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

It's hard to generalize about public sector pensions since they vary considerably but there is no doubt in my mind that they need radical change.

The current unfunded public sector pension liability is around £800bn. Compare that to the current national debt of £1 trillion. The Pensions Policy Institute has calculated spending on unfunded public sector pension schemes will rise by 40% over the next 20 years. That compares with 16% on health and 14% on state pensions during the same period. Money spent on these pensions will directly reduce spending on the health, education, defense etc.

The problem stems from the fact they are defined benefit pensions. Whether they are final salary or average salary doesn't matter. Defined benefit pensions are not sustainable since you simply can't guarantee the pension contributions will generate the necessary returns to provide the guaranteed benefits. Even currently well funded defined benefit schemes risk becoming unfunded if investment performance is poor.

It's vital that public sector pensions are changed to defined contribution schemes immediately. The alternative means that future generations are left with the debt of the current generation; this is not just morally reprehensible but will create further resentment from the young that disadvantaged compared to the baby boomers.

Not all public sector pensions are a drain on the economy. NHS pension funds generate a profit, don't they?

We don't all sponge off hardworking taxpaying private enterprises

If I had accepted low pay and long hours in return for decent benefits when I retired I'd be pissed off if the T&C's were changed and I lost them. Frankly, I'd feel it was out and out theft.

But then, I won't have much of a salary having worked in the lower echelons of public sector and charity sector for a long time. Goodness only knows what I will live on.

Of course not all public sector pensions are a drain on the economy. Some are perfectly well funded right now. However, that doesn't mean they will be well funded in the future.

Moreover, there is an outstanding £800bn public sector pension deficit so clearly some pensions are not funded at all well!

The key is for employees and employers to provide the contributions, but for the employee to take the risk on the benefits rather than the future taxpayer. It's about taking personal responsibility for providing for your future.

Average public sector pension is around £4000 a year.

The Local Government pension scheme is funded. Employees pay something between 5.5% and 7% of gross salary. The pension scheme costs the taxpayer nothing more than the employer's contributions. I wish I could assume that no one objects to that, but sadly I expect everyone does.

Sometimes it seems like the general public will only be happy when public sector workers are all volunteers.

But knowing that the LG scheme has no taxpayer support, I would be very nervous about increased contributions lest the pension not be forthcoming due to a stock market crash or similar.

I see absolutely no reason to force public sector employees to make larger contributions. It should be their choice how much to contribute and their responsibility to invest intelligently. Moreover I accept that many public sector pension funds are well funded and don't create any taxpayer liability at all.

All I want is to see a move from defined benefit to a defined contribution system. This would mitigate the risk of an even larger unfunded pensions blackhole developing. The UK already has a £3 trillion unfunded state pension liability which will become a huge drain on tax revenues over the next 20 years.

"Not all public sector pensions are a drain on the economy. NHS pension funds generate a profit, don't they?"

I'm not sure but I think that the Armed Forces Fund is also in profit - if not, I'll stand corrected.

We put up with a lot of upheaval in our lives in order for my husband to do his job. He's currently serving unaccompanied and only comes home for a weekend once a fortnight. We bought our own home near my family to provide educational/family stability for our three children and my husband goes back and forth from there. He'll be off to Afghanistan at the back end of this year.

Before anyone jumps in and says "Well, no one makes you join up!" I'll say that I agree with that. My husband chose his career and I chose my husband and we both made decisions that were well-informed as to the type of lives we would lead. We weighed the pros and cons of Army life and decided that the balance was weighted towards the positive. On of those pros was the pension, so tinkering with that would feel like a bit of a betrayal. We've had a pay freeze; plenty of people are going to be made redundant (thankfully, not in my husband's cap badge so far); allowances have been cut (fairly, we think) so we are "doing our bit" to help the economy.

I wish we could see some sort of parity of pensions across the private and public sector - right now it seems like such a lottery!

I don't think that it is unreasonable to ask public sector workers to make greater contributions to their pensions. It sounds as though those on low incomes are going to be protected to a certain extent so this should stop people from opting out of the pension plan.

Before they increase contributions for contributory schemes, I think they should make non-contributory schemes contributory. It seems very unfair that some public sector workers might be paying a tenth of their sa;ary and others still paying nothing at all.

"It seems very unfair that some public sector workers might be paying a tenth of their salary and others still paying nothing at all."

I can't find the link just now but the BBC ran a story round about the time of the Hutton Report in Oct last year and it had a table showing the % contributions made for the public sector and the Armed Forces was the only one that had a 0% contribution.

There is a BBC Report with details of the big public sector schemes (although some of the fine detail regarding the 75 Armed Forces scheme isn't quite accurate) that gives a good overview of the issue.

The report does correct my previous statement that the Armed Forces fund makes a profit - in fact, the Armed Forces pension is funded directly from taxation.

Oh is that right? I thought there were others but I must be wrong. In my view the Armed Forces are a special case so I wouldn't pursue my point in relation to their pension scheme.

But it does say that civil servants pay only 1.5 to 3.5%. What with their super generous maternity package, £20 a day out of office expenses and other benefits, they don't know they're born compared with the rest of us.

