BBC4 Programme on pensions

System

Hi

Well if you do work in the Public Sector and Cambridgeshire is your admin authority (Partnered with Northamptonshire) you won't know much about the value of your LGPS etc etc, as they are not the sharpest blade in the box.

However I do find them trying...

"The Fund delivered a return of 12.2% for the year, under performing the Fund’s benchmark return (13.5%) and the average Local Authority Pension Fund (13.2%). (Source WM Universe)."

Add in notional amounts of income from Academies, based on their short Lifespan (Rates 21%, 22% and 23% for many of them as employers) and payments of about a third of what they should be, then the LGPS balance sheet gets distorted. Academies are Quasi private sector.

The lifespan of an Academy was initially for 7 years, with liabilities expected for perhaps 10 times that length.

So Cambridgeshire et al are at a dis-advantage from pretty much any angle. AND YES, the Local Authority will be expected to bail out a failed academy / pupil at council tax payers expense.

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Of course there are school cleaners etc who get a tiny amount of LGPS added to their state pension and then get excluded from a whole raft of other state benefits, saving the taxpayer considerable sums each year.

But this makes them 'villains' because they worked hard in the public sector for a pittance?

NO, they are decent members of society.

+++++++++++++

Ooooh don't I rant on?

Bootsox

slowpoke_rodriguez wrote: »

One Sunday evening, a couple of years ago....

Not exactly as you describe but, just over three years ago, there was a very interesting R4 programme about pension fees and commissions:

http://www.bbc.co.uk/programmes/b037r5dh

hugheskevi

As I explained above, using a reference to CETV's to support my argument, public-sector workers have enjoyed an astonishing windfall since the era of low interest rates began, compared to private-sector workers in DC pension schemes.

Taking the era of low-interest rates as starting in January 2009, it is an interesting point as to whether the value should be calculated with reference to either a notional capital value or with reference to actual benefits paid.

Aside from LGPS members (the position is different as that is a funded scheme so nothing below applies to that scheme), public sector pension members cannot transfer their pension, so the notional capital value is purely academic (except in cases of divorce and possibly a few other exception circumstances). The only value that matters to the member is the annual accrued pension and lump sum as this will be the only cash payment they can receive. The same applies to the Exchequer, the only time money is paid out is to pay pensions, as these are unfunded schemes. Employers pay contributions, but as that just goes back to the Exchequer who provided the vast majority of employers with the money in the first place that is just an accounting exercise in moving money around.

CETV values are relevant to private sector DB members and sponsors, as those are accessible and real payments. To the extent that CETVs are correlated with ongoing funding requirements, they also influence the employer contribution rates. But none of these apply to unfunded pension schemes, so valuations based on CETV basis has no relevance for those schemes. The pension can be assigned a capital figure, but it doesn't mean anything to the member as they cannot crystallise that notional valuation and it doesn't mean anything to the Exchequer as it has no impact on the pattern of required expenditure.

Since 2009, the future value of members' accrued rights was significantly reduced with the change to revaluation and indexation from RPI to CPI. That is a real loss, with members receiving less pension than they would have done with the change in policy. The value of future accrual has also fallen significantly, with higher employee contribution rates, higher normal pension ages and a career average structure.

The price of certainty has increased significantly, but I doubt many public sector members are thinking that although their pension is lower than they had expected, that they are well ahead as the inaccessible notional capital value of their asset has soared. Also worth noting that since 2009 the returns in a private pension will have far outstripped the SCAPE discount rate of CPI+3%, so those in Defined Contribution pensions should have done well in the period, this is similarly a real gain which will make a difference to what members receive. The pension freedoms have shown that the cost of certainty calculated using a gilts basis is considered by most individuals to be excessive (otherwise annuities would be more popular) so arguably using a CETV basis produces an excessive capitalised value from a member perspective.

Similarly, when interest rates and gilt yields increase, I doubt public sector pension scheme members will be agonising about the waning capitalised value of their pension - they wil be focusing on what they will actually receive, which will not have changed. The Exchequer will not care either (for funding purposes), which suggests a CETV valuation basis doesn't have much relevance, except for academic interest.

Bootsox

OP, this might be the article you are after (7mins in):

http://www.bbc.co.uk/programmes/b0381hnw

The reason given by the programme makers for picking on a LGPS is that, as a public body, it could be made the subject of a FOI request.