Another "hint" from Pensions Minister that State Pension Age eligibility will change

zagfles

Universidad said:

zagfles said:

Still a good pension, far better than typical private sector pensions.

Highly debateable if it is still a good pension. You get the advantage of employer contributions and salary sacrifice, which makes it valuable. 

But at the 40000 salary cap ~12000 per year is being contributed.

With that mony up front, I think most people would be able to do better.

I doubt it - people always underestimate the value of DB pensions. But not many DC pensions would come with employer contributions of 20+%. Perhaps the unions should campaign for DC pension instead?

Yes, there's less risk with a DB scheme, than a DC pot... but with a DB scheme that basically doesn't try to match inflation there's still... quite a lot of risk.

You can't have it both ways telling me that modern pensions are so much better than older pensions which didn't match inflation and then ignore that this scheme doesn't match inflation.

I didn't say "match" inflation - most private sector schemes cap inflation protection. But back in the days when high inflation was persistant, about 12.5% average inflation in the 70's and 6.5% average in the 80's, having a scheme which provided no inflation protection whatsoever meant a good pension could become worthless if you moved jobs decades before retirement.

Inflation is obviously high now, but most forecasts predict a return to more normal levels ie around 2% in the next year or two.

zagfles said:

Your parents were lucky. If they'd moved jobs frequently, or worked for an employer like Maxwell....

My parents were lucky, to be part of the generation that got those pensions. They're not lucky to be recieving them - that's what they are owed.

My grandparents who lost everything in their Maxwell pension and worked until they died in their late 80s weren't "unlucky".

They were victims of a crime.

A crime which was made easier by the rules at the time. Occupational pensions these days are far better protected, in terms of management, oversight, funding requirements, statutory (limited) inflation protection, and the PPF as a lifeboat. 

Universidad

zagfles said:

I doubt it - people always underestimate the value of DB pensions. But not many DC pensions would come with employer contributions of 20+%. Perhaps the unions should campaign for DC pension instead?

You're completely right that most private companies do not offer a 20% pension contribution. But you know what they do offer? Substantially higher salaries, bonus payments, stock options, and tax efficient ways to pour all that excess money into a retirement pot.

The older I get, the more I realise that it is better to be paid, than to hold a promise to be paid.

zagfles said:

A crime which was made easier by the rules at the time. Occupational pensions these days are far better protected, in terms of management, oversight, funding requirements, statutory (limited) inflation protection, and the PPF as a lifeboat. 

If your argument is that getting less but with more certainty is a more stable position, then I agree.

The problem is my pension has been cut in ways that have reduced the value of my already accrued benefits at least twice, and so I'm not benefitting from the certainty I have supposedly traded off the value of my pension against. 

zagfles

Universidad said:

zagfles said:

I doubt it - people always underestimate the value of DB pensions. But not many DC pensions would come with employer contributions of 20+%. Perhaps the unions should campaign for DC pension instead?

You're completely right that most private companies do not offer a 20% pension contribution. But you know what they do offer? Substantially higher salaries, bonus payments, stock options, and tax efficient ways to pour all that excess money into a retirement pot.

Some do, many don't. Average public sector pay is now higher than private sector, without even including the value of the pension.

The older I get, the more I realise that it is better to be paid, than to hold a promise to be paid.

zagfles said:

A crime which was made easier by the rules at the time. Occupational pensions these days are far better protected, in terms of management, oversight, funding requirements, statutory (limited) inflation protection, and the PPF as a lifeboat. 

If your argument is that getting less but with more certainty is a more stable position, then I agree.

The problem is my pension has been cut in ways that have reduced the value of my already accrued benefits at least twice, and so I'm not benefitting from the certainty I have supposedly traded off the value of my pension against. 

What cuts have you had to already accrued benefits?

OldScientist

zagfles said:

Universidad said:

zagfles said:

I doubt it - people always underestimate the value of DB pensions. But not many DC pensions would come with employer contributions of 20+%. Perhaps the unions should campaign for DC pension instead?

You're completely right that most private companies do not offer a 20% pension contribution. But you know what they do offer? Substantially higher salaries, bonus payments, stock options, and tax efficient ways to pour all that excess money into a retirement pot.

Some do, many don't. Average public sector pay is now higher than private sector, without even including the value of the pension.

The older I get, the more I realise that it is better to be paid, than to hold a promise to be paid.

zagfles said:

A crime which was made easier by the rules at the time. Occupational pensions these days are far better protected, in terms of management, oversight, funding requirements, statutory (limited) inflation protection, and the PPF as a lifeboat. 

