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

Lego (love the name) but if you can't afford it now then how will you ever afford it and what will you do when you retire?

Do public sector workers realise that the rest of us pay miles more as a percentage of salary into pension schemes with no idea what we will come out with at the end of it? It could be nothing!!!

I personally would kill for a final salary pension, public sector workers just have no concept of how much they are worth. And if they all decide to leave en masse then more fool them.!!!

well said trixy

Public sector workers need to take more responsibility for investing in their futures?

Really?

Very low pay, no pay increases - decreases in fact - no perks, no bonuses, long hours, constant upheaval, very little training or PDP unless you pay for it yourself....oh but, I might - might - get a vagely reasonable pension at the end?

Yeah, I am beginning to see how unrealistic I have been with my expectations. What I should have done when I left school/uni was say fuck it, I'll go an work in the private sector and earn as much as I can. Hell, maybe even in banking, after all, the real cuplrits for the recession in 2011 will be those selfish money-grabbing public sector workers.

Well not to worry - this time next year both myself and my OH will be out of work and we don't intend to return to public sector. We will start again.

This time instead of people getting treatment from me for free on the HNS they can pay £50-60 per hour to get it privately. My OH can earn 75% more doing his job for large multinationals whose products you all buy.

Then we won't be draining the economy any more, hey?

Well said Tigerseyemum.

Tigerseye mum, I think you have a very unrealistic view of what working in the private sector is like. Most of what you are moaning about, I hear my friends in the private sector moaning about in their jobs and then they have to pay in 16% of their salary to gamble on having a reasonable income in retirement. Not everyone is a banker.

Public sector salaries have caught up with the private sector and one report I read recently said they were up to 30% higher in some jobs. Don't know how reliable that is,bit certainly there doesn't seem to be the big disparity there used to be.

No Trixymalixy. The median (I think) public sector salary is now 30% higher. That is because most of the lowest paid jobs have been outsourced to the private sector. So the jobs left in the public sector are generally the better paid ones requiring more qualifications whereas the private sector figures now include all those outsourced low paid jobs.

Don't you think that you need to take responsibility for your own retirement though? I agree it is unfair that the rules of the game have changed for public sector workers, but they changed for private sector workers 10 years ago and the disparity between public sector and private sector pay has narrowed massively over the last 10 years. It is unfortunate, but the fact is there is no money to pay for it. What's the alternative?

I am not picking on public sector here by the way, but there are lots of people who work in the private sector who are worse off than those in the public sector in terms of earnings, it is not automatic that those who work in the private sector are better off, which seems to be the base case assumption here, nor is it a given that everyone who works in the public sector is only doing it because they want to make life better for everyone and everyone who works in the private sector is a money grubber with no morals.

I just don't see why there is this them and us divide

When civil service pension contributions increase from between 1.5% and 3% to the same level as mine, then I would be prepared to accept an increase in my own pension contributions. Not until.

Thanks for clarifying that statistic GaelicSheep, nevertheless the pay gap has narrowed.

Personally I would pay a large percentage of my salary to have certainty about what my income would be in retirement, it is a massive worry for DH and I and we are only in our 30s at the moment.

I think it's utter craziness that we are effectively forced to gamble on our future financial wellbeing.

I don't begrudge public sector workers their pensions, that is the way pension provision should be for all, and I think it would be a sad day if DB pensions were done away with. What I do begrudge is the bloody moaning about having to contribute when the rest of us pay much more for less and the economy is in such a state.

As I said, I don't begrudge contributing and I wouldn't begrudge paying more - within reason. But I fail to see why civil servants should pay less than everyone else. Theirs is truly the gold plated pension, they have the gold plated terms and conditions. Why?

moaning? i can afford it now-as it is now-thanks. i have been happily paying for it for years without 'moaning'.

i also know that i will be working untill i am very very old and already the pension has changed since i was first employed. i am ok paying and contributing and i do take full responsibility for my old age.

