Rhetoric media on state gold plated pensions

MK62

CorseyEdge said:

dunstonh said:

frugal90 said:

Don't think mine is especially gold plated. I worked as a teacher in middle management for 36.25 years. Pension is £22800 per year plus I got 3 times as a lump sum. Fortunately married to retired teacher , so comfortable compared to many.

It is the deal we signed up for. Those that complain go and do 36 plus years at the chalkface.

To get that equivalent in the private sector, using a DC scheme, you would need to have paid around 25-30% of your salary (including employer contribution).

The comparison of just pension equivalence could be seen as quite a narrow economic view of the teaching profession's impact to our society. If we continued to pay teachers £20-45k pa (headteachers £50-80k) and then asked them to contribute 25% of salary how many teachers would we have... less of them or more??

Today's public servants contribute 6-10% (teachers ~7-11%), the 'employer' contributes around double that, that being the private industry standard. There's your 25-30%

I don't think you'll find that many employers in the private sector paying 20%+ employer contributions........they might double the employee contribution, but usually at a much lower cap........my last works pension, for instance, was 4% employee contribution (with optional rise to 5% in your 40s and 6% aged 50+) and double the base 4%, ie 8%, for the employer contribution .......plus optional employee AVCs.......all fees/charges were taken from your pension account too (though they did pick up the "adviser" cost).

That said, we did get a plethora of other benefits too, which I suspect few public sector workers get.......private healthcare probably being the biggest one........so all those should also be taken into account too when making "remuneration package" comparisons.

CorseyEdge

MK62 said:

CorseyEdge said:

dunstonh said:

frugal90 said:

Don't think mine is especially gold plated. I worked as a teacher in middle management for 36.25 years. Pension is £22800 per year plus I got 3 times as a lump sum. Fortunately married to retired teacher , so comfortable compared to many.

It is the deal we signed up for. Those that complain go and do 36 plus years at the chalkface.

To get that equivalent in the private sector, using a DC scheme, you would need to have paid around 25-30% of your salary (including employer contribution).

The comparison of just pension equivalence could be seen as quite a narrow economic view of the teaching profession's impact to our society. If we continued to pay teachers £20-45k pa (headteachers £50-80k) and then asked them to contribute 25% of salary how many teachers would we have... less of them or more??

Today's public servants contribute 6-10% (teachers ~7-11%), the 'employer' contributes around double that, that being the private industry standard. There's your 25-30%

I don't think you'll find that many employers in the private sector paying 20%+ employer contributions........they might double the employee contribution, but usually at a much lower cap........my last works pension, for instance, was 4% employee contribution (with optional rise to 5% in your 40s and 6% aged 50+) and double the base 4%, ie 8%, for the employer contribution .......plus optional employee AVCs.......all fees/charges were taken from your pension account too (though they did pick up the "adviser" cost).

That said, we did get a plethora of other benefits too, which I suspect few public sector workers get.......private healthcare probably being the biggest one........so all those should also be taken into account too when making "remuneration package" comparisons.

Yes, sorry I didn't mean that employers contributions were as high as 20% in private sector, my point was on the 2:1 employer to employee ratio (from what I've seen from the ONS, employer contributions are, on average double employee). Sorry for the confusion.

I know a number of the public service schemes are unfunded but the public servants still contribute 6-10% of salary, plus as taxpayers, they also contribute to the employer contribution (the taxpayer being the employer in this case)

JoeCrystal

CorseyEdge said:

Yes, sorry I didn't mean that employers contributions were as high as 20% in private sector, my point was on the 2:1 employer to employee ratio (from what I've seen from the ONS, employer contributions are, on average double employee). Sorry for the confusion.

I know a number of the public service schemes are unfunded but the public servants still contribute 6-10% of salary, plus as taxpayers, they also contribute to the employer contribution (the taxpayer being the employer in this case)

If you can share the ONS link, that would be helpful!

The last time ONS published any employer contribution, only 19% of the jobs with DC pensions in the private sector had an employer contribution more significant than 8%. 58%, on the other hand, had an employer contribution of less than 4% Link: https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/workplacepensions/datasets/annualsurveyofhoursandearningspensiontablesemployercontributionbandsbyindustryandbypensiontypep10

Anyone who got a job with a DC pension scheme in the private sector whose employer contributed more than 20% is among the 1.5% of the employment. 

CorseyEdge

JoeCrystal said:

CorseyEdge said:

Yes, sorry I didn't mean that employers contributions were as high as 20% in private sector, my point was on the 2:1 employer to employee ratio (from what I've seen from the ONS, employer contributions are, on average double employee). Sorry for the confusion.

