemes of over £30,000. Actually there are just over 5M working in the public sector according to ONS stats . Do we count them as contributors to their own windfalls?

You can either exclude the normal taxation contributions which public sector workers might be making that will also go towards current public server retirees' pension liabilities or you can leave them in the equation.

Oh whatever, lets leave them in - after all, they earned this thing and they are taxpayers like the rest of us, right?

But what an equation! It can't possibly add up, can it?

Put it this way, because the government doesn't accrue money against future public sector pension liability (e.g. by either setting aside personal pension pots for individual workers or by running its DB scheme as an investment funded scheme like private sector run theirs), every UK working citizen has the current burden of finding £33,000 to contribute towards funding public service pensions.

Perhaps some kind person will be able to argue how fast that liability will grow if none of us pay the £33,000 ? If the average annual wage is £27,000, how are we all going to forgo that kind of money which is akin to a year's gross salary for one of us in order to sub the pensions of the 5M?

How far can this mathematical problem "can" be kicked down the road before the public sector pensions juggernaut catches up with it?

Kynthia

Someone would have to be extremely low paid, and I mean extremely, and have to have worked in the civil service for a long time in order to have a higher income in retirement than when working. It would only be the case when including state pension, as civil service pensions are generally restricted to a percentage of the pensionable salary, and wouldn't surprise me if it was also possible in the private sector with a decent employer because i think it only works when the state pension is over 50% of someone's working salary. It's not a headline that applies to virtually all civil service employees so it's just ridiculous for it to have been used in a argument against them.

The Classic scheme, which the majority of people retiring now will be in, only pays a maximum of 50% of your pensionable salary if you've worked for 40 years. Plus members were contracted out so will receive a lower state pension than those contracted in. The new career average scheme everyone is being moved to doesn't pay out until state pension age, which means the age people are expecting to get it may get put back numerous times during their career.

It's hard to compare to private sector employers and their pensions because they differ so much. There are some generous employers out there who pay more than double the contributions their employees pay into their pension schemes. I know someone who's employer throws a few expensive parties and days out each year, has a death in service benefit of 25 times their salary so doesn't need life insurance, gets a good standard of travel when going somewhere for work, pays 12 months of enhanced maternity pay and will get a paid month off work when working there 10 years. I'm sure not every employer is like this but some are clearly good to work for with rewards the public sector employees can only dream of.

Andy_L

agarnett wrote: »

In those comments someone says there is the currently UK liability for public sector pensions running at £1,000BN. I can hardly get my head around such. Is that really the size of it? I take it someone has calculated a kind of Cash Equivalent Transfer Value of the current estimate of deferred benefits plus the cost of paying retirees who have already retired?

The report is here
http://www.iea.org.uk/publications/research/sir-humphreys-legacy-facing-to-the-cost-of-public-sector-pensions
(the PDF is free, its £10 for a physical copy)

He's calculated the current liability & then assumed that the government buys gilts (ie government debt) to cover pension liabilities (ie a government debt) & comes up with £1[STRIKE]billion[/STRIKE] trillion cost, but bear in mind that that debt is spread over 80 odd years (ie till the newest workers die of old age)

IMO The first half is very good & tells you in an easy to understand way how to value FS pensions & how the financing works. I think the bit where he comes to the £1b is flawed as he makes some very questionable assumptions about salary growth eg every PS working has a full 40 year career & are able to get RPI +2% salary rises every year which requires every worker to reach the top of their career which is obviously not possible. In addition theres no sensitivity analysis to show which has the biggest effect on the numbers, is it life expectancy, salary rises etc.

Its also 10 years old so a lot has been rendered obsolete by changes in schemes, eg the RPI/CPI switcheroo

[Deleted User]

Muscle750 wrote: »

9 months salary to retire early tax free.....................meanwhile in the real world.
A whole 20% if you find a job how will one manage i wonder

Oh I know. It will be a problem but if I decide to look for a job, it's just one more burden I'll have to take into account.

