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?

also receive a reduced state pension.

Everyone retiring is treated the same for state pensions.

Completely untrue. Even before career average it was 40 years. Also you now have to work until 67 or your payment is reduced

I'm a social worker with an LGPS pension. I pay 6% of my salary towards it. The job is extremely stressful. If it wasn't for the LGPS I don't think I would stick around, that and the increased annual leave for continuous service. I'd probably move to the charity or voluntary sector where the workloads are much lower, responsibilities are lower and I'd be doing more direct work with families rather than spending most of my time doing paperwork to justify the work I do. I'd also not be part of a profession often stigmatised. Not required to record CPD and register with SWE annually. LGPS will be maintaining a lot of experienced workers in challenging and essential roles. People like to think public service workers have it easy but they really don't. I'm sure there is the odd role which is very nice and fluffy but most are working very hard in jobs that are very important for society.

As far as I understand it, the problem here is that essentially it was the government that originally put into place define benefit pension schemes that took that benefit and took that advance of cash (back in whatever day, I think around the 1850s!!).

The amount now being paid in is circa amount the amount being paid out so the current government is pretty much funding what they ought to be funding in terms of future benefits. (If you work on the basis that if they were paying the cash out to a to find contribution scheme instead the workers would get the benefits of the growth of that rather than the benefit being used to pay the current people who have retired.)

But because the original government who introduced defined benefit pension schemes back however long ago didn't build up a large pot, there essentially is no pot to draw from which means that you end up with an unsustainable position for any government who wants to change that approach, because they'd have to pay double contributions - even though they are currently paying the right amount.

If you were employed. But I wasn't. I worked hard and earned well, but I was self employed from the age of 35. DH is a small entrepreneur. Our realities might be quite different. In my world, you earn it and give as little away as possible. Because only what clearly belongs to you because you earned it is yours, less whatever the tax due.

Out of interest, are you saying a DC pension pot is taxed more heavily than a public sector DB pension?

Australia does it!

There is a means-tested age pension but many people have enough in private pensions that they can either fully retire on that, or they only need a part state pension to top it up. The mandatory employer contributions are higher than here.

State pension and public sector DB pensions are two sides of the same coin IMO.

Of course, the two countries have other differences in terms of taxes and benefits that I can see why there is a lot of pressure here to not means-test the state pension. But in theory the argument is the same.

They’ve been raided several times since the last Tory govt. And Labour haven’t been shy either. Good luck recruiting a cop without it when they’ve had effective pay cuts since 2010.

Are you joking? I joined LGPS at 20, planned a d put extra in so I could retire at 55 with a full pension. Guess what, they changed the rules when I was 40+ so I would get about half ... so they do change the rules.

Maybe do one asking if we shouldnt do that in a few weeks, see if you get the same responses 🙃

But the numbers speak for themselves. There's no mandate to make the change you want.

The triple lock does not bind future parliaments (its parliament that isn’t bound in the constitution)
The triple lock is set in legislation, future parliaments can amend or suspend legislation (and since the introduction of the triple lock parliament has changed the relevant legislation)

What overtime?

Local govt pension scheme funds itself. Its very good value for the tax payer

Civil Service pensions can and have been changed for new joiners …… and also changed for existing civil servants

If you check, I think you'll find it was Gordon Brown who trashed pensions. By removing the pension dividend credit.

We may end up there, they've being stripped away for many years, especially at the bottom with encouragement to transfer to the DC option. Not great encouragement, but it's been there.

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.

If we remove any deferred compensation, would that mean civil servant contracts paying overtime as default rather than the deferred compensation of time in lieu/flexi as it is in many departments?

Cause my pay would be way higher if I was actually compensated for my overtime when I did it rather than getting emails each pay cycle to gently remind me that I'm near the flexi limit again and can use my flexi to leave 30 minutes early...if everything has been finished first...because they'd rather I didn't replace one of my annual leave days with flexi leave again. My annual leave calendar starts in June, and I've already done it twice.

Personally, I think giving those who regularly work overtime time off to compensate has more benefits for everyone than the cash alternative, and while that may be the norm in other sectors, it's absolutely not in mine. That's why I put up with public service BS, it's nothing to do with pensions that, with my disabilities, I think is fairly unlikely for me to see, it's 'think of the flexi' through another late evening.

But they can't, because they're still stuck paying for teachers who retired 20 years ago.

As pp have said, pensions can be and have been changed before.

Governments have and are doing far worse than not paying people a promised pension. The idea that they absolutely can't do whatever because of an employment contract is laughable. It would be a risky move, we could say it's something they shouldn't do, but it's absolutely not something they can't do.

If the voters of tomorrow decide that control of that waterway is critical to the nation's security and vote for that party, sure,

Regardless of the ideals you were taught in school, do you really think this is how governments work? Do you think our government right now is doing what the voters decided is critical at the last election?

You may know more than me on this point. I understand the £ values are currently quite close. However how much of this is due to factors like, for example, the increase in the number of public sector workers overall, so it's easier for them to pay for a smaller number of predecessors?

One of my concerns, which is why I referenced the "binding of future parliaments" thing, is that a future government which decided it wanted to reduce the amount of spending on pensions wouldn't be able to do it, because the payments today are deferred payments for past work.

It seems there would be no way to ever reduce the size of the public sector.

This might be a feature, not a bug, for some people...

They would need to increase wages though as people wouldn't work for the lower salaries if it wasn't for the pension which makes up for it.

You’re missing one major point about the current pension process.
Currently it is not paid until it is due to be claimed, and an “equivalent” may be calculated to compare the “whole pay & pension package as if it were paid

If it was changed to the equivalent contribution being paid in salary for personal arrangements to be made then it would be real money.
The people who are going to die before claiming turn into an extra cost in real terms rather on the promise of getting it if they live

I could earn double, plus bonuses in the private sector.

Your argument doesn’t really stack up though, because if I got paid more now, this would also be binding future authorities as my contractual terms would need to be met.

The alternative is that they outsource my team, this would be easily 4 x the operational and staffing costs of my department. Minimum.

I don't really have a problem with flexi-time and similar short-term incentives. I'm okay with, say, contractual annual bonuses that get part-paid out if you quit halfway through the year for example. I think these kinds of things are easy to plan for within the ebbs and flows of a normal year, and importantly, on the timescale of "one finance manager's time in the role". It's fairly straightforward to have a few rules around annual leave balances not getting too high, and keeping a small pot to deal with any needed layout.

I don't think our governments do a lot of the things voters want. I think part of the issue is that there are a lot of commitments that aren't able to be changed easily (for example local governments going bankrupt with so many statutory duties - not quite the same but related in spirit).

What school taught you that? Embarrassing OP

The reality is that only government can future proof / future promise pensions…private capital cannot (based in any reality). You are unaware of huge pension failures / market failures ?

How utterly pathetic to want public servants to receive less too…how about not chasing less but advocating for better ALL

Pick me economics, Simping for billionaires 🤢 extracting wealth that just passes you by??

My assumption (which may be ridiculously misguided) is that it's possible through some actuarial calculations to estimate the amount that will be needed overall based on the population characteristics.

Some individuals will die early and some will unexpectedly live to 110 but it should roughly even out.

Exactly. Maybe I'm daft but I don't even understand what the issue is in the OP. You get paid less in public sector then get better pension vs getting a better salary and less pension? The money is still coming from the same pot but they would need to pay sooner to keep people from joining private sector.

NHS too