I know a number of the public service schemes are unfunded but the public servants still contribute 6-10% of salary, plus as taxpayers, they also contribute to the employer contribution (the taxpayer being the employer in this case)

If you can share the ONS link, that would be helpful!

The last time ONS published any employer contribution, only 19% of the jobs with DC pensions in the private sector had an employer contribution more significant than 8%. 58%, on the other hand, had an employer contribution of less than 4% Link: https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/workplacepensions/datasets/annualsurveyofhoursandearningspensiontablesemployercontributionbandsbyindustryandbypensiontypep10

Anyone who got a job with a DC pension scheme in the private sector whose employer contributed more than 20% is among the 1.5% of the employment. 

I tried to clarify, I didn't mean to assert employer contributions were as high as 20% in private sector DC, my point was the relative 2:1 ratio of employer to employee contributions. There was some weighted average analysis comparing employee and employer contributions somewhere but the latest ONS bulletin on funded occupational schemes in the UK shows a 2:1 ratio of contributions https://www.ons.gov.uk/economy/investmentspensionsandtrusts/bulletins/fundedoccupationalpensionschemesintheuk/octobertodecember2021

dunstonh

CorseyEdge said:

JoeCrystal said:

CorseyEdge said:

Yes, sorry I didn't mean that employers contributions were as high as 20% in private sector, my point was on the 2:1 employer to employee ratio (from what I've seen from the ONS, employer contributions are, on average double employee). Sorry for the confusion.

I know a number of the public service schemes are unfunded but the public servants still contribute 6-10% of salary, plus as taxpayers, they also contribute to the employer contribution (the taxpayer being the employer in this case)

If you can share the ONS link, that would be helpful!

The last time ONS published any employer contribution, only 19% of the jobs with DC pensions in the private sector had an employer contribution more significant than 8%. 58%, on the other hand, had an employer contribution of less than 4% Link: https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/workplacepensions/datasets/annualsurveyofhoursandearningspensiontablesemployercontributionbandsbyindustryandbypensiontypep10

Anyone who got a job with a DC pension scheme in the private sector whose employer contributed more than 20% is among the 1.5% of the employment. 

I tried to clarify, I didn't mean to assert employer contributions were as high as 20% in private sector DC, my point was the relative 2:1 ratio of employer to employee contributions. There was some weighted average analysis comparing employee and employer contributions somewhere but the latest ONS bulletin on funded occupational schemes in the UK shows a 2:1 ratio of contributions https://www.ons.gov.uk/economy/investmentspensionsandtrusts/bulletins/fundedoccupationalpensionschemesintheuk/octobertodecember2021

Salary sacrifice would be recorded as an employer contribution.  So, that would distort the amount allocated to employer from employee.

Albermarle

As above a lot of DC schemes are operated via salary sacrifice nowadays ( it is a wheeze to reduce NI payments).
It means only the employer makes a contribution ( and the employee has a reduced salary) so this will be skewing the figures.
We have has similar debates on the forum before and you see all kinds of figures in different company DC schemes.
For many companies, especially smaller/medium sized ones, they only pay the minimum 3% , if the employee pays 5% and some do not even calculate the % on the full wage. Then at the very generous end you have the 20% + employer contribution. At a guess, if you worked for most  larger employers they would contribute between 5% and 10% , as long as you contributed 5% to 7% say.

Also to look at this debate from another angle. A couple of posters said they had public sector pensions paying around £25K with uncapped CPI increases. The cost of buying a pension/annuity like this in the open market for someone age 65 has come down a bit recently, but would be in the region of £850 K . For someone at 60 , over a Million.
If you were to drawdown a DC pot instead, the amount needed would be lower, but the income would not be 100% guaranteed. Probably a pot of £650 to £750K would be sufficient, depending on retirement age.

michaels

You need 35% total pension contributions on top of your salary in a DC scheme to give the equivalent to the Alpha CS scheme.

EG 40k salary plus CS Alpha equals 40k plus a total of 15k employer + employee DC contributions

zagfles

Albermarle said:

As above a lot of DC schemes are operated via salary sacrifice nowadays ( it is a wheeze to reduce NI payments).
It means only the employer makes a contribution ( and the employee has a reduced salary) so this will be skewing the figures.
We have has similar debates on the forum before and you see all kinds of figures in different company DC schemes.
For many companies, especially smaller/medium sized ones, they only pay the minimum 3% , if the employee pays 5% and some do not even calculate the % on the full wage. Then at the very generous end you have the 20% + employer contribution. At a guess, if you worked for most  larger employers they would contribute between 5% and 10% , as long as you contributed 5% to 7% say.

