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Gold plated public sector pensions
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Those with Defined Benefit pensions know exactly what the deal is when they work for that employer.
Not always. I have a DB pension where increases once the pension is in payment are entirely at the discretion of the trustees. Whilst I worked there increases were made in line with inflation. That continued after the company was taken, But since that company was taken over there have been only 2 rises of 1% each in the last 16 years.0 -
Where are you getting this information from? Sounds....er.....untrue to me!
It appears to be plateauing now, but has certainly been rising for the past few decades, not decreasing!
Life expectancy has been going up fairly constantly for both men and women, and so it's rate of change is not changing much. Take the derivative of the first graph in your first link to see what I mean. For men the derivative is increasing a bit back to what it was early in the 20th century, but its nothing drastic. So the increase in longevity is nothing out of the ordinary and can be easily planned for by sensible pension administrators. The headlines about enormous increases in longevity bankrupting pensions are misleading......it's poor administration, funding and the desire to kill off DB plans from employers that are the real issues.“So we beat on, boats against the current, borne back ceaselessly into the past.”0 -
bostonerimus wrote: »
Yes the changes in life expectancy were predictable, but what 'simple changes' would you suggest to deal with the cost of providing pensions doubling?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.0 -
bostonerimus wrote: »Yes the changes in life expectancy were predictable, but what 'simple changes' would you suggest to deal with the cost of providing pensions doubling?
The things that have happened to the reformed Public Sector Schemes?
Increased employee & capped employers contributions
Increased NRA
CARE not FS
Decreased indexation (CPI not RPI)0 -
Yes the changes in life expectancy were predictable, but what 'simple changes' would you suggest to deal with the cost of providing pensions doubling?
Increased contributions (and actually make them), increasing retirement age, projections based on reasonable return models, not long term gilt rates, the usual things every sensibly run retirement plan would do.“So we beat on, boats against the current, borne back ceaselessly into the past.”0 -
“So we beat on, boats against the current, borne back ceaselessly into the past.”0
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bostonerimus wrote: »0
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OkOne of the main problems with all this is that there isn't "a public sector pension", there are a number of schemes for different parts of the public sector, all with their own Ts&Cs.
Lumping them all together may help with a headline but isn't really very useful.
Stopping, or leaving, a running PS DB scheme isn't straightforwards for those associated employers with the LGPS, a funded scheme.
Two examples I am aware of. One non-LG organisation that had a LGPS scheme running when it was setup and staff TUPEd into it was considering hiring new staff on a separate DC scheme as the employer contribution was deemed to be higher than they could afford. LGPS Scheme Admin / Actuaries gave them projections for how much their contribution would need to increase by to compensate for lower employee contributions going forwards, Ouch was their response when they saw the numbers, cheaper to carry on as they were.
A second, similar organisation, wanted to end their LGPS membership and move everybody over to a new scheme. No employee or employer benefits being paid in the future so they would have needed to contribute about 10 years "profit" (social enterprise, nominal 1% profit to be used for re-investment in service provided) in a lump sum at point of leaving. Apart from not having that level of cash available it was again more cost effective and beneficial to carry on with the LGPS DB scheme.
On a general point don't forget the move to CARE will significantly impact the overall cost of these schemes in 30-60 years as those on older FS elements die off and it is only CARE benefits being paid out.
There was a reference earlier to in-service pension increases being better than deferred. Didn't understand that or recognise it from today's situation. CPI on CARE accumulated to date, 1 - 2% on Final Salary pay rises compared to CPI on it all if deferred. As CPI is running ahead of Local Gov pay rises deferred is a better growth route on accrued pension to date.
I'm not an expert, but the deficits in the scheme are causing huge issues for a lot of admitted bodies. They are often in that position because councils put care services out to tender and they inherited the staff who already had an lgps pension with the service.
One small organisation I knew had to sell their only asset, the building they operated from. What some of them do is stop entry to new employees. A large vol org offered an lgps pension to everyone, although a lot of people didn't take it. They then froze it to new recruits. Over a number of years it got to a point where less than 100 people from 2000 employees were still in the pension scheme. At that point they introduced a DC scheme, pre-empting a stakeholder and pointed out the inequity of spending a substantial six figure sum each year on 5% of the workforce. They then stopped it and moved everyone left to the DC scheme.0 -
I'm not an expert, but the deficits in the scheme are causing huge issues for a lot of admitted bodies. They are often in that position because councils put care services out to tender and they inherited the staff who already had an lgps pension with the service.
If this DB liability was for their own scheme (plenty of similar-ish organisations, if around 20 years ago, might have their own legacy final salary scheme), they would have:
- A PPF levy to pay [not applicable for the LGPS]
- The possibility of close inspection of financials by the Pensions Regulator [tPR does not regulate LGPS financials]
- Tighter requirements on recovery periods, and accompanying demands to put more money in now, not gradually over the next couple of decades.
- If in a non-public sector multi-employer scheme, the full weight of section 75 exit valuations, rather than the LGPS's equivalent but relatively informal, looser provisions.
Also, their ex-employees would realistically be facing a PPF haircut rather than a fully funded backstop courtesy of the local council taxpayer.
LGPS admission bodies have things too easy, not too hard.0
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