Public Sector Pay Restraint Ending?

BobQ

Moby wrote: »

The problem is private prisons don't work at all well!

Quite. The privatised police force would fare so much better, you could incentivise coppers through payment by results schemes.

BobQ

antrobus wrote: »

Yes. What research there is indicates that public sector pay is higher than that in the private sector.

I believe that the IFS says it's 13% more. But only 3% more if you adjust for educational qualifications.

Of course, the public boys and girls will squeal that we don't get bonuses, or whatever. (Not that everyone in the private sector works for John Lewis.) And the private boys and girls will squeal that we don't get those 'gold plated pensions'. Which are, of course, quite significant. The liability now stands at about £1.3 trillion I think.

Which is to say, that comparing apples with oranges is a tricky exercise. But it is an inescapable fact that we have been running a fiscal deficit that is unsustainable. Pay restraint was, and is, therefore inevitable. It can't last forever, however. Whatever sector you are talking about, pay needs to be set at the level that attracts workers.

and at a level that stops people leaving at a greater rate are attracted.

The problem is that the public sector is like the private sector large and diverse. Comparing like for like is necessary but not always possible.

I think that its easier to compare administrative jobs. In my view the public sector does offer a better package for those jobs. But the level of reward for technical jobs is probably below the market rate.

Of course there are some public sector jobs that are difficult to compare. For example social workers are exposed to some very difficult and emotional situations.

BobQ

Silvertabby wrote: »

Mr S and I are both retired public sector, and we do know the value of (and are extremely grateful for!) our pensions.

It's true that the average public sector worker's employer pays at least 18% into their DB pension scheme, whereas the average private sector's employor pays 8% (if that) into a DC scheme.

My proposal for current public sector workers would be :

A. Carry on as you are

B. Opt out of your DB pension scheme in return for a 10% pay rise and 8% employer contribution into a DC scheme.

I'd be very surprised if many people (once fully informed) went for option B.

Not sure about all public sector schemes but the Civil Service has the option of transferring from the DB scheme to a DC scheme already.

The problem is that Government wants its cake and wants to eat it. They want the current contributions to subsidise the obligations to pay current pensions. They also wanted the opportunity to degrade the value of the final salary benefits by pay restraint.

It would have been fairer to the private sector and the taxpayer and the employees if in 2011 they had closed the existing schemes to all staff and replaced it with a DC scheme. Then staff would have had a clearer idea of what they were getting and the preserved benefits would have declined more quickly.

Instead they introduced other DB schemes which while fairer to those who have no future career aspirations simply perpetuates the pension obligations for longer.

Thrugelmir

BobQ wrote: »

It would have been fairer to the private sector and the taxpayer and the employees if in 2011 they had closed the existing schemes to all staff and replaced it with a DC scheme.

Unfortunately not that simple. The Unions want their cake as well.

BobQ

Silvertabby wrote: »

AFAIK, only the LGPS is funded. Pensions for the NHS, Civil Service, Armed Forces, Police, etc etc are paid for out of general taxation.

That is true, although the employee contributions are used in the "unfunded" schemes and the taxpayer makes up the difference.

In each unfunded scheme the pension trustees manage a "nominal" account (actual pension contributions, go in and the pensions paid go out). The employer contributions are actual payments from the employers HMT allocated budget but it is an internal accounting mechanism so they know the cost of the pensions.

The reason Governments allowed this situation to develop is that when life expectations were lower they actually made a profiit, where as now they have to make up the deficit.

System

Thrug-

. Unfortunately not that simple. The Unions want their cake as well.

We could present them with a pie chart instead of cake...

I suppose though even DB pensions save on the pension credit bill, and nursing home bill... The long term cost to gov is less than it may appear short term

BobQ

paparossco wrote: »

True, but the NHS scheme has always delivered a 'profit' to the government even when it was 'final salary'. Now that it is a CARE scheme and with the increased staff contributions I assume this will at least continue along similar lines.

Are you sure?

BobQ

Thrugelmir wrote: »

Unfortunately not that simple. The Unions want their cake as well.

Probably true, but I do not think the option was on the table.

I suggest the real problem would have been that either more people would have left (if say they had offered the legal minimum pension contribution) and not increased pay; or that people would have control over their DC pot rather than it continuing to subsidise the existing pensions in payment.

I can agree that the unions would have wanted the most generous DC scheme ever to reflect what they would view as a reduction in the overall package by about 19%. To maintain that level of contribution in a DC scheme would not have saved anything.

Tromking

I love the fact that the solution for many of the usual suspects on here to the increasingly chronic public sector remuneration/retention conundrum, is to worsen the 'package' on offer further.
It doesn't make sense!

paparossco

antrobus wrote: »

Profit?

How can you have a profit when the NHS pension scheme has a deficit of £381 billion quid?

The scheme accounts show a net expenditure of £29 billion for 2015-16. That's what lost people call a loss.:)

https://www.nhsbsa.nhs.uk/sites/default/files/2017-04/56324%20NHS%20Pension%20Scheme%20HC%20370%20Web%20only%20%282015-16%20accounts%29.pdf

As far as I was aware there has always been more contributed by members* than paid out. It was the case for years that if a sortfall in the pension scheme was predicted then the contributions went up automatically to cover it. 'Profit' was a poor choice of words on my part, my apologies.

*actually on reflection I'm not sure if that includes Employers contributions or not which makes a big difference.