Public Sector Pensions

[Chil1234]

Lord Hutton (former Labour cabinet minister) has produced his report this morning on the state of public sector pensions suggesting, amongst many other things, that increasing contrbutions may be necessary to make up some of the shortfall and that final salary schemes should make way for average salary schemes. Union representatives interviewed on the Today prog this morning ranged from 'we'll look at the recommendations' to 'no way Pedro'. Who's right?

yes of course.

just strikes me that it would be cheaper to pay them their police wage and have them doing those jobs than pay them their pension plus the wage. 25-30k annual salary is not bad on top of a final salary pension.

It is quite lucrative but they would still be entitled to that pension as they have contributed such a high percentage compared to other professions which enables them to retire at such a young age.

agree with beenbeta (not often bb eh?) particularly regarding early retirement where candidate carries on working.

BeenBeta, there just wouldn't be enough jobs if the prison service did that tbh. Many officers do move up the ranks to management, but not everyone is cut out for it even if there were enough jobs. It wouldn't be a job for me. Probation service could be a possibility, but would rquire total retraining and again, how many vacancies would there be? not enough.

The police officers who are retired at the moment were on the old pension scheme. The new pension scheme means that Officers who started in the last few years are paying more into the pension scheme for longer (11%). In order to qualify for the full scheme you have to do 35 yrs.

if the average public sector pension is £7000 they might have been better off not paying into a pension at all and then getting pension credit. just saying....
my nan always said there was no point being one of the little people with a crap pension - better to have a great pension (obviously) or throw yourself on the mercy of the state cos you'd be no worse off and at least you'd have had good use of the money in the mean time. bit like there's no point earning just over £16000 cos then you lose much more than you gain.

Final salary pensions are totally unfair and unaffordable. A pension based on average salary is an improvement but it still implies a defined benefit at the end.

In the private sector nearly everybody gets a defined contribution pension. Why should the public sector be any different? The problem with a defined benefit pension is that it creates a fixed government liability. How exactly will the government guarantee that payout? Probably it would have to use lower yielding fixed-income products resulting in a higher cost to the taxpayer. Which is the current problem again.

Surely its better for the government to provide a defined cotribution pension and allow the employee to decide what risks to take with that money.

Personally, if I end up taking the full term career break (plus mat leave), I'll have not paid into my pension for over 6 years and obviously nor will my employer. I was going to pay into it with voluntary contributions on return to work, but seeing as there's no guarantee that I'll get it all back, I'm more inclined to buy ISA's or premium bonds with any money I might have available instead.

sanfairyann I understand your point but think it would be dangerous to assume that the Govt won't hit pension credit too. Workhouses for everyone..

What irritates me is that until GB raided the private pensions with his tax grab, no-one moaned at all about public sector pensions; the private sector final salary scheme ones were very good.

Public sector workers who pay contributions don't have the option of seeing where the money is invested (or not); if the pension provider (HMG) chooses to use those contributions to pay current pensioners rather than to build up for future liabilities, there is nothing that the public sector worker can do.

I think that the Local Government pensions are actually invested and fairly fully funded, but the govt ones aren't.

I don't understand this view of public sector pensions being brilliant.

Teachers' pension schemes are supposed to be good but we had a guy come in a couple of years ago to talk about our pensions and work out how much we could get when we retire. They were all under £10,000, mine was about £7000 as I only work on a 0.75 contract so 28 hours a week.

Is that considerered a good pension? I will now be working til i am 67 says the new legislation, so is between £6000 and £7000 better than a state pension?

It's the baby boomers again, they're at or so close to retirement now that they will be largely unaffected, but all those younger get to pay for their unaltered generous pensions (whilst paying fir everything else too)

I would love to see some of the imminent cuts fall on those aged say 55-65 as they seem to have escaped every time so far.

I heard a terrible story from a former Governor at a primary school who left shortly after the head had had his salary inflated for his last year to increase his pension. I don't know how common that was but I was spitting feathers when I heard that. Career average would have got over this.

To the lady who said £7000 is not good. It is when you consider the average public sector pension is about £5000. Plus you do get the State Pension at time and the £7000 would be paid before age 67 as that is the retirement age for the State Pension not the teachers Pension Scheme which for you may be aged 60.

I would prefer every UK resident get a good state pension and make all employees (public Sector or not provide the same to their staff). That for me would be the most equitable solution.

Sorry meant to say you also get the Basic State Pension at age 67 which is about £97 per week or £5044 so that would be over £12,000 per annum in total.

fsmail - that happens a lot at the top end of the pay scale n teh civi service. It is a common way to get people to come out of teh private sector for a few years before they retire.

They come in on a fairly high salary but it is really the pension paid out on the basis of that final salary salary that is the real attraction. Work 3 years and get a 30 year index linked final salary on the back of it. The pay package looks lower than the private sector so it does not get criticised but the real value of the package is hidden in the value of the pension.

This bumping up of pay in the final year and employing people (often nakedly political appointees) for a few years on a large final salary has bloated the pay bill at the top of the publuc sector in recent years. I actually think all of that should be defined as ultra vires and clawed back.

Its difficult to retroactively change a final salary pension. However, its perfectly possible to tax final salary pensions at a higher marginal rate. That way a lower paid public sector worker would not get hit like a highly paid one.

fs, public sector workers do pay into their pensions every month and they pay a fair sum. No one gets £7k pa for nothing which is how you make it sound.

pointydog

You're missing the point.

While public sector workers pay in a propertion of their salary each year, their defined benefit is based on their final salary (we assume higher). Hence they have been underpaying for the benefit they receive.

Furthermore, a private sector worker can pay in the same amount per month but would have no guarantee about what they will receive at the end. They only have defined contribution. Typically it is far far lower.

But BB, if they work 3 years they will get 3/80 ths of their final salary so it's not likely to be a fortune. You make it sound like they get close to their final salary paid to them for 30 years for only 3 years work!

Siasl - "Its difficult to retroactively change a final salary pension."

Pass a law limiting maximum payout of impose a 100% tax rate above a certain level. Its that easy.

This calculator will show you how much you have to pay if you don't have a final salary pension.

You will be by how much you have to put in to get £7000 out. Let me know if you still think that it is fair.

What I meant is that it would be difficult to go back over say 40 years of pension contributions and recalc the contributions under a different methodology to arrive with an annuity. Lawyers (like me!) would be in the courts forever.

However, to pass a law to tax pension payments at a different level seems possible and has been already discussed in some countries.