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?

God OP you’re really up for an argument today. I’m taking Rebekah Vardys sage advice on this one.

I think the main problem is the huge allocation of a persons salary is across the board, I totally agree, teachers, nhs, police, fire should get what they do but someone doing admin in a council department should not get a quarter of their salary into their DB pension scheme, I know someone who gets this so it is happening, they should get the same or slightly more than a private sector employee.

They'd have a huge employment law problem and expensive lawsuit if they just withdraw those benefits which are contractual

I dont think you know that much.

Lots of schools are pulling out of the TPS. Teachers are enrolled in less generous pension schemes now.
Teaching is a shitty stressful job. One of the only benefits was being in TPS.
Shitty stressful jobs ( also police, fire NHS etc) deserve decent pensions. Anyone who thinks otherwise is VVU.

I work in financial services and earn good money with a 17.5% contribution DC scheme. My brother works for the NHS, much harder than me and with huge debts. I have never once felt that he didn’t deserve it. Very few people in the public sector are rich

It would take probably 80 years to get to the end of all DB benefits that employees have if the schemes were terminated tomorrow. How would you fund the ring fenced pensions for that group which already exist, alongside whatever new scheme you also need to pay for, when both need to be done today? The advantage of the current schemes being unfunded is that it’s only the difference between contributions and total pensions that the government needs to fund in each year. I would expect the cost in today’s terms of all those existing pensions would be in the trillions of pounds and the government can’t pluck that money out of the air to fund the existing obligations while putting away the current contributions for their future pensions. I think that makes the UK look terrible to the financial markets which has knock on effects many times the magnitude of the Truss budget.

You could design a DC scheme with whatever contribution rate you wanted, it wouldn’t need to be equivalent to the DB benefit they already have, but it probably wouldn’t be popular.

I actually think one of the key problems with modern politics is the short term nature of governments never thinking beyond the end of the parliament, which is why longer term issues are never debated or resolved. Look at social care, HS2 and other big infrastructure projects - either nothing gets started or it does and is delayed and amended and delayed and changed until it costs multiples of the original estimate and is completed 15 years late.

I worked for a local authority social services for 15 years, got no raise for the last 7 years and hourly rate was low! The final salary pension I was promised was ended before I finished.
Public sector working is thankless! No perks, like equivalent private sector jobs.
You are being unreasonable.

I retired almost 20 years ago. I was in education and my pension now is more than the average UK wage. But my contributions whilst I was working were around 12% of my salary. I worked for more than 30 years and retired on a final salary pension. I think it would be fairer to extend those benefits rather than decide they should be illegal. Having a decent income in retirement should be a right. It contributes hugely to the health and welfare of older people and saves money in the long run. If people can’t afford to live in their retirement the taxpayer will pick up the slack anyway. There are scores of people claiming pension credit because the basic state pension is inadequate.

I think surviving spouse's pensions and dependant children's pensions are paid. Also a dependant's pension may be paid eg to a disabled financially dependant relative - in this case though you have to apply BEFORE you retire.

The link was posted yesterday. (institute for Government report if you want to search.)

No one these days has a DB pension based on final salary - they’re all based on career average. Employee and employer contributions are way higher than you’ve posted.

PMSL! Firstly, most of the final salary pensions have been phased out & they’re not nearly as gold-plated as people think they are. Secondly, who do you think actually runs the country because, newsflash, it’s not the elected government! They might make policies but the work requires knowledgeable, experienced people who provide a continuity when govt changes. Civil Servants also heavily influence what govt policies are because they know what’s viable. How well they do that is up for debate obviously. Finally, have you seen the absolute shambles going on with CS Pensions currently?! It’s an absolute disgrace. People who have given their to public service have been left high & dry with no income when they should have had their lump sums and regular pensions but there’s a giant backlog and maladministration by Capita.

I agree with you. When politicians talk about the massive welfare bill, they mean pensions. And what they don’t mean is private sector pensions which are miserly & which it’s your money.

no, what they mean is whopping public sector pensions with their 30% employer contributions. All paid by private sector workers who NEVER receive the same benefits or job security.

And before we get to job descriptions. The average private sector worker works twice as hard as those in the public sector.

Then we have all the time off, paid annual leave, early retirement clauses, duvet days, general laziness, and incompetence that is NEVER tolerated in the private sector.

