Makes my blood boil

uk1

Andy_L wrote: »

In the fire brigade yes, its plausible. If you look at the cohort in the frame for medical retirement in 95-2000 they would have had a career with much poorer safety equipment than now (a wet rag to protect them from smoke) and where far nastier chemicals where in use in furnature. Also, AIUI, their criteria for medical retirement is "unable to be a fire-fighter" rather than unable to do any job so the level of disablement to qualify is lower.

In local gov less so since its double the private sector rate of "<20%". but I'd want to see some good analysis on, eg the deomgraphic profile, before slinging around the accusation of poor governance

I share your reticence to conclude anything about the fire workers, for the reasons you state. I do not share your reservations about the 39%. I cannot think of any part of industry or more closer perhaps a largely desk based industry with a mature pension scheme where 39% of the people retiring each year do so through incapacitation.

I don't think the presumption that it is more probable that a substantial number of the 39% early retiring are not genuine.

Jeff

uk1

I must admit I am unable to make any sense of the scale of this problem.

Until relatively recently DB schemes were quite the norm in the private sector. Until Gordon Brown. It is the taxes from the companies and their employees in the private sector that funds the public sector. So in terms of scale, I would sort of expect the deficit in the public sector DB schemes to be a small fraction of the private sector DB schemes deficit. But the aggregate deficit for private sector DB schemes is stated to be (by the PPF) £270bn. How can the public sector "deficit" be four times the size of the whole of the private sectors deficit?

My understand is that less than 20% of people are employed in the public sector and 80% in the private sector.

I must be missing something somewhere.

Jeff

Andy_L

uk1 wrote: »

I must admit I am unable to make any sense of the scale of this problem.

Until relatively recently DB schemes were quite the norm in the private sector. Until Gordon Brown. It is the taxes from the companies and their employees in the private sector that funds the public sector. So in terms of scale, I would sort of expect the deficit in the public sector DB schemes to be a small fraction of the private sector DB schemes deficit. But the aggregate deficit for private sector DB schemes is stated to be (by the PPF) £270bn. How can the public sector "deficit" be four times the size of the whole of the private sectors deficit?

My understand is that less than 20% of people are employed in the public sector and 80% in the private sector.

I must be missing something somewhere.

Jeff

Must Public sector schemes (the main exception being Local Gov) are unfunded. ie contributions are not invested but are used to pay the pensions of the currently retired and any excess/shortfall goes to/is made good by the treasury. Effectively, when you try to value a shortfall they start from a position of being 100% underfunded rather than funded private sector schemes which at least have some funding (eg Tata is only about 15% underfunded)

In addition whilst the public/private sector split is 20/80ish the 20% of public sector almost all have DB schemes unlike the private sector so the ratio of DB pensions could be 1:1 (nb I've plucked that number out of the air to demonstrate the point)

hugheskevi

But the aggregate deficit for private sector DB schemes is stated to be (by the PPF) £270bn.

I think that figure is based on what is called a section 179 basis. That is the valuation which is the cost of buying out liabilities assuming that Pension Protection Fund level benefits are paid out, ie, all members below Normal Pension age have their pension cut by 10%, indexation and revaluation changes to statutory minimum and a cap on compensation applies. So that is quite a big understatement of existing unreduced liabilities, which is of the order of £800 billion.

It can be spun any way you like, but it is extremely clear that with just 5M out of 30M of the UK working population and their predecessors having made little direct contribution to their own pensions and expecting the taxpayer to fund unexpectedly high longevity risks, your public sector pensions are unsustainable not just mathematically, but also morally and politically.

Expenditure on State Pension is over £90bn p/a. Net expenditure on public service pensions (total expenditure less pension contributions received) is a bit over £10bn.

If public service pensions are unsustainable mathematically, is the State Pension system similarly unsustainable?

uk1

hugheskevi wrote: »

Expenditure on State Pension is over £90bn p/a. Net expenditure on public service pensions (total expenditure less pension contributions received) is a bit over £10bn.

If public service pensions are unsustainable mathematically, is the State Pension system similarly unsustainable?

Not similarly, no.

Jeff

BobQ

I think it is true that in the past there was a lot more medical retirements. Today the rules are scrutinised more closely but then to qualify you generally had to show that you could not do the specific job, rather than that you could not do any job. So in some areas a bad back might qualify if your job involved lifting.

My impression from speaking to people who retired early is that LGPS and NHS has been quite liberal in signing this off in some areas. You also need to remember that people leaving 10 years ago may have had much more manual work in their career. (Not a great reason I agree)

The other factor is that as the composition of the public sector workforce has changed over the years there have been lots of voluntary redundancies and sometimes medical retirement was a convenient way to exit people in their 50s.

These days you would have to show you are incapable of doing any job including outside the public sector.

hyubh

uk1 wrote: »

The thing that I found almost more alarming than the total "deficit" in the earlier link, was the comment:

• Governance in public sector pension schemes is very weak, leading to extremely high ill-health retirement rates – for example, 39 per cent for local government employees and 68 per cent for fire service employees.


Is this true?

