Public Sector Pensions

[PigletJohn]

But what about those trough-snouting MPs?

epetitions.direct.gov.uk/petitions/22456

Much good it may do....

there is absolutley no correlation at all between people who work very hard, and people who get a lot of money.

When a deal looks too good to be true, in such matters, it is definitely too good to be true. Nobody in the market will offer you anywhere near that rate.

No fireman, policeman, etc gets anywhere near 1/40th for 13.75%. Nobody.

You are either totally naive or completely disingenuous. Thunder, you've most probably absorbed the ways of those you work for...

Thunder - you really mustn't tell porkies. Unlike you, some of us do know what we're talking about.

Firefighters and police have a 1/60th accrual rate. Nobody has a 1/40th rate for 13.75% before tax.

Enjoy your little Walter Mitty world while it lasts.

until April weren't they contributing just 12% to get a 1/40th pension accrual?

I don't know what tax rate a typical MP is on, but for an example, a person earning £65,000 and paying 40% tax, who has a 12% deduction from salary into his pension scheme, actally loses (£65,000 x 12/100 *0.6=) £4,680 out of his pocket. Tax breaks into pensions are especially valuable to higher earners.

Ignoring inflation for simplicity, this person after 20 years would receive half-pay (£65,000 x 0.5=) £32,500 from retirement until he pegs out. If he lives for, say, 25 years, he would receive £812,500 ignoring inflation and index-linking.

In his 20 years of work, he would have contributed (20 x £4,680=) £93,600 net

OOI, at current annuity rates, to receive an index-linked pension of £32,500 with a 50% widows pension, you would need a pension pot of about a million.

So the MP is given a fund worth ten times what he pays in. Note that I have ignored both growth and the increase due to inflation causing final salary at time of retirement being far greater than the salary on which the contributions were based.

We should do the sensible thing and get rid of all defined benefit pensions whether final salary, average salary.

When are we going to relaize that it is about time that people took responsibility for their own pensions rather than expecting the next generation to pay for them.

Most final salary pensions still have implied annuity rates of 8-9%, indexed, when actual annuity rates, indexed, are closer to 2-3%. It is impossible to replicate the cashflows required by these final salary pensions now government bond yields are 1.5%.

The only sustainable way forward is for everyone to be moved to defined contribution pensions, so there is no unhedgeable liability is created for the next generation. Our children will have enough to deal with with ridiculously high house prices, expensive education and competition from 8 million Chinese graduates/year without being expected to pay for the prior generations overly generous and unsustainable pensions. The National debt is now £1 trillion; but that is a drop in the ocean compared to the pension liability at £4 trillion.