public sector pensions

[LegoStuckinmyhoover]

another silly osbourne idea going wrong.

doesn't this government think through anything before suggesting/doing things?

'The government's controversial plan to make public-sector workers pay higher pension contributions is in crisis as the Tory head of local government warns of "strong evidence" that employees will opt out en masse, with disastrous economic consequences'.

www.bbc.co.uk/news/uk-12516645

and

www.guardian.co.uk/society/2011/feb/19/public-sector-pension-disaster-threat

Hmm ... I see your point, but I doubt if huge numbers would opt out thoughm as there is no viable alternative is there? I mean, private pension schemes are in deep trouble.

I say this as a public sector worker, and my pension contributions may rise by another £100 or so a month, and that's on top of the huge amount I pay in already. All that will do, is maintain the terms and conditions I'm already on - so in effect, it makes me worse off.

However, there's no point trying to escape the fact that the country is in a dire economic mess, and yeap, we're all in this together, so its no good complaining when it hits your own pocket.

At the end of the day, public sector pensions for those of us who've been paying in for a good while already are the best deal going. I mean, who else is going to get a nice big lump sum plus half their final salary index linked for life?

It's not nice having to pay more and not see any more for your money, just the same service, but tbh, I would rather contribute more for the sake of getting a good deal at the end of it. Many public sector workers have made their career decisions partly on the basis of the pension, so its in their interests to do what needs doing to maintain it.

P.S I realise there are some very low paid public sector workers out there too, but they will be paying proportionately into the scheme, so the principle is the same. Public sector pensions are the best there are.

If you are on a low income you live hand to mouth. Someone on 12 K who has to support a family may well decide to worry about retirement tomorrow.

If you have no pension provision other than the state pension you may well be entitled to various types of income support in the future.

Having a tiny pension that you have to pay huge amounts for is not sensible. Epecially as low income benefits are vicously means tested. Often reduced £ for £ of tiny state pension you get.

Even some dustmen or dinner ladies can do maths.

The local pensions scheme was reformed a few years ago with increasing % of contributions as pay went up. I think this is definately the way to go. Prehaps is what missing is a cap on the size of pension some can have. A final salary pension on an income of 300K is obscene. Maybe final salary pension schemes should be allowed to go up to a max salary of 30K and after that you contribute to a private scheme.

No sympathy at all. Final salary defined benefit pensions are worth their weight in gold.

A public sector worker on a defined benefit final salary pension could get up to 2/3 of their final salary, secure and independent of stock market fluctuations - they take zero risk. A public sector bigwig on £300k could get a £200k/year pension.

Compare that with private sector defined contribution pensions. They take huge risk on how the stock market performs. The maximum pension pot is now just £1.5mm.
Thats means a private sector worker if the maxed out their pension pot could obtain a max pension of around £45k/annum (given cpi-linked annuity rates now at 3%). There is no realistic way to obtain pensions > £100k.

well i paid £50 a month into mine for three years and i wish i'd kept it under my bed

I wouldn't expect much of a return on anything if I only paid in £50 a month!

Judges can't opt out. Their right to return to their professions was removed when they became judges. At least other public workers can, theoretically, go and teach in a private school or nurse in a private hospital etc etc

In the case of the judiciary the government is attempting to severely curtail their benefits after banning them from their professions. Is that fair? I don't think so. It goes completely against judicial independence.

I hate the way some newspapers etc are taking the 'serve you right' attitude to public sector workers. PSW had a great scheme and the reason some went into those careers. Pay has historically been lower than the private sector and the pension was the payback. I agree pay has risen for those workers, but the many reasons why public sector pensions are now unsustainable are to do with the way many govts have squandered the money. It's bad luck but not the fault of those workers - not had their noses in the trough (like the bankers, MPs etc) Many are low-paid council staff, dinner ladies, hospital porters etc.

I can't see any viable alternative. Even the current plans probably go nowhere near deep enough to address the pension timebomb. People are living longer and we simply cannot afford these final salary pensions.

Whilst I totally understand the injustice for people who have been promised this and taken that promise on good faith, virtually everyone agrees we won't have the money to pay these pensions when staff are older.

Not all public sector pensions are final salary ones. Neither dh or I are on that.

with schools, hospitals etc all now heading for privatisation, i dont think the pensions that are currently promised will actually be there in the future. i think that is the point.
i am not sure that many people will gamble nearly 10% of their salary on a pension that may not be there at all, if say you are 30 years old now.

i can safely say that i will opt out of the scheme because like many other people, my children are young, i am on my own, food is going up, my rent is going up, petrol is going up, i have a 2 year pay freeze and simply cannot afford to pay that much more into a pension every month. especially one that may well not even be there or may not even be comparable in 35 years time, to a private pension that i pay less into now with a private company.
the point is that i am not alone and if a lot more people opt out, then they really will be stuffed [the government].

Violet Hill, I'm not sure what type of public sector pension you have (teachers?) because both myself and my other half have been paying into a public sector pension all our working lives and will received NOTHING like this figure. The terms and conditions are continually changing. We pay much more now (relatively, not because of income increases) and the final benefits have been reduced and we have to work longer. And we will still retire with about 20% of our salary.
If my husband dies before me, I will be left in utter penury as I have only been able to work part time due to having a disabled child. This mis-representation of the public sector pension scheme has to stop. The terms might be very favourable for the teaching profession but it is not for Local Government workers.

You have to work for 40 years to get two-thirds of final salary as you accrue 1/60th of your final salary for each year you work. Pretty much no-one will do that.

