To be shocked by this proposed change to public sector pensions?

[lesley33]

I don't know how this passed me by, but I have just been reading my annual report on my Local Government Pension Scheme Fund i.e. how much money it has made, investments, etc. It has a big bit about the proposed chnages which I thought I had understood.

But one of the changes is to link public sector pensions with state pension age. So basically you won't get your public sector pension unti, you get your state pension! That is already 67 for me and I am sure will rise significantly! So basically it means I will probably be in my 70's before I get any pension.

tbh I'm not sure I would have joined the pension scheme if I had known this 20 years ago.

It might be worth checking again what it says about the changes. As far as I know, all past service is going to be protected - the new retirement age linked to state pension age is for future pension earnt.

I might be wrong about this, but surely you could stop paying into it at 61, if there was no further benefit but then not claim it but just sit on the pot you had accrued until you were 68?

I don't think you would get less (in actual monetary terms, obviously its value would lessen due to inflation) if you did this?

From what I can tell, the issue is more connected to what has happened to the money that has been invested.
Listened to someone the other day explaining it.

Public sector workers have contributed a percentage of their salaries (I think he said 6% but can't be totally sure) to their pensions. The rest of their contributions were made by employers (which put the entire contribution up to 20% of the salary) - but salaries were adjusted down to allow for it. So effectively, the employee (teacher, in this case) contributed 20% of their salary - and it was acceptable as a solid pension was flouted as one of the benefits of going into the profession, so a slightly lower salary now was worth it in the long run. He'd worked out that in total, he'd saved around £200,000 in his lifetime of working before interest. He then said that if that money had been wisely invested it would easily have covered his pension and probably someone elses as he couldn't see that he would be alive long enough to go through the whole pot. But now people are telling him there isn't any money. He wanted to know where it had gone.

Yes, you could choose to leave the scheme whenever you want, and the pension would increase with inflation until you retire. In addition, if you retire before (or after) your normal retirement age you would be likely to have an "early retirement reduction" (or "late retirement increase") applied.

It is also likely that you may have different retirement ages for different periods of service - eg in the Local Government Pension Scheme the retirement age changed on 1 April 2008, so service from this date may have a different retirement age from earlier service. Similarly when the new changes come in, they are proposing to have the retirement age linked to SPA ( probably for post 2015 service)

Sorry that was to Missmajoribanks

missmarjoriebanks - I'm not sure if I can. But even if I can the amount I get will go down. Thats the wierd bit about public sector pensions - more recent contributions are actually worth more than contributions made years ago. So 10 years contributions before you retire will get you more than 10 years made 25 years ago at the same loevel of wage. Topsy turvy from usual pension schemes.

babythesea - Employers contributiosn to local government pension scheme have only recently went up to 16% plus. For many years they were less than the employee was putting in - 2%, 3% etc.

apipkinofpepper - But I thought the inflation rate they used was really low so that you will end up with less pension?

babybythesea Sorry but your friend has absolutely no idea what he is talking about. Teachers' pensions and the LGPS are very different animals. LGPS is basically the same as a private sector defined benefit scheme except that the lump sums are bigger, and the employer contributions are much much bigger. It may also have more restrictive covenants on its investment activities but I'm only basing that on some experience auditing other (smaller) public sector defined benefit schemes. The teachers' pension scheme on the other hand is an UNFUNDED scheme. There is no money to invest. The notional amounts withheld from teachers' salaries are paid out to current pensioners immediately. There is no fund.

lesley33 With a defined benefit scheme an employer can take a contribution holiday if the fund has outperformed expectations significantly. This was common in the 80s and 90s. Less so now. LGPS employer contributions are actually currently running at 25% for the highest earners, because the pension promise is so humungous. In the years when the employer contribution was low or zero, members of the scheme were still benefitting massively from being members of a huge scheme, not run by a crook (eg maxwell) the funds of which had been spectacularly well invested over the years (or spectacularly luckily invested). They were benefitting from a surplus built up by the employer and employee contributions of the past.

The tasigmamum - I currently pay £220 a month into my pension. It will go up to £300. Whether that is enough is up for debate - but I don't call it notional.

wherearemysoca if you're a teacher you din't 'pay' it at all. It is withheld. And not put in any sort of fund. There is a notional entry in a ledger to record that this has happened to fulfill scheme membership rules. But you don't technically 'pay in'. Because the money doesn't go anywhere. Notional != nominal it's accounting terminology.

A aargh. don't not 'din't'. Stupid fingers! :(

wherearemysoca £300 a month is a lot. You're right. I don't blame teachers for being concerned.

