Abuse of final salary pension schemes?

hyubh

zagfles wrote: »

Why? That's the point - it incentivises this sort of manipulation. If an employer thinks an employee is worth a pay rise then that employer should pay the full cost of the payrise, including any extra liability they impose on the pension fund.

The USS polled all costs and shared them out equally, and still does to some extent, presumably for simplicity. No individual employer was tricked by this. Whether you judge this a good policy or not is neither here nor there, and more to the point, does not explain any deficit troubles the USS currently has.

So dodgy practices which may prevent contractual pension promises being kept - for instance those which impose an excessive burden on the fund and increase its deficit like unfunded late career payrises, should be banned.

Final salary links no longer exist in the USS...

How do you that "back in the day" the actuary would have known these practices were going to take place?

If materially more early retirements are being granted than envisaged, then clearly, this will be reflected in the data for the next valuation...

GunJack

Where the USS has probably suffered is in the explosion in higher education over the last 10-15 years...when the scheme and it's rules were set up, the sector was very small with only 5-10% going to uni, and significantly less staff to teach them than now.

Malthusian

The moral question (whether one should maximise one's entitlement within the rules of the scheme, e.g. by bargaining for a last-minute pay rise) was settled almost twenty years ago by Ice-T - "Don't hate the playa, hate the game".

The financial question was settled a while ago when the scheme moved to a career average basis.

Not sure why people still want to get worked up about it.

[Deleted User]

Those who remain in the 1995 Health Service scheme (final salary) used to be able to manipulate in the same manner. However, since April 2015 any increases over 4.5% result in a very heavy charge on the employer when the employee applies for their pension.

hyubh

As you've now let on that you too are part of the pensions aristocracy as much as university lecturers, what final salary pension do you have with AA? (Perhaps you have others too...?)

You know, I'm also beginning to wonder whether you're one of those people who've benefitted from the end of contracting out, currently earning state pension you wouldn't have earned otherwise. To think my taxes are going to help pay for that...

How has the AA scheme done by comparison?

All for a DB pension on terms very similar to your own. Shocking

hyubh

A refund was probably the only option (and yes, that would have been the only option in the USS too) - since 1988, a DB scheme only has to grant a pension after a minimum of 2 years membership (before then it was 5 years).

CARE is not actually bad, just 'too little, too late' to save DB generally. AA is a case in point - its CARE section closed to new entrants last year, though its still open for people who were already a member.

A 'deferred' pension is when someone leaves, has been a scheme member long enough to earn a pension (so, not like you with AA), but hasn't actually drawn it yet. While a scheme is still open, this will be because the member has got a job elsewhere (or has just quit). When a scheme 'closes to further accrual' though, active members become deferred too, i.e. for pension purposes it's as if they've quit as well.

In neither case however does earned pension to date somehow get wiped, and while the statutory (i.e. minimum-by-law) inflation proofing won't be great in periods of inflation bigger than now (it's CPI based, but capped), it still exists.

zagfles

hyubh wrote: »

Final salary links no longer exist in the USS...

Then the issue the OP was complaining about no longer applies!! Why have we wasted 3 pages discussing it?? I see the article was from 2015 and the final salary link ended in 2016.

hyubh

No, a deferred (or 'preserved') pension is as I said. Collective bargaining is more associated with the public sector...

The PPF was set up in 2005. As I've said before, the USS (as a non-statutory scheme) acts within the framework of it, just like the AA pension scheme does.

Guess what, it's not 1990 any more - legislation toughened up during the latter part of the 90s and the early 00s especially.

Erm, yes. S52a orders - look it up.

Parking_Trouble

I guess what used to be accepted practice, working within Final Salary scheme rules has been rife in the public sector for decades.

It only ends up getting labelled as abuse because some schemes haven't tightened up on the rules and in many cases the scheme can't satisfy the demand put on it. Often through mismanagement and lack of foresight.

I used to be in a Final Salary scheme and coming up to retirement I might have bust a gut to get pay rises or promotions. The pensionable salary got capped, had 2% cap on increases which then changed to no increases. It started being called a Defined Benefit scheme, no FS.

I have a friend who is a copper. Stayed as a sergeant for years, working loads and loads of overtime. Bought himself a nice yacht, sent his kid to private school.

Coming up to retirement he took his Inspector exams and passed. Had a boring office job for a while, then retired on his higher Inspector salary.
Common, accepted practice, not abuse.

Classic case for having average salaries to reduce pressure.

phillw

Parking_Trouble wrote: »

Common, accepted practice, not abuse.

Common accepted abuse.