Rhetoric media on state gold plated pensions

arnoldy

What slightly rankles is the fact that MPs, Civil servants can propose taxes on Shell, BP, Banks etc confident in the knowledge it won't affect their gold and diamond encrusted pensions. Its for all the private sector DC pension holders to suffer.

Maybe we should have a windfall tax on these public sector pensions! The way these pensions with their uncapped inflation linked generosity are treated as 20x for LTA purposes is a scandal.

CorseyEdge

zagfles said:

Don't understand the relevance of a GDP %, it's about 5% of the cost of these unfunded schemes being directly paid by taxpayers. Plus the indirect costs (basically all public sector costs are ultimately paid by the taxpayer)

The relevance is taken from the OBR brief I linked to previously. As the Office for Budget Responsibility's duty is to report the sustainability of public finance I thought they'd know best. So I'd argue it's not "about 5%" but actually "0.2%" of public spending. Here's the summary:

"In our latest forecast, we expect unfunded public sector pensions spending in 2022-23 to total £2.5 billion (reflecting £49.7 billion of total payments less £47.2 billion of contributions). That would represent around 0.2 per cent of total public spending, and is equivalent to £89 per household and 0.1 per cent of national income."

I'm unclear where your 'about 5%' comes from, do you disagree with the OBR report?

CorseyEdge

SouthCoastBoy said:

Are those contributions employee contributions or employee plus employer?

Total contributions are both employee and employer.

NedS

CorseyEdge said:

zagfles said:

Don't understand the relevance of a GDP %, it's about 5% of the cost of these unfunded schemes being directly paid by taxpayers. Plus the indirect costs (basically all public sector costs are ultimately paid by the taxpayer)

The relevance is taken from the OBR brief I linked to previously. As the Office for Budget Responsibility's duty is to report the sustainability of public finance I thought they'd know best. So I'd argue it's not "about 5%" but actually "0.2%" of public spending. Here's the summary:

"In our latest forecast, we expect unfunded public sector pensions spending in 2022-23 to total £2.5 billion (reflecting £49.7 billion of total payments less £47.2 billion of contributions). That would represent around 0.2 per cent of total public spending, and is equivalent to £89 per household and 0.1 per cent of national income."

I'm unclear where your 'about 5%' comes from, do you disagree with the OBR report?

47.2 / 49.7 * 100 = 95% funded, hence the missing 5%

Pensions_matter_2

I agree the unfairness of the 20x rule for LTA assessment purposes mentioned by Arnoldy in relation to defined benefit schemes. It really cannot be justified. Its incredible it has lasted this long without change, perhaps down to lack of understanding by the population generally of how pension rules work and also lack of knowledge on the part of those with only defined contribution pensions (those with defined benefit will be keeping quiet!). 

Silvertabby

Pensions_matter_2 said:

I agree the unfairness of the 20x rule for LTA assessment purposes mentioned by Arnoldy in relation to defined benefit schemes. It really cannot be justified. Its incredible it has lasted this long without change, perhaps down to lack of understanding by the population generally of how pension rules work and also lack of knowledge on the part of those with only defined contribution pensions (those with defined benefit will be keeping quiet!). 

The 20 X rule was set back when typical annuity rates were over 10% and, for whatever reason, were never changed when annuity rates plummeted.

Now that annuity rates are creeping up again, the difference may not be quite so marked.

JoeCrystal

I wonder if the index-linked annuity rate (compared to inflation) will go down since we expect to see high inflation. 

Pensions_matter_2

The difficulty is that the 20x rule hasnt changed since 2006 but annuity rates have changed drastically. No account has been taken of this, which seems unfair. Annuity rates may well improve of course, but this may take some time, possibly years. The government have currently no automatic review mechanism in place to review the rule to take account of inflation etc.

NedS

Pensions_matter_2 said:

I agree the unfairness of the 20x rule for LTA assessment purposes mentioned by Arnoldy in relation to defined benefit schemes. It really cannot be justified. Its incredible it has lasted this long without change, perhaps down to lack of understanding by the population generally of how pension rules work and also lack of knowledge on the part of those with only defined contribution pensions (those with defined benefit will be keeping quiet!). 

I'm a basic rate tax payer. I've never been a high earner. I'm lucky enough to have a couple of DB pension schemes, and am hoping to retire early in my mid to late 50's. If I carried on working until 67 and inflation remains high (which it may well do given where we currently are), I would almost certainly hit the LTA. Increasing the multiple for DB pensions would only exacerbate the issue.

Unless they unfreeze the LTA and raise it with inflation, many more low to mid earners like myself will hit the LTA and that was clearly never the intent? I'm not some Whitehall Mandarin earning £80k per year, but a shop floor worker earning less than the national average wage, and moving backwards all the time due to lower than average pay rises.

hyubh

NedS said:

Pensions_matter_2 said:

I agree the unfairness of the 20x rule for LTA assessment purposes mentioned by Arnoldy in relation to defined benefit schemes. It really cannot be justified. Its incredible it has lasted this long without change, perhaps down to lack of understanding by the population generally of how pension rules work and also lack of knowledge on the part of those with only defined contribution pensions (those with defined benefit will be keeping quiet!). 

I'm a basic rate tax payer. I've never been a high earner. I'm lucky enough to have a couple of DB pension schemes, and am hoping to retire early in my mid to late 50's. If I carried on working until 67 and inflation remains high (which it may well do given where we currently are), I would almost certainly hit the LTA. Increasing the multiple for DB pensions would only exacerbate the issue.

Unless they unfreeze the LTA and raise it with inflation, many more low to mid earners like myself will hit the LTA and that was clearly never the intent? I'm not some Whitehall Mandarin earning £80k per year, but a shop floor worker earning less than the national average wage, and moving backwards all the time due to lower than average pay rises.

Could you clarify? The LTA is just under £1.1m, the multiplier for DB is x20. Are you expecting your income in retirement from your DB pensions to be more than double your pay while working...?