I would happily pay an increase-but not an increase making my contributions nearly 10% per month with two kids to bring up on my own. that is just not do-able for me, and many more, at the moment.

it was a right wing conservative moaning in the first instance and from where i am standing, for good reason. the same reason being that they are still in talks as it is a real worry/concern.
As a public sector worker you have no choice but to either opt out or pay the extra 3% on top of a pay freeze for at least 2 years. for many people the 3% is simply unaffordable.

people talk about a secure pension in the public sector? well, yes maybe for the next 10 years, but after that? after the coalition go about privitising everything-i won't be banking on a secure pension at all, as a public sector employee. not everyone in the private sector pays more towards their pension, it's a sliding scale.

as for 'them and us'. well it never used to be and you hit the nail on the head. divide and rule-it is the way they roll.

Lego, I can't see public sector final salary pensions lasting forever either. They won't be able to take away the years service you have accrued though so if I were you I would find a way to afford it while you have the chance.

To get an equivalent income in retirement as that from a final salary scheme you would have to pay something like 2.5 times the contributions into a DC scheme.

Some people in the private sector might pay less ,but that is their choice and in effect they are choosing a lower income in retirement.

Perhaps if affordability is such an issue then there should be an option of keeping contributions to public sector pensions the same but accruing pension at a lower rate.

betternotsay, thanks for saying you like my name, yours is good too . i did think about changing it to
PensionContsStuckimyhooverBecasueItMayBeWiserWithToriesInCharge, but it's a bit of a mouthful!

yes, trixymalixy, you are right there. it would be good to have that option. maybe they might come up with that solution.
i guess it depends where you are in life, what you have/don't have etc, that it all depends on. but when you are just told that suddenly you are to loose a certain amount of your wage and a pay freeze as well as everything else, it is a hard call and something has to give. for me, it would have to be my old age.

And a lot of people in the private sector have made that choice Lego and don't pay into DC schemes preferring to have the money now, expecting their state pensions to keep them in retirement and are going to get a massive shock at if not ending up in poverty at least suffering a massive drop in lifestyle.

yes, except it's not a 'choice'. it's what you can afford.

In some cases yes, but a lot of people especially younger people make a lifestyle choice not to pay into a pension.

Yes, divide and rule is exactly my point, public sector spending is not to blame for the economic downturn but has become the scapegoat.

I have worked, on and off, in private sector: the salaries are higher, the benefits better, the pensions equally as good. And there was far less pressue to work hard and achieve targets.

My OH's equivalents in private IT sectors work as hard as him, though usually shorter hours, but with higher perks and greater potential development. When he is made redundant later this year this is where I will encourage him to move. When the private sector moves in to run the NHS in this area I will jump back to them as well.

Well I hope the grass is indeed greener .

So do we, we are on our uppers here.

The problem is not bankers, not the government ... the problem is demographics, life expectancy and annuity rates.

Demographically, the population is ageing. As the baby boomer generation retires, we have fewer tax payers to support their state and public sector pensions.

Life expectancy is increasing. Where previously people retired and died within 5 to 10 years, now they can easily life for 20+ years on average.

In the late 80s, RPI-linked annuity rates were 8%+. Now expected lifespan is 80+ and RPI-linked annuity rates are 3%.

So guess what, people are living twice as long a retirees and annuity rates are two-fifths of what they used to be. So to have the same pension you, your employer or the government) are going to have to contribute 5 times are much.

The problem with public sector pensions (and state pensions for that matter) is that the implied annuity rate is still 8% when really they should be 3%.

So there is no way to fill the funding gap without either employees contributing more or the taxpayer stumping up the difference. Problem is that the number of pensioners keeps rising relative to taxpayers.

Hence why DC pensions are sustainable (but unattractive) and DB pensions just aren't. Either we contribute much more (and take more risk with that money to generate higher returns) or we accept a lower pension and standard of living.

Just carrying on as we are and expecting future generations to pay for our retirement is simply unfair ... it's quite likely to be even worse for them. Sorry but if you expect to have the same standard living as your baby boomer parents, you're simply deluded ... unless they bought a big house and you're going to inherit it!