Incidentally, I know you'll be pleased to hear that I was offered 2 jobs in the past couple of months, one part time in a public sector job, (although you probably think that all public sector jobs are part time :rotfl:), and one full time in - wait for it - the PRIVATE sector!:eek:

Now, take a deep breath and try to get over the shock.

Neither was of any interest at the time, I'm very busy you know! Anyway, I'll take up no more of your time - you should be resting.

WR

BobQ

agarnett wrote: »

Why are you deflecting the real issues now, hyubh and others? Where's that balanced executive summary covering chronological history of typical private sector pensions I asked for, hyubh?

Seriously, the comments section at the foot of the following October 2015 Telegraph article are a far better read than the show put up by the assorted beneficiaries of public sector pensions here on MSE -
..............................

The actual figure is £1.2T but £0.3T is funded (the LGPS, although clearly the Government underwrites any shortfalls in that).

I understand it is not based on CETV. CETV tends to underestimate the value of an unfunded public sector scheme. The figures are total liability based on assumptions that include longevity and something called the discount rate. I assume it also includes the contributions being made by current employees.

BobQ

agarnett wrote: »

Put it this way, because the government doesn't accrue money against future public sector pension liability (e.g. by either setting aside personal pension pots for individual workers or by running its DB scheme as an investment funded scheme like private sector run theirs), every UK working citizen has the current burden of finding £33,000 to contribute towards funding public service pensions.

The decision to use unfunded schemes was a Government decision taken many decades ago. The rationale as I recall was that such a fund, investing it, administering it, managing the risks etc was likely to be more expensive than the unfunded option. I have non idea if this is valid but I imagine that dealing with a fund of £1T would be significant. It apparently costs about £500m to do the LGPS.

Regarding the burden, the £1T calculation was done in 2012. The increased pension contributions of current members will start to reduce this liability. Impact will clearly be long term.

Muscle750

Just to clarify i joined the FS scheme in 2000 althou i started in 1988 the company was took over in 1999, The old company offered no pension whatsoever, I joined in 2000 the FS scheme which was then pulled in 2006 and we were transffered into the new scheme. In the years from 1985 to 2000 i paid into my own PRU pension however i could not afford to pay both the FS and the PRU one so i had to cease paying money into my PRU one. The transfer value of the PRU one on its last statement was £72k

BobQ

Muscle750 wrote: »

Just to clarify i joined the FS scheme in 2000 althou i started in 1988 the company was took over in 1999, The old company offered no pension whatsoever, I joined in 2000 the FS scheme which was then pulled in 2006 and we were transffered into the new scheme. In the years from 1985 to 2000 i paid into my own PRU pension however i could not afford to pay both the FS and the PRU one so i had to cease paying money into my PRU one. The transfer value of the PRU one on its last statement was £72k

2007 was when the Civil Service closed its FS scheme to new staff.

You probably made the right decision to pay the FS rather than the PRU.

hyubh

BobQ wrote: »

Originally Posted by agarnett View Post
Why are you deflecting the real issues now, hyubh and others? Where's that balanced executive summary covering chronological history of typical private sector pensions I asked for, hyubh?

If it appears that I am not fully engaging, it's because I haven't even seen your posts - you're on my ignore list. I've only seen this one because BobQ extensively quoted it.

hyubh

Muscle750 wrote: »

Just to clarify i joined the FS scheme in 2000 althou i started in 1988 the company was took over in 1999, The old company offered no pension whatsoever, I joined in 2000 the FS scheme which was then pulled in 2006 and we were transffered into the new scheme. In the years from 1985 to 2000 i paid into my own PRU pension however i could not afford to pay both the FS and the PRU one so i had to cease paying money into my PRU one. The transfer value of the PRU one on its last statement was £72k

If you haven't already, you should consider posting a new thread asking for tips and suggestions about your own pension situation.