Public Sector Pension Reform In Trouble?

Thicko2

It is an interesting one this. It is complicated to work out how each individual will be affected by this if the plan is to 'make good' the discrimination suffered by the younger members without transitional protection.

You need to remember that pension value revision under the new CARE schemes, e.g. in the NHS CPI plus 1.5%, has probably seen more pension growth than what they would have received in wage growth when wages have been flattish (would have been the basis for the pensions pre the 2015 CARE schemes) . For people at the top of bands in NHS they would have probably seen wage growth of: 1% increase in 2015/16, 1% in 2016/17, 1% in 2017/18, 2% in 2018/19. However no automatic lump sum in the 2015 CARE scheme and for an accurate analysis you probably need to take into account an early reduction for the 2015 scheme to be payable at 60 to allow direct comparison with the 1995 final salary scheme.

I suspect if your salary has increased due to promotion etc, over the period you will be more affected than the wage growth highlighted above.

In my circumstances with promotion my salary increased at probably double the rate of the above inflation. Adjusting for early payment the actual yearly payable pension was within 2% of the direct comparison, but the lump sum probably the best part of 19% lower (the 2015 CARE scheme has no lump sum). This is all based on pension earned to 2019. i.e. 4 years in the CARE scheme, 21 in the old scheme.

In my case i have another 12 years to 60. I suspect salary growth or lack of it will either widen or close this gap.

hyubh

Silvertabby wrote: »

I know that the LGPS is slightly different, in that it kept the final salary link for all pre 2014 service (regardless of age)

So did the others - difference was that those closest to old scheme NRA stayed in the final salary scheme full stop, with a tapered entry into the CARE scheme for those a bit younger, until the youngest went into the CARE scheme immediately (like all did in the LGPS).

The LGPS, in contrast, had/has the underpin instead, which is again age discriminatory to the extent you have to be above a certain age to benefit from it, even with equal service dates to someone younger (or so the logic goes). However, the LGPS doesn't have the secondary issue of things like ill health retirement terms being different for members under and not under transitional protection.

Bearing in mind that R85 was already on its way out (stopped completely for joiners after October 2006 without too much of a drama)

Well, the unions challenged that in the courts as well, but lost... only that time, it was the government saying the change was needed to remove age discrimination, rather the unions saying the change should be stopped to avoid age discrimination.

Silvertabby

Well, the unions challenged that in the courts as well, but lost... only that time, it was the government saying the change was needed to remove age discrimination, rather the unions saying the change should be stopped to avoid age discrimination. Posted by hyubh

Sex discrimination came into it as well - men were more likely than women to rack up the service needed to meet R85.

zaax

With the Civil service average pay of £26,405 and the private sector pay at £32,961, all the really intelligent staff have left and gone to the private sector

hyubh

zaax wrote: »

With the Civil service average pay of £26,405 and the private sector pay at £32,961, all the really intelligent staff have left and gone to the private sector

You appear to have plucked two figures out of the air, however as it happens, £26,405 + Alpha scheme membership could be reasonably considered roughly equivalent to £32,961 + Auto-Enrolment DC...

nigelbb

zaax wrote: »

With the Civil service average pay of £26,405 and the private sector pay at £32,961, all the really intelligent staff have left and gone to the private sector

hyubh wrote: »

You appear to have plucked two figures out of the air, however as it happens, £26,405 + Alpha scheme membership could be reasonably considered roughly equivalent to £32,961 + Auto-Enrolment DC...

Indeed! DB accrual in public sector schemes is around 1/50 so assuming a 25 year retirement that's 50% extra salary paid as pension.

JoeCrystal

hyubh wrote: »

You appear to have plucked two figures out of the air, however as it happens, £26,405 + Alpha scheme membership could be reasonably considered roughly equivalent to £32,961 + Auto-Enrolment DC...

Besides, the average salary is a pretty lousy measure. I would be more interested in the median full-time salary. : According to one report I read, in April 2017, median weekly earnings for full-time employees in the public sector were £599 in the public sector compared to £532 in the private sector although I am not sure they took pension benefits into account in this case.

GunJack

JoeCrystal wrote: »

Besides, the average salary is a pretty lousy measure. I would be more interested in the median full-time salary. : According to one report I read, in April 2017, median weekly earnings for full-time employees in the public sector were £599 in the public sector compared to £532 in the private sector although I am not sure they took pension benefits into account in this case.

I think that average is severely skewed by the likes of NHS doctors and the like....plus, when you say public sector, what do you mean? NHS, local govt., civil service? Certainly from what I've seen NHS et. al. have higher pay than the CS...but often they all get lumped in to one for "media purposes"...

Paul_Herring

I think that average is severely skewed by the likes of NHS doctors and the like

A mean would definately be skewed by them, median not so much.

Found this with mean and median hourly rates broken down by profession for '17:



But that's simply pay alone, and doesn't take into account pensions which are in different tables:

Golactico

This is a horrendously complex mess that the Government have got themselves into. It’s hard to see how any kind of ‘one size fits all’ remedy can be applied that accounts for not only all of the different public sector pension schemes but also the varying circumstances of members within those schemes.

I think that an offer to ‘buy off’ scheme members’ right to a formal legal remedy is the sensible solution. I strongly suspect that a large proportion of public sector workers will be unaware/uninterested in these legal proceedings – it certainly doesn’t seem to be on anyone’s radar where I work. Present affected members with the broad facts of the case, then transparently offer them say, £1K each to waive their rights to a formal legal remedy, with an assurance that their current pension arrangements will remain the same. An awful lot of people will gladly take this and view it as a surprise windfall out of thin air. Using worst case scenario figures, If 5 million public sector workers took up such an offer (much fewer will actually be affected), the problem would go away for a one-time cost of £5 billion, rather than an (alleged) £4 billion ongoing annual cost. Even if only half settled in this way, it would significantly mitigate the Government’s problem both financially and administratively.