Change to cost of voluntary pension benefits and early retirement in public sector

Universidad

michaels said:Net impact to the govt is zero as the employer premiums go straight back to the treasury.  Plus don't forget that the decline in longetivty will impac tin the opposite direction so the net effect will likely be less than the headline rate suggests.

I'm sure you're right, but likewise when employer contributions go over 30%, the country is falling into a financial hole, and the public sector is falling apart, I fully expect the usual arguments to be made about reigning in our gold plated pensions.

Best to get them accrued  now, than wait till Delta and Gamma schemes are all that's available...

NedS

hugheskevi said:

Universidad said:

hugheskevi said:

I don't, sorry. However, this is a very significant reduction to the discount rate, so I think the difference in factors will similarly be significant, leading to a large cliff-edge difference on the implementation date.

Can you give me a ballpark idea of how significantly this change is likely to affect added pension?

Let's say I'm putting in 1000 pounds added pension each month, 25 years to go, and currently expecting this to buy £1100 of annual pension over the year. Are we talking about this buying only ~950 of pension now?

Based on those figures and a bit of playing with spreadsheets, I'd expect the same contribution to purchase £935 of Added Pension after the change under the parameters stated (the impact would be greater on younger people, and lesser on older people). Given that next year you will also be a year older, that would further reduce the amount of Added Pension purchased.

Ouch - so my Added Pension this year may only get me 85% of what I thought I'd be purchasing when I entered into the 'contract'. I say 'contract' loosely as I simply get a prediction from the Added Pension spreadsheet and notify MyCSP of the amount I'd like to pay each month (£1100/month). I guess I'll have to wait for my pension statement in 2024 to see what it's actually purchased. Glad I maxed out last year (at the lower cost) foreseeing that inflation would be high and benefited from the 10.1%.

Thank you for the information though - good to have a greater understanding.

hugheskevi

NedS said:

hugheskevi said:

Universidad said:

hugheskevi said:

I don't, sorry. However, this is a very significant reduction to the discount rate, so I think the difference in factors will similarly be significant, leading to a large cliff-edge difference on the implementation date.

Can you give me a ballpark idea of how significantly this change is likely to affect added pension?

Let's say I'm putting in 1000 pounds added pension each month, 25 years to go, and currently expecting this to buy £1100 of annual pension over the year. Are we talking about this buying only ~950 of pension now?

Based on those figures and a bit of playing with spreadsheets, I'd expect the same contribution to purchase £935 of Added Pension after the change under the parameters stated (the impact would be greater on younger people, and lesser on older people). Given that next year you will also be a year older, that would further reduce the amount of Added Pension purchased.

Ouch - so my Added Pension this year may only get me 85% of what I thought I'd be purchasing when I entered into the 'contract'. I say 'contract' loosely as I simply get a prediction from the Added Pension spreadsheet and notify MyCSP of the amount I'd like to pay each month (£1100/month). I guess I'll have to wait for my pension statement in 2024 to see what it's actually purchased. Glad I maxed out last year (at the lower cost) foreseeing that inflation would be high and benefited from the 10.1%.

Thank you for the information though - good to have a greater understanding.

Your 23/24 purchase should be partly at the old rate and partly at the new rate when factors are updated. 

There should be updated factors online however, among with an updated calculator to assess impact before statements however.

ChocolateWombat

The people who will be impacted by this, are teachers in the independent sector that are part of the TPS.

Their employer contribution is paid for by their private school, not the state.  Some have already pulled out over the last increase in employer contributions, but more will probably look to do so when the new employer contribution figures come out.

Universidad

ChocolateWombat said:

The people who will be impacted by this, are teachers in the independent sector that are part of the TPS.

Their employer contribution is paid for by their private school, not the state.  Some have already pulled out over the last increase in employer contributions, but more will probably look to do so when the new employer contribution figures come out.

Hard to foresee how that will play out but my expectation is that prestigious schools will raise their fees to accomodate the difference, and weaker independent schools will start to fail.

I'm aware of one school that has already used fire and rehire style tactics to switch away from the public sector scheme and to a lower contribution DC arrangement. Personally, I expect that school to no longer be running in its current form within five years.

Independent schools attract a relatively small salary premium for their teaching staff, and TPS accruals are worth 20-30% of salary.

Independent schools are competing with a service that's free at the point of use. If you're paying 20% less than the competition, you're not going to be able retain top tier staff, which is kind of make or break for an independent school.

I know from my time in Higher Education that prestigious institutions think they can pay their staff in reputation points, but as far as I can tell, the primary value of working somewhere with a good reputation is the ready ability to get a job somewhere else...

chubsta

There was mention earlier of potential adjustments to the actuarial reduction percentages, does anyone have an idea of when adjusted tables will be available? 

hugheskevi

chubsta said:

There was mention earlier of potential adjustments to the actuarial reduction percentages, does anyone have an idea of when adjusted tables will be available? 

There will not be a fixed timetable. Schemes may roll out new factors as they become available from actuaries, focusing on the most important factors first.

Based on past experience, I would expect it to take a matter of months, so sometime over summer perhaps - but that is just speculation.

german_keeper

Last time they changed they were published on 1 August 2019, effective from 1 May 2019. The guidance published by the Government Actuary's Department also contained the following at para 1.4.

"The factors provided in this note have been prepared in light of our advice to the Cabinet Office dated 30 October 2018 and its instructions following that advice".

Lots of other detail available on MyCSP website (Knowledge Centre/Resources/Actuarial Factors).   

jsinc

Some updated LGPS info here: https://lgpsregs.org/schemeregs/actguidance.php

chubsta

german_keeper said:

Last time they changed they were published on 1 August 2019, effective from 1 May 2019. 

Hope they don't leave it until May 1st of 2024 as I am due to retire on April 30th!