Fire was heavily tightened up around the introduction of the 2006 scheme (lots of aggro from the FBU at the time). Not sure about the LGPS figure. Intuitively it doesn't sound correct (*)... but it's difficult to say without a breakdown. This bit makes me wonder whether the 39% is including 'compensatory added years' (CAY) cases (common with employer-led early retirements back in the day), rather than just ill health ones strictly speaking:

'The employer who authorises the retirement does not have to bear the cost, as it will fall as a current cost under future employers’ budgets when the pension is actually paid. In other words, unlike in the private sector, if a decision is taken to provide an enhanced pension owing to ill-health retirement, the cost of that decision is not recognised when the decision is taken but over a number of years as the pension is paid'

Admittedly, this paragraph comes off of the back of explaining the police and fire figures. However, in LGPS-land, it perfectly describes the distinction between CAY and (under the final salary scheme) Augmentation. Both actually existed at the point the report was written, though CAY was withdrawn shortly after. What remains nowadays are the three ill health tiers (none of which involve a recharged cost), employer-led unreduced early retirements, which (like Augmentation) involve a capital cost, and two forms of pension enhancement, both of which are capital costs to the employer too and (for exactly the reason given above) are far, far less popular than CAY was.

(*) Searching whatdotheyknow.com for "LGPS ill health", I came across Herts CC replying to a request (in 2012) for the number of ill health retirements in their fund under the 1997 scheme regulations. Their answer was 652:

https://www.whatdotheyknow.com/request/local_government_pension_scheme_3#incoming-265310

Even if we take 'during the 1997 Regulations' to mean just from 1998 (when they became effective) to 2008 (when a revised set of rules came in), for a middling county like Herts, I'd guestimate 652 to be around 10%. Still high (and I'd imagine the rate to have fallen since - anyone fancy putting in a FOI request to find out ), but nowhere near 39%.

Until relatively recently DB schemes were quite the norm in the private sector. Until Gordon Brown.

It wasn't Gordon Brown (or for that matter Nigel Lawson) that led to the collapse of private sector DB, but much tougher accounting standards (FRS17) that put liabilities, realistically estimated, on the balance sheet.

BobQ

agarnett wrote: »

It can be spun any way you like, but it is extremely clear that with just 5M out of 30M of the UK working population and their predecessors having made little direct contribution to their own pensions and expecting the taxpayer to fund unexpectedly high longevity risks, your public sector pensions are unsustainable not just mathematically, but also morally and politically.

This is indeed spin and inaccurate spin at that.

You are speaking about the current PS workforce, but the benefits "quantified" include people who perhaps retired 30 years ago, and those who will retire in 30 years. It includes those who have worked in the public sector and the private sector at any time in their career.

Most current employees are contributing up to 10% to it. Some are paying even more. The fact that the Government is using their contributions to pay the current pensions is not the fault of the current workers.

Those retiring today contributed by working for a below market salary in return for that pension. They are not expecting the taxpayer to fund their pensions. They are expecting the Government to honour the commitments that were made in the past. They will also continue to pay tax on their pension earnings.

When I left the civil service with 10 years service I got a 22% pay rise in my private sector job (less a 6% contribution to another FS scheme). I expect no more than that the Government pay me a pension of 10/80th of my pensionable pay at that time index linked because that was the deal I had at the time. I wish they had put their contributions and mine into a fund, but they chose to pay me a lower salary and spend the difference, while telling me I was earning an indexed linked pension for life.

RickyB2000

BobQ wrote: »

I think it is true that in the past there was a lot more medical retirements. Today the rules are scrutinised more closely but then to qualify you generally had to show that you could not do the specific job, rather than that you could not do any job. So in some areas a bad back might qualify if your job involved lifting.

My impression from speaking to people who retired early is that LGPS and NHS has been quite liberal in signing this off in some areas. You also need to remember that people leaving 10 years ago may have had much more manual work in their career. (Not a great reason I agree)

The other factor is that as the composition of the public sector workforce has changed over the years there have been lots of voluntary redundancies and sometimes medical retirement was a convenient way to exit people in their 50s.

These days you would have to show you are incapable of doing any job including outside the public sector.

How does ill health retirement usually differ between DB and DC schemes members?

MPD

agarnett wrote: »

your public sector pensions are unsustainable not just mathematically, but also morally and politically.

Should the state support public sector workers in retirement? I would say it is less morally and politically sustainable to argue they should not. Others have dealt with the quality of the figure you quote.

agarnett wrote: »

Whether senior, middle, or lower paid types, they all generally demonstrate a rather ugly picture of "entitlement"

I sign a contract with my employer including a pension. Should I not feel entitled to that pension?

agarnett wrote: »

There should be a national referendum on this question. No doubt about it.

It could be in the form "Do you agree that public service pensions payments should now start to be subject to a special additional rate of income tax in order to offset the unexpected windfall effects of outdated "for life" pension promises made when pensioners lived on average only half as long in retirement?"

Referendum questions are supposed to be neutral then it is up to the different campaigns to persuade the electorate to back a particular point of view.