Yup, sorry about the typo - trying to do several things at once. Not an accountant (or a Maths teacher, or even an English teacher, thank goodness) but it still comes up on my payslip as a reduction. And it's quite a bit.

Oh sure. But it's referred to as notional because it's (sort of) an accounting fiction. There is no money 'put in a pot' for you. That doesn't mean the money isn't withheld! But sadly 'your pension payments' are notional. If you can be said to be paying anything (and really, it's just staying in the big old government slush fund) it's someone else's pension. Unfunded schemes are a truly terrible idea but at the time I suppose they seemed like the quickest way to get something moving and in particular to deal with the problems retired people were facing then and there. But we have been robbing Peter to pay Paul ever since and it just gets more and more difficult to make the numbers add up.

And I was correcting my own typo, didn't notice one in your post!

OK I am fully concentrating now! I think I copied your typo! As I have said - my expertise is not in pension accountancy and I am happy to be corrected. I don't want to be a scourge on society but I would like some honesty from all concerned - the government and our own unions seems so polarised that it's hard for us mere mortals to work out what needs to be done. You clearly know what you're talking about so I'm genuinely interested in what you have to say. You've also managed to do it without flinging insults unlike on some other threads. So I ask you, quite innocently - what can be done?

I could retire at sixty - not long to to go and I am protected from the worst of the proposed fraud changes.

But Ken or Boris, I don't know and don't care which, has decided that I can't have my Freedom Pass till I am 62 and DW won't get hers till she is 63 and I am 64. We have paid London fares and rates then poll tax then council tax all our adult lives and I am damned if I will retire and then pay fares. So I'm staying on, holding down a job, keeping somebody else out of it, and I am not ashamed of it.

Catnet life expectancy has risen by 8 years since 1970 alone. (See Leon D, Trends in European life expectancy The International Journal of Epidemiology)

Tax and spend. That's what I'd do. But I'm an old lefty.

I don't think it is possible to handle the public pension issue in isolation from either the private pension crisis or from tax policy. But nobody wants to think in a joined up way.

I honestly think the only way we can reach a genuinely equitable solution is to tear up everything and start again. But those with vested interests won't allow that. There should be a proper state pension which is fully funded and which everybody pays into. One scheme. Fully funded. No lump sums or little perks like that for the top dogs. Salary averaging but with some kind of adjustment for people who have to take leaves of absence for caring duties and maternity.

It will never happen.

In the short term somebody should be suggesting that public sector workers give up their lump sums in return for drastically smaller increases in contributions now. Although I haven't seen the figures so maybe that wouldn't help as much as I think...but certainly it's that sort of thing which isn't provided by private schemes which makes public schemes both better yet at the same time, too expensive.

Basically though, the whole situation? can of worms. Open. And nobody knows how to get the lid back on.

theta Please explain in words of one syllable why those who have contractual rights (which you call "vested interests") to a lump sum for which they have paid contributions all their working lives should give up one jot or tittle of them.

I read somewhere that everyone in Chile pays 10% of their income regardless into a state pension which is then topped up for lower earners. And I agree with you totally in what you've stated above. Thanks for that. Any time you need to get an A* in GCSE German, I'm your girl.

It i difficult because there are two things going on here. The increase in member contributions, and then the longer term changes to public sector pensions (eg linking retirement age to State pension age).

The long term changes are needed because people are living longer. The short term increases in member contributions though... that's because the government wants some savings in the short term - as thetasigmamum says there is no "pot" of money allocated to (most) public sector pension schemes, it all just goes into the same place with all other govt money.

At the moment it is really uncertain, because Unions and Govt are still arguing negotiating. So Unions want to portray everything in the worst light possible so they can persuade their members to strike. And the Government wants to show they are being entirely reasonable and fair!

The university scheme i was in was so well invested thatthe surpluss in it was apparently so large that it wasnt allowed to continue.

Were we given a payments holiday, were we offered a year off retiremnt age, was the estimated pay out increased?

No.....somebody somewhere decided that the pension surplus would be used to build a new physics building. I never really understood the usual pension jargon used to boggle us, but that is in effect what happened. I hope the building was named "The Ripped off Pensioners Institute of Physics"

The government might not be in the same league as Maxwell, but they are definetely crooks, this isnt the first time they have felt at liberty to make free with other peoples pension money.

nofrikkincarbs - I think the contributions that you have paid in to date are protected. I understand this would include the pensions that you have transferred into the scheme. I think that you may be able to claim all the benefits that you have paid to date at the time already contracted for - ie age 60. I'd check this with your pension provider though. This is just my understanding.