All civil servants are now on a "career average" scheme, not a final salary one, so they accrue 1/60th of whatever their average salary is over their public sector career - makes a vast difference.

However, having said that, the fact that the benefits are guaranteed is pretty much worth its weight in gold.

Judges are not in final salary schemes, they are in a non-registered pension scheme which does not get tax relief payments from the public purse, so they are a special case.

LaydeeC - what public sector pension do you have?

Yes, mine is a teaching one. As with yours, the terms and conditions have changed, and as I said earlier, I may well have to start paying in significantly more each month if I want to retain a decent pension. The teaching one is good, but having said that, I have worked my way up into a managerial position, which is obviously going to help a lot, and I will have accrued almost the full 40 years, as I took minimal time out when I had babies.

If I hadn't done that, then like many women, I would left in a mess if my DH dies before me. But that's the nature of pensions isnt' it? - you aren't going to get something for nothing.BTW, I won't get two thirds of my final salary - it's half. Still a very good deal (though as I say - I have gone for management positions and will work almost the full 40 years) but I just want to clarify that.

^^ violet, no, I guessed that as a number of my rellies and friends are teachers. Mine is a Local Government one. It is final salary at the moment but because of my son, I have only been able to work part time for the last 15 years. As said above, most pension schemes are moving towards career average rather than final salaries. I can see the fairness in that as the latter are unsustainable I guess, but it feels more than a tad unfair that the rules constantly change and there is nothing I can do about it.
With regard to the percentages, my husband is in a similar scheme and two of the ways to reduce the benefit has been to decrease the payout, so he will now receive 1/70th for every year of service rather than 1/60th as when he entered the scheme and his contributions have increased. So much so that we couldn't afford to pay the extra to add me to the scheme to increase the final payout.
I don't doubt for one minute that it is better provision than a large number of people in the private sector have but that doesn't make the gold plated, end of the rainbow sort of pension elements of the press would have everyone believe.
It also hacks me off that, having got to my mid 40s, worked every day other than one year off for my first child, I am too scared to think about what happens to us in old age. No golden retirement in this house - and probably no jobs for the twenty years leading up to retirement if Dave gets his way.

My husband has a public sector final salary pension and it's one of the things that's keeping him in his job right now. He pays no contributions and is eligible to retire in three and a half years (after 16 years service) with a handy lump sum that will clear our mortgage and a pension for life. He'll only be 40, so he can have a second career and accrue another pension. To top it up, we pay into private pensions for both of us.

The thought of Osborne tampering with his pension is truly frightening for us but I gather that his sector has been ringfenced and the government have said they won't be changing it (although that may alter in the future, I suppose).

jcscot - then he (and you) are VERY fortunate. Although, have to say, your circumstances sound very unusual. That is certainly not like any final salary scheme I have ever encountered. Retiring at 40? With a pension for life? Why aren't we all doing his job?

Sorry - should have said he's an Army officer, so he does have to survive regular tours of Afghanistan and similar places to collect the pension!

His initial pension point is after 16 years' service (which for him is aged 40). His pension is decided on him having been in his rank for two years (otherwise he gets the pension applicable to his previous rank) and is payable immediately on retirement. He can continue to serve up until he's 55 (unless he reaches a very senior rank - brigadier or above, I think, in which case he can serve until he's 65) and can leave at any point after 16 years with whatever pension he has accrued.

The Armed Forces are really protective of their pension and, so far, the government has said they won't be changing the terms. Whether or not they'll stick to that is anyone's guess.

^^ ah! then in my view this more than makes up for the pathetically low salary the armed forces pay. Can't believe anyone in the private sector would complain about your final salary scheme - but they probably would!

As a confirmed lefty, but also someone who has worked in pensions, I have to say that I think that a 3% employee contribution for a final salary pension scheme is not unreasonable.

"I have to say that I think that a 3% employee contribution for a final salary pension scheme is not unreasonable."

Actually, despite my previous posts, I do agree with you. What would annoy us would be any retroactive alterations, IYSWIM. However, given that the Forces generally sell the non-contributary pension as part of the salary package (I can't remember how much they say it's worth off the top of my head)telling us that we had to start making payments would be tantamount to a pay cut.

Some public sector pensions of the past were ludicrously generous. My dad's pension and my grand-dad's pensions spring to mind.

Plus people are living longer and longer these days.

So none of this is easy, there are issues that need looking at.

I would like to see a system whereby everyone (public and private) was guaranteed a decent pension - I also think it's reasonable for people to contribute while they are working.

The disparity and often perceived disparity between the public and private sector pay and conditions lead to adversarial positions that play into the hands of the likes of this government.

Sardine - I couldn't agree with you more.
There have been a very fortunate tranche of people who have enjoyed generous pension payouts, jobs for life etc the like of which will never been seen again.
As someone who is mid forties, I grew up with this expectation and it has been snatched away from me. Necessary I know but it still irks.
At least the younger generation will grow up knowing that there is no state provision regardless of how much you have paid into it. Although I dread to think what the future holds for my disabled son as I can't see him getting a job anytime soon let alone pay for pension provision to avoid living in poverty. Or perhaps I shouldn't worry so much, after all, the big society will be there for him. Won't it?

it is a 3% on top of the percentage you are paying. that is 3% more when you are having to look at a pay freeze for a minimum of 2 years and costs rising everywhere around you. i dont think the 3% would be as bad if there were no pay freeze. i think 1% wouldn't be too bad with a pay freeze. it's not that people cannot see the point of paying into a pension, it's that it is unaffordable to many. it is also the point, that as they keep changing it all, do we really know what will be there in 30 years time.