If your argument is that getting less but with more certainty is a more stable position, then I agree.

The problem is my pension has been cut in ways that have reduced the value of my already accrued benefits at least twice, and so I'm not benefitting from the certainty I have supposedly traded off the value of my pension against. 

What cuts have you had to already accrued benefits?

Public section vs Private sector: https://ifs.org.uk/news/even-if-real-pay-cut-5-public-sector-workforce-may-need-be-cut-more-200000-2024-stay-within

with an interesting quote:"When we look at the gap in total remuneration – accounting for differences in both pay and pensions between the public and private sectors, as well as differences in employee characteristics – the public–private differential was around 6% in 2021. In other words, total remuneration for public sector workers is on average 6% higher than for their private sector counterparts. This measure has also fallen in recent years, but to a lesser extent than when considering pay alone."

As for USS (I am a retired member) - the details can be found at https://www.uss.co.uk/for-members/youre-a-new-joiner.

As far as I am aware (but could be wrong) there have been no cuts to existing benefits but future benefits have been cut, e.g.

• Inflation adjustments. Prior to 2011, no cap, 2011-now(?) 5% cap of full increases, then half cap to 15%, future contributions 2.5% cap. This cap also applies to the benefits built up, so initial contributions will potentially suffer 30+ years of inflation prior to retirement and another 30 years of inflation post-retirement.
• Average salary instead of final salary (for contributions since 2011).
• Salary cap for contributions (as mentioned earlier) is now ~£40k (and will only be adjusted for inflation capped at 2.5%). Employer contribution is over 20% under the cap and 12% (to a DC scheme) over the cap.
• The DC component is very good (very low fees and reasonable selection of funds)

By any definition, the DB part of scheme is nowhere near as good as it was and, for new starters, may be worth less than a more usual DC scheme (dependent on market performance).

tooldle

I'm also in USS. My understanding is 'cuts' are to future benefits and not existing. 
In my institution, new starters not eligible for USS (lower grades), get NEST only. A massive inequality.

A_T

if my state pension is moved back from 67 I'll cry

eastcorkram

A_T said:

if my state pension is moved back from 67 I'll cry

How far away is that for you at the moment?

Universidad

tooldle said:

I'm also in USS. My understanding is 'cuts' are to future benefits and not existing.

There are two ways in which the value of already accrued USS benefits has been reduced by cuts, that I am aware of.

1) When the scheme switched from its own NPA, to the SPA, with the SPA being higher.

Your accrued benefits are not directly cut, but the cut introduced does absolutely devalue them. Because now either you retire earlier than the new SPA, and your benefits after the cut are actuarially reduced, or you retire at SPA (later than the orignal NPA), and your benefits from before the cut are reduced... because they're not uprated by late retirement factors, so you just get less of them than you've paid for.

2) When the final salary scheme closed, settling your final salary as the salary at the time of the closure, rather than your final salary with the employer.

Again, not a direct cut to the benefit accrued. You could have quit on the spot and it would have made no difference.

But let's not be obtuse, the scheme was sold to us as a final salary scheme. This change alone devalued my original package significantly. I got my big promotion the year after the scheme closed.

Now you can tell me that sort of unfairness was why Final Salary was not a good way to run a scheme. But what you can't tell me is that the change didn't cost me, based on the career I had, and the benefits I'd already accrued.

Notice how both of the above cuts affected younger people more and older people less - a theme in all of these cuts, and where I came in - on the theme of intergenerational equality in pensions.

HHarry

A_T said:

if my state pension is moved back from 67 I'll cry

 I have more of an issue with the 10 year link between State Pension and taking Personal Pension benefits.

 I’ve got a plan that involves taking some momey at 57, but that is looking increasingly likely to be 58 - with less than 10 years notice.

resk

HHarry said:

A_T said:

if my state pension is moved back from 67 I'll cry

 I have more of an issue with the 10 year link between State Pension and taking Personal Pension benefits.

 I’ve got a plan that involves taking some momey at 57, but that is looking increasingly likely to be 58 - with less than 10 years notice.

Stay mindful of the difference between what the law says and what people on the internet say.  The Finance Act that just went through increased the pension access age from 55 to 57 in 2028 and there is no automatic link in law to "SPA minus 10".  In fact the consultation paper prior to this change said something like "there are no plans to automatically link the pension access age to state pension age at this time".  

(Obviously please do your own research on this, as I am just some guy on the internet too!)