It’s practicality impossible to sack a public sector worker, have 100% job security, backed up by unions.

Then we get to actual salary. Public sector roles have massively increased their salaries in the past 2 decades. Now it’s the public sector who is paying whopping salaries (think council workers, NHS managers, etc) and it’s the private sector on minimum wage and zero hours contracts.

In fact the government had to clamp down on public sector abuse by workers in IR35 when workers resigned their jobs on Friday, got massive redundancy pay outs and when back to the same job but with a different contract on the following Monday.

To answer if the poster above, if they cracked down on abuse in the public sector of incompetence and skivers, those would be on the dole, not some fancy private sector role. And don’t they know it.

Maybe try see it as buying a company and buying its debt too. It’s not that hard.

Totally agree. My FIL has received his index linked, final salary police pension for longer than he actually worked in the job!

I expect most of them do. They do 30 years and retire in their early 50s usually.

Wow. Do you believe what you've just written?

So bad pay, no job security and pension taken off them - guess you don't want anybody working in the civil service

Totally agree with this , the general public working in private sector is currently being asked to pay twice over for public sector workers. As the OP rightly points out the debt that exists to meet the pensions of public sector workers runs into trillions and is mostly unfunded ie there is no money to pay it unless you tax today’s workers even more . But worse than that there is almost no recognition by today’s public sector workers of the current day value of their pension entitlement so we are also faced with striking public sector workers because they “aren’t paid a market salary”. However if you valued the pension they will receive in the future their current salary is a multiple higher . The government would be far better to move all new entrants into DC , then plan to move all those inDB across to DC with some recompense , and eliminate both the pay gap and the unfunded liability. Not toiling be easy but it is probably our counties biggest problem long term.

Db pensions need to stop. Private companies generally stopped them years ago due to their huge indubded liabilities making them totally unaffordable. This needs to be stopped but unfortunately no govt of any persuasion has the balls to do it! So all reeves’ attack on pensions hits only private sector. It’s a scandal

I don’t believe this is true. The GDST moved all their staff out of the TPS into DC pensions, while increasing pay and increasing flexibility as to what you could do with your pension. While the NUT campaigned hard against the change , it was ultimately voted through and the schools have not seen any drop in recruitment since . TPS is DB but is not as flexible for anyone outside the norm eg unmarried, no children etc as a well constructed DC scheme

They should pay a fair rate for a fair days work.

Why is everything about pensions about the lowest common denominator? Businesses used to fund good pensions. I’ve gone without wages and stood on the picket line, not just for my pension, but for those who follow me. What have you done for yours?

Yes, l can voucher for that. I pay alot every month into my pension pot.

The difference between GDST and state schools is that in the latter the 28% employer pension contribuiton is calculated into the funding. In April this is set to reduce to 17% or so but the funding will be reduced in recogniton of this. The GDST had to pay the 28% from their own income so they had the flexibility to be flexible.

The employer and employee contributions are calculated to that this pay s teachers already taking their pensions. If teachers had, say, a scheme where their 10% contribution was matched with even 8% along with a 5% pay uplift then the vast majority of the funds that were being used to pay retired teachers' promised pensions would have to replaced with further tax or borrowing for a few decades.

You're right, I suspect, that teachers would not be unhappy with a relatively generous DC scheme and small pay uplift but the treasury might not be so keen.

Where do you get the notion that the government is funding the LGPS scheme? They are not. Many people pay in for many years and get very little out on retirement. There's not some pot of free gold handed over on your last day of work. The scheme changes all the time and everytime it changes, it is far less favourable for those yet to draw their pension. State pension is the same amount every four weeks for the rest of your life plus annual raises, we paid in for that too, its not free. At 65 for those eligible to retire then, there's not going to be another 25 years left or even 20 for most retirees to live a heady lifestyle on the fruits of our working lives Pensions in this country are poor compared with orher similar countries and don't forget, public sector pay is poor and well below the national average for a lot of people in the sector. So before you get all righteous about the LGPS, don't forget, we have paid in and get very little out plus of course your outrage at the scheme and recipients can be appeased by the fact that most of us receiving paultry benefits will be dead soon and the next batch of local government retirees won't even have as much as we received. On the other hand, benefit claimants who choose not to work will be burdening this country and successive govermnents for generations to come, try being outraged at that.