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?

i imagine that will have to be means tested in the future.

Some people think they'll never grow old and never need to rely on a pension.
Plus - soft target.

Ultimately, that doesn't solve the problem of costs now.

It might solve the problem of costs in the future, 25 years down the line, but it doesn't solve them now.

That's because now all of the historically accrued pensions would still have to be paid out and that would apply probably for the next 50 or so years. However, obviously a good chunk of those would be smaller say in 25 ish years and certainly you would see a reduction over time.

However, the other thing you'd have to pay now would be the additional salary contributions of all of those staff that are now not getting a pension where you've deferred the cost later. So that means that you would have to pay both the current salaries and and the current pension costs of people who are already retired or will be retiring. Whereas currently you defer a portion of the current salaries to the future pension costs and just pay the current pension costs.

So whether or not it's a good idea, it would require the allocation of an enormous amount of upfront cash, which means we're very unlikely to see it happen. Because governments don't have much incentive to do something that makes their life way harder for the next 25 years.

The LGPS is a funded scheme op.
I agree it is a shame that the same doesn't apply to other public sector pensions schemes.

But I don't see it as a bad scheme. More employers should trade salaries now for more generous pension contributions. Ensuring people can live well as they get older strikes me as eminently sensible

My DH was a public sector worker, not highly paid. At one time if he had been paid £1 less it would have triggered £10 in social payments (we had 2 children at the time)! His pension is DB and I consider it deferred wages. Not all public sector workers are highly paid and nowadays not even secure.

They will likely be means tested, not enough people to support them.

Some public sectors pensions like LGPS
oS are fully funded from both employees and employer contributions. It is civil service and NHS that are unfunded in the sense the government underwrites the the scheme . It is about time that was changed but no one wants to tackle it but stumping up the funds in advance.

Government enters into long term contracts all the time though. HS2 for one. Capita for administering civil service pensions, for another.

I'm not making any comment about whether public sector workers are paid too much or too little overall (the public sector is quite a broad group with lots of different types of workers, anyway).

My point is that too much of their overall compensation is deferred compensation. As a percentage.

They should have no deferred comp. Either paid today as cash/in-year salary and bonuses, or paid today as cash into a retirement account in the person's name that they can manage themselves and has nothing to do with the government going forward.

Came to say this and you got there first 😅

Average salary pensions are still defined benefit pensions. A defined benefit pension is any pension where you get a fixed, predictable amount guaranteed to you in retirement regardless of how the investments go.

Saying we don't have many final salary pensions left doesn't address this.

Well not sure that will work. Look at the trouble trying to remove the winter fuel allowance, also no Tory/right wing party will ever want to disenfranchise their main support by making them worse off. I guess it’s a possibility with a labour government but despite what they could achieve if they were left to get on with the job they’re unlikely to make it past the next election thanks to the fail and the express and reform/restore

Public sector workers are taxpayers too.

Work for 30 years, retire at 60, draw half pay for another 30 years. What's not to like.

@Catsandcheesenothing will change for current pensioners as they are untouchable. It will be for future ones.

Agree. It’s not sustainable. I don’t see my DCs receiving a non means tested state pension.

Yes I know that but nobody is going to vote for a party that will massively change their pension will they? Maybe when you are in your twenties you might think I’m not going to need a big pension but once you are in your 50s you are no doubt delighted to have it. And you won’t be voting for a party that is going to take it away from you.

Yeah, another day, another public sector bashing thread. Yawn.

But still less than increasing salaries by 20% to stop staff leaving for the private sector.

Teacher recruitment is in crisis now - without the DB pension, things would be substantially worse. It is one of the very few remaining perks of the job.

Edited for typos.

Yes, no easy solution.

@CatsandcheeseI think many people in their 50s are completely aware it’s unsustainable and if all parties are saying the same thing then there is little choice.

It's £12k index-linked for life. Which is the equivalent of a £400,000 pot, absolutely waaaay beyond the reach of a PT job on "crap wages" for non-NHS workers.

The NHS pension is not "gold-plated" because it gives everyone a huge pot (although it largely does), but because it rises with inflation. What amazes me is that people in these schemes do not know this - and then we compare apples with oranges in any debate on pensions...

To give you an idea of how insane the NHS scheme is, DH (consultant) will retire on £100k pa, roughly 50% of his salary index-linked for life, having maxed out employee and employer contributions since his registrar days. He has some invested under the "old" scheme, which is more generous, but even the supposedly reformed scheme is exponentially more generous than anything I have seen in the private sector for two decades.

Not complaining, but Jeez-o that's a huge amount of money.

So you're suggesting all agreements and legislation can and in some cases should be overturned every 5 years? Madness!

Huh?
Parliament isn’t supposed to bind parliament but it binds government all the time!