To think public sector DB pensions should be illegal

[OneAmberFinch]

Everyone seems to accept that it's obvious that the private sector, speaking very generally, pays better salaries in-year but the public sector makes up for it in excellent defined benefit (DB) pensions.

As in, you get a certain amount paid to you indefinitely, based on how many years of service, your level reached, average or final salary, etc.

Everyone acts like this is normal but it is actually insane!

Growing up in school I was always taught that it was a fundamental principle of a parliamentary democracy that one parliament cannot bind another. Parliament should be able to override anything a previous parliament did, so that voters always have the ability to change course democratically and nothing is locked in forever.

But having DB pensions for public sector workers is binding future parliaments into very large financial commitments that will leave them increasingly less wriggle room.

It would be one thing if they were defined contribution pots that were in each individual's name. That would operate independently and doesn't represent an obligation on future governments to pay out pensions out of future taxpayer money, maybe future taxpayers who have different priorities for what they want to spend the money on.

AIBU to think public sector salary culture should, if anything, be the reverse: high salaries now, because the government is legally not allowed to commit to future compensation in another government's name?

well, you could say that in that case nobody should be employed in the public sector either because legally they can't commit to paying us in five years time

also, what school did you go to?😂

They are also unfunded - liability is estimated at £1.2 trillion.

It's not about binding a future parliament - workers accrue pension benefits during their working life and you can't go back and change them, because otherwise what is a 65 year old meant to do if you take away the pension they thought they were earning all through their working life. Its not just public sector pensions, its exactly the same for all occupational pensions too

3.5m used to be in private sector DB schemes in the past which blew my mind.
Don’t forgot public sector schemes are less generous for newer entrants.

The LGPS is funded.

The fact that government departments enter into contracts (of all kinds) that commit them to doing something beyond the end of the current parliament doesn't offend the principle that one parliament can’t bind another. Parliament could (constitutionally) pass a law saying the present government won’t honour contracts entered into by the previous government but it verbally chooses not to as this would cause lack of trust in the state at home and abroad, market collapse etc. not that I think it’s a bad idea to pay civil servants more and remove db pensions. But realistically it would only be done prospectively.

Don’t know where the word verbally came from in my post….

The government of today can hire you and pay you this year and for the next five years, the government of five years' time can fire you if they think your job isn't something they want to fund, yes, what's the problem?

Quite different from the government of 5 years' time being forced to pay another 20y of pension for someone who retired 5 years before they even came into power and had no control of the hiring of.

Yes, that’s the exception.
NHS. Teachers, Police, Armed forces etc all unfunded.

Good luck recruiting teachers, nurses and civil servants to the Gov that decides to change their pensions.

Pensions are paid using current member contributions btw.

If the Government can’t legally commit future governments to spend £x on y wouldn’t all public sector employees be on short term contracts? Which makes me think your understanding is somewhat bollocks.

I thought most of these DB schemes were being closed to new starters? That’s what’s happened in my workplace.

im pretty sure a lot of the benefits have been reduced over the years, so they aren’t the gold plated schemes they used to be.

Yup, I think we should not make those kinds of promises to people because so much does go wrong if we have to break those promises.

I'm fine with DC pensions.

I'm fine with private sector DB pensions although I think they have similar risks, committing the owners or shareholders to unfunded future payouts, but that's their business not the taxpayer's.

I’m in LGPS which is funded by- although still a generous scheme.

I earn 20% less than I would in the private sector though so if you took my pension benefit I’d want paying the market rate!

Partially unfunded. They’re not employer or employee contribution-free. Contributions are pretty hefty.

Why's it bollocks?

They could pay into DC pensions. They could pay higher salaries today to help with nurse recruitment etc.

Exactly. I suspect increasing public sector salaries by 20% would cost far more than any unfunded pension liabilities.

Im in the LGPS. Local authorities just would not have staff if they were axed. I earn a lot less being in the public sector.

But the liability is enormous.

Local authority pensions are funded.

As I said - paying higher salaries would cost far more than the pension liability.

What on earth are you going to on about? Why do you feel so angry about DB pensions?

Public sector pensions are generous. They are far less generous than they used to be.

Starting either mutual or individual funds for Teachers, NHS staff etc would be eye wateringly expensive at the outset because all the employee and employer contributions that currently pay retired staff pensions would instead go into funds.

BTW employers contributions for Teachers pensions are going to fall from about 28% to about 17% from next April.

Having worked in the public sector & private sector the salary thing isn’t necessarily true. Lower roles tend to pay more in the public sector vs private

Yes, it’s the exception.