Also to look at this debate from another angle. A couple of posters said they had public sector pensions paying around £25K with uncapped CPI increases. The cost of buying a pension/annuity like this in the open market for someone age 65 has come down a bit recently, but would be in the region of £850 K . For someone at 60 , over a Million.
If you were to drawdown a DC pot instead, the amount needed would be lower, but the income would not be 100% guaranteed. Probably a pot of £650 to £750K would be sufficient, depending on retirement age.

Careful, you'll be accused of a hate crime by giving facts about how good public sector DB pensions are

Seriously though, there are a few advantages in the private sector. For instance, most private sector DB schemes use capped RPI, rather than uncapped CPI. Which is best? Who knows, but say someone has a DB scheme in payment or deferment since say 2010, and with RPI being typically about 1% above CPI, that could result in a 20% advantage over CPI over 20 years, perhaps being better than uncapped CPI if high inflation only lasts a year or two. RPI is ending in 2030 but it'll move to CPIH, ie inc housing costs, which again tends to be a higher measure.

DC schemes aren't typically anywhere near as generous from an employer contribution point of view, but they do tend to be flexible and use sal sac (not usually used in the public sector), which can have significant advantages if you know what you're doing. For instance, making "lumpy" pension contributions to save NI (discussed here a few times), using sal sac pension conts to avoid/reduce student loan repayments (they use NI'able income, so AVCs using "net pay" or SIPP conts won't affect them) as well as all the usual tax savings, child ben/personal allowance withdrawal, even creating eligibility to tax credits, UC, student loans etc.

We've got quite a good mix of public sector DB, private sector DB, and DC so hopefully get the best of all worlds!

Prism

JoeCrystal said:

Andy_L said:

CorseyEdge said:

dunstonh said:

frugal90 said:

Don't think mine is especially gold plated. I worked as a teacher in middle management for 36.25 years. Pension is £22800 per year plus I got 3 times as a lump sum. Fortunately married to retired teacher , so comfortable compared to many.

It is the deal we signed up for. Those that complain go and do 36 plus years at the chalkface.

To get that equivalent in the private sector, using a DC scheme, you would need to have paid around 25-30% of your salary (including employer contribution).

The comparison of just pension equivalence could be seen as quite a narrow economic view of the teaching profession's impact to our society. If we continued to pay teachers £20-45k pa (headteachers £50-80k) and then asked them to contribute 25% of salary how many teachers would we have... less of them or more??

Today's public servants contribute 6-10% (teachers ~7-11%), the 'employer' contributes around double that, that being the private industry standard. There's your 25-30%

I don't think that the private industry standard is employers contributions of 2x the employee's. Do you have a citation for that? 

Especially when the private industry standard is 3% from the employer and 5% from the employee based on the amount above the qualifying earnings limit. Even major companies try to get away as little as possible; Amazon, for example, only match 5%, so 10% overall. I believe Tesco only contributes 7.5% maximum as an employer as well.

Pension provision is undoubtedly one of the most crucial aspects to look out for when applying for new jobs in my case.

I don't think it matters too much what the employer contribution is as a % - its more about the total package of salary plus that contribution. My company pays in 4% flat but using salary sacrifice you can adjust that to be almost any split that you want.

NedS

Prism said:

JoeCrystal said:

Andy_L said:

CorseyEdge said:

dunstonh said:

frugal90 said:

Don't think mine is especially gold plated. I worked as a teacher in middle management for 36.25 years. Pension is £22800 per year plus I got 3 times as a lump sum. Fortunately married to retired teacher , so comfortable compared to many.

It is the deal we signed up for. Those that complain go and do 36 plus years at the chalkface.

To get that equivalent in the private sector, using a DC scheme, you would need to have paid around 25-30% of your salary (including employer contribution).

The comparison of just pension equivalence could be seen as quite a narrow economic view of the teaching profession's impact to our society. If we continued to pay teachers £20-45k pa (headteachers £50-80k) and then asked them to contribute 25% of salary how many teachers would we have... less of them or more??

Today's public servants contribute 6-10% (teachers ~7-11%), the 'employer' contributes around double that, that being the private industry standard. There's your 25-30%

I don't think that the private industry standard is employers contributions of 2x the employee's. Do you have a citation for that? 

Especially when the private industry standard is 3% from the employer and 5% from the employee based on the amount above the qualifying earnings limit. Even major companies try to get away as little as possible; Amazon, for example, only match 5%, so 10% overall. I believe Tesco only contributes 7.5% maximum as an employer as well.

Pension provision is undoubtedly one of the most crucial aspects to look out for when applying for new jobs in my case.

I don't think it matters too much what the employer contribution is as a % - its more about the total package of salary plus that contribution. My company pays in 4% flat but using salary sacrifice you can adjust that to be almost any split that you want.

Agreed, I'd much rather earn £1million/year with a minimum 3% employer cont than earn £30k with a 25% employer cont