Jcscot - HM Forces have a salary restriction of about 10% to 'fund' the pension or so the Chairman of the AFPRB told me when they did a roadshow a couple of years ago. Therefore, dh's 'contributions' are quite a lot over the 32 years he has been in, as I suspect are your dh's.

AFPS75 is paid out earlier than 55 for the RN, as the retirement ages are different from the Army and RAF. The details aren't accurate for 05 as it is not all paid on retirement, but stepped, and the full pension and all the lump sum isn't paid until 65 I think. I assume they expect quite a lot of people t have popped their clogs by then given the rate of survival of serviceman once they've retired. We stayed on 75, no point in moving for us.

Oh, and the allowances review sucked when it came to LOA, as it had been raised last year as the cost of living here is so high, but it has now been slashed by 33%. Dh almost convinced that it will be cheaper to drive back to UK and shop in Tesco than to buy food here.

"The details aren't accurate for 05 as it is not all paid on retirement, but stepped, and the full pension and all the lump sum isn't paid until 65 I think. I assume they expect quite a lot of people t have popped their clogs by then given the rate of survival of serviceman once they've retired. We stayed on 75, no point in moving for us."

Someone once told me that around half of all servicemen/women who serve a full career die within 10 yr of retirement, apparently. We got all the paperwork regarding the switch from 75 to 05 and it all showed that we'd be much worse off on 05 so we refused to switch.

I didn't know how much the salary restriction was, although I knew the pension was 'counted' as part of the package - we might not pay directly, but we still pay through the restriction. 10% of my husbands pay over the past 12.5 years is quite a bit!

I didn't realise they'd slashed LOA by that amount - bloody hell! The RAF boys in my husband's office were really worked up about the changes to flying pay but some of the other cuts seemed fair at first glance.

We lose £400+ LOA from May; the married unaccompanieds lose over £700 per month. I went to Delhaize today and loo roll had gone up to 9 euro 90 for 18 rolls, and despite only buying what I needed and what was on offer meat wise (and will do us for several meals and some batch cooking for the freezer) it was over 100 euros.

However, they've lost 50% LOA in Germany and Cyprus, so it could be worse. It's the car insurance that kills though, that's over 1200 euros a year for third party for the two cars, and they are both old cars as well.

That's quite a blow on top of the pay freeze and general inflation. We were rather worried that GYHP was going to be slashed (even though we're INVOLSEP) as travel at short notice between London and Scotland is pretty costly (can't plan too far ahead because of the battle rhythm in the bunker so we have to pay whatever the going rate is for ticket a few days in advance) - they have tightened the rules but it won't affect us at the moment.

Sounds like it was during Kosovo for us and dh was down the hole. Didn't see him for three months.

Now waiting to see what the redundancy rounds will bring - dh has less than 3 years to go (unless they promote him, ha bloody ha), but db who is white mafia seems to think that anyone with less than 4 years to go will be OK for some reason - I suppose they are looking for longer term savings than 3 years salary.

There's only two people in his section (him and his SO3) and the work rate sounds pretty full on. Mind you, since the new build it's not a hole/bunker any more, so the risk of developing mole-like blindness has decreased - they actually have windows now!

I think the Army are looking to get rid of some middle-ranking officers (as your brother states, they're looking for longer savings than simply a few years left to push). DH's Corps should be reasonably secure as they have the highest PVR rate for officers/seniors in the Army - they're trying to retain his specialism rather than have redundancies. Rumour has it that the Cav, Artillery and REME are going to be worst hit for job losses.

(Sorry for the thread hijack!)

There were only two for what dh was doing at the time as well. He was watch keeping as well and on call too, so it was a bit like being at sea, 6 on, 6 off etc.

I think the Army will get away pretty unscathed for the moment, but watch it come 2015 and withdrawal from Afghanistan. Mind you, if the Middle east all goes tits up soon, perhaps SDSR will be thrown out as they will find a functioning RN, with a carrier, might be quite useful!

I think they're keeping a watching brief on Libya et al right now. I think some of the defence cuts (in terms of manning and equipment) are scandalous. We're actually going to have the smallest Army post-2015 since the Peninsular War!

Somehow, I can't see Afghanistan becoming tickety-boo in four years, can you?

DH pays a very small contribution and is in a final salary scheme.

I would really like to see a situation where pensions in both the private and public sctor were reasonable. So many people in the private sector have no pension at all and I just don't feel it's right that anyone who works is left with no pension at the end of it.

To me it is about time. I have worked in private sector pensions for 20 years. It will still be worth paying the extra to have a public sector final salary pension scheme. No private sector company can really afford to run these anymore unless they have a very small number of the workforce in them. I would gladly pay extra to keep this benefit rather than the DC options with much lower employer contributions that all the companies I have worked for offer. My DH does not get any employer conts into his and is having to pay it all himself. Sorry but it is reality and it is only reasonable for the pension burden to be shared by those who benefit. If you worked in the private sector with many companies having had pay freezes for years, you would feel aggrieved.

but what if you can't afford the extra now?