Gold plated public sector pensions

DairyQueen

Johnnyboy11 wrote: »

The Government has deliberately sanctioned significant detriment to Public Sector pensions in recent years:

A near pay freeze over the past 8 years, resulting in salary and pension lagging RPI by about 15%, ouch!
RPI -> CPI indexation in retirement
Final Salary -> Career Average
Employee contributions 5% -> 7%+
NRA 65 -> 67
LGPS Rule of 85 gone

There's a clear and determined direction of travel here...

Yep, stealthy bunch aren't they? They chip away at the mountain piece by piece and hope that it will be the size of a small hill by the time anyone notices. Problem is that I doubt there is sufficient time to chip away. They will need to take a bulldozer to it at some point.

Stubod

Muscle750 wrote: »

Yes but how long they been employed in that post etc?

All her working life and full time.....?

busy_dad

Absolutely, as a public sector worker, I fully understand the pension is good. It is part of the employment package I had to weigh up when deciding whether to go into the private or public sector. I certainly earn a lower salary than I would in the private sector and never get bonuses but the pension and annual leave/sick pay are better.

In terms of pension changes, they were significant in 2015. In the old scheme I would have been paying around 6.5% of salary. I now pay over 12%.
In the old scheme I could have accessed my full pension at age 60, now it is 68 (at least..). If I now take at 60, I will have my pension reduced by around 40%. I am paying a lot more in to get a lot less out than the generation who are retiring/have retired now. As the previous poster said, uplifts are now linked to CPI instead of RPI as well. The change to career average from final salary is also a significant change.

Don't get me wrong, it is still a great pension and I am grateful to have it, but I am not getting it for free, I contribute a significant amount of salary and my salary is lower than it would be in the private sector. It's the choice you make when you decide where to work.

k6chris

I used to work in the private sector for 27 years, have now been in the public sector for 5 years. My salary dropped by over 50% when I made the move, but many other things, such as stress levels and pension improved. When I last checked, people are free to decide where they want to work based on their personal requirements and the skills / knowledge they have to offer. There are thousands of 'public sector' job vacancies right now, loooking for good people, so if a 'gold plated' pension is important to you, you know what to do.......

andy001

busy_dad, you're spot on...
It is still a great pension and you're not getting it for free..Pay in public sector is low compared with private sector and bonuses..

K6CHRIS- true.


Employee contribution has gone up, admin fees gone up too.. retirement age gone up..
Slowly It's been tinkered so people won't realise what they are losing.. my 2 cents

Tromking

kidmugsy wrote: »

(iv) So gripes along the lines of "it's not fair, mummy, his pension is bigger than mine" are worthless. So are gripes that Fred Ltd makes the minimum pension contribution. If you don't like the terms take another job.

Indeed.
Plenty of these ‘gold plated’ pensions available to the aggrieved in the private sector. 11K nursing vacancies in the NHS apparently and in my area of the Civil Service there’s loads of jobs going, although it has just been identified as the most perilous profession in Western Europe though.

hugheskevi

It is very important to understand the funding differences in private and public sectors around Defined Benefit pensions.

When funding shortfalls arise in private sector schemes, they have to be made good via a recovery plan, with the required additional contributions typically set over 15 years. In comparison, the unfunded public sector schemes don't have to make good the position, just fund the higher pensions due in the future as they fall due.

Private employers may also be poorly placed to sponsor schemes, especially employers who were historically larger than they are today. In some cases scheme deficits may be higher than the entire value of the sponsoring employer. The Exchequer does not have this issue.

In the private sector, member and employer contributions go to the pension scheme which is separate to the employer. Whereas the government uses employee and employer contributions to reduce the cost of payments of pensions today. The employer contributions are largely meaningless, as the Exchequer votes funds to employers who then hand them back to the Exchequer, but member contributions go straight back to the Exchequer and so are a revenue source (which can be increased should the Government decide, although this will of course have limits before the loss of revenue from those opting out due to increases outweighs the additional revenue from those remaining in the scheme). This is the main reason Defined Benefit schemes continue to exist in the public sector today - a move to Defined Contribution would be a big revenue loss to the Exchequer.

Private sector scheme liabilities can easily be brought-forward. The most obvious example is if members decide to transfer their pension. Schemes can however protect themselves by reducing transfer values if underfunded. In recent years employers have sought to remove the liabilities by mechanisms such as buy-outs of the pension scheme, incentivised transfer offers and so forth - most of which bring costs forward. In comparison, the Government legislated that transfers out of unfunded public service pension schemes cannot take place in most circumstances, significantly reducing the risk that forecast future liabilities are brought forward. Even the lump sum commutation rate is set at a dire 12:1 so that there is little incentive for members to take a voluntary lump sum, despite it being tax free.

Whereas the huge liabilities of unfunded public service pension schemes make good headlines, they are largely meaningless as the Exchequer does not need to pay them immediately. It is similar to a mortgage - the capital amount may be huge and could not be repaid immediately, but the key measure of affordability is whether the regular repayments can be met.

Hence, what matters is the ability of the Exchequer to fund payments when they fall due. Therefore the measure of required pension expenditure as % of GDP is a key figure. This increased significantly in the 1990s and 2000s, peaking at about 2% but is forecast to fall to about 1.5% between now and about 2050.

In comparison, health expenditure is 7.6% of GDP, forecast to increase to 13.8% in 2067/68, long-term care 1.3% increasing to 1.9%, State Pensions about 5% increasing to 6.9% (source here).

Of all the age-related spending committments the Exchequer has, only public service pensions are decreasing as a percentage of GDP. The alarming figure is for health, which will increase by 6 percentage points, with the cost of the increase alone more than four times the total expenditure on public service pensions.

bostonerimus

Triumph13 wrote: »

The whole issue here is that the cost of providing pensions has multiplied massively simply because people are living so much longer. [ /QUOTE]

The rate of change in life expectancy has decreased for females since 1950 and for males it's close to the historical average. This is not a surprise to the actuaries and there are simple changes that could have been made to pensions to compensate rather than the wholesale gutting of them. This is down to government...thank you Mr. Brown.......and to employers wanting to get more money to shareholders and into their own pockets. Small contribution increases and small changes in pension age would compound to compensate for the predictable increased longevity. A well run DB plan is better than a DC plan as it will provide mortality credits so the adoption of DC plans has nothing to do with bettering the benefit of the employee, it's all about reducing costs and risk to the employer.

kidmugsy

Johnnyboy11 wrote: »

There's a clear and determined direction of travel here...

Good: I approve of that.

antonic

Thrugelmir wrote: »

Highly unlikely. As after 10 years will hit the top of their grade. Only so many can move to a higher grade position.

No one will get to the top of their grade after 10 years anymore.
If you are recruited to the Civil Service you will enter at a certain point on the pay range and stay their indefinitely as the Govt have now abolished pay increments.
The only annual pay rises you will get is what the Govt decide.
The only way to get a signifcant pay rise is to get promoted.
Once promoted you enter at a specified point on the payscale and the process repeats itself (but you are now on worse Terms & Conditions).
I have been a Civil Servant now for 30 years and I agree with being asked to pay towards my pension - after all I had 26 1/2 years under the old scheme where I didnt have to pay a thing.