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[HelenMumsnet]

Morning.

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Thanks v much, MNHQ

Lord Hutton speaks.

www.bbc.co.uk/news/uk-16021345

He says the downgrading of growth figures means that the deal being offered now is actually probably too generous.

In another move MPs will now be paying 17.5% contributions to their pensions. I actually think this is a terrible move and it will further serve to price ordinary people out of being MPs

So basically one of the main planks of their argument that the changes made previously made the pensions sustainable is now apparently untrue.

Wonder what else the unions will now use as an excuse?

It's not an excuse. Just perform a proper valuation and up the payments if necessary. Why is that so difficult?

And Hutton also conceded that if contributions go up so much that people leave the scheme, the whole thing will fail. So he urged the Govt to go back to negotiations on that point. Which is what the unions want too.

I guess because valuing it based on current contributions would send out the wrong signals. The issue is the government cannot afford to pay in so much money and it must reduce it's contributions, just like the private sector employers have already done.

The bottom line is that change has to happen. We all must work longer and expect less back. Public sector pensions even after the currently proposed changes will still be incredibly generous compared to the private.

To demand even more, to me is simply ignoring the facts.

Could you put in a Freedom of Informtion request for the facts and figures that neither the government nor the unions appear to be withholding. Then talkin' can go to another pp presentation and work it all out?

To demand even more, to me is simply ignoring the facts

But the latest 'fact' from the National Audit Office says different.

When an agreement is in place, both sides are bound to honour it. The government's refusal smacks of the same weary and patronising tone of your posts, niceguy - 'look, we are not going to give you any of the evidence required to show why you should pay more, just pay up and stop moaning'.

Reneging on an agreement like this makes people suspicious. No one is going to blindly hand over around £200 extra a month (2 teachers in this house) without proper and transparent evidence - something else Lord Hutton said was necessary.

So a public report states that the scheme is affordable, the government say otherwise but stamp their feet and refuse to explain why it isn't. I would say that their refusal illustrates perfectly why they want the extra money - and it's to spend on plugging the deficit, NOT for extra contributions. And if that's not true, then the government are at liberty to prove otherwise - as per the agreement.

Sorry can not find anywhere saying current public sector pension payments are affordable have read all of this:

National Audit Office Report (HC 662 2010-2011): The impact of the 2007-08 changes to public service pensions (full report)

for example from page 8 of the report:

"Sustainability
The Treasury set three criteria for sustainability in introducing the changes (ie to the public sector penion schmes in 2007/2008): financial affordability and stability in employer costs; fitness for purpose in staff recruitment and retention; and, setting the right example to private sector employers.
We do not comment on whether public service pension schemes are financially affordable because that is a political judgement rather than an audit assessment. However, our analysis of savings is relevant to that judgement. Financial stability is about managing risks that costs might turn out to be higher than projected because factors about which assumptions have been made behave differently from what is currently expected, or because those factors are not well enough understood. We found that the changes improve the management of the key financial risk related to longevity, but not the risk related to any permanent change in GDP growth, while three other areas of uncertainty were not considered by the Treasury?s sensitivity analyses."

GDP growth is lower than estimated (0.9% this year and 0.7% predicted for next year compared to predicted 1.7% and 2.5%). Also this report queries the discount rate applied by the Government of 3.5% above RPI inflation. This discount rate is queried in many reports, its generosity underestimates the true value of these generous pension schemes. In fact all the reports I have read question its value significantly.

Reports I have read and found of interest:

This the interim report most useful for the financial background to how the pension schemes and their valuations work:

www.public-sector-pensions-commission.org.uk/wp-content/themes/pspc/images/Public-Sector-Pensions-Commission-Report.pdf

This is the Hutton report 2011 which focuses on what potential changes to the pensions could entail:

cdn.hm-treasury.gov.uk/hutton_final_100311.pdf

Sorry trying to get a link :

cdn.hm-treasury.gov.uk/hutton_final_100311.pdf

"By making changes in 2007 and 2008 to pension schemes of NHS staff, civil servants and teachers, the Treasury and employers have taken some steps to tackle potential growth in costs to taxpayers. In addition to saving significant sums of money, the changes are projected to stabilise costs in the long-term around their current level as a proportion of GDP.?

and

We estimate that the 2007-08 changes will reduce costs to taxpayers in 2059-60 5 by 14 per cent compared to what they would have been without the changes. In net present value terms, using the Treasury?s discount rate of 3.5 per cent above increases in RPI, aggregate savings over all years in the period to 2059-60 are equivalent to £67 billion in 2008-09 prices.

Both quotes are from the National Audit Office webpage containing the actual report link.

""By making changes in 2007 and 2008 to pension schemes of NHS staff, civil servants and teachers, the Treasury and employers have taken some steps to tackle potential growth in costs to taxpayers."

Some steps to tackle potential growth in costs to taxpayers. Does not mean it is covering the costs just that they are trying to. Hutton on BBC website makes it clear the problems being faced. And also the quote above refers to potential growth in the costs ie it is not covering its costs even now.

"We estimate that the 2007-08 changes will reduce costs to taxpayers in 2059-60 5 by 14 per cent compared to what they would have been without the changes. In net present value terms, using the Treasury?s discount rate of 3.5 per cent above increases in RPI, aggregate savings over all years in the period to 2059-60 are equivalent to £67 billion in 2008-09 prices. "

Again this does the opposite of backing your side. It will reduce the growing costs eg if it was to grow by 10 billion this would mean with controls it may only grow by 8.6 billion BUT it would grow (the £8.6 and £10 billion are for illustration purposes).

This also shows the dangerous rate of 3.5% above RPI discount rate being used. Past reports have used this rate (at previous governments request) to predict if the pensions were in theory sustainable (this is with a generous employer contribution of circa 14.1% of wage for teachers and 14% of wage for NHS compared to employee contributions ranging from 5-8.5%). In effect they are saying they could safely deposit the contributions in an account that gained inflation and 3.5% interest (today that would be 8.7% interest ). Many economists say this is not possible the 3.5% has no basis to it and it is currently under review (not just here in Europe) there is a strong argumnt that the disount rate should shadow government gilt rate of growth or GDP.

Sorry rubbish keyboard " there is a strong argument that the discount rate ".

Page 34-35 of the interim report put across real potential value of these generous pnsion schemes:

www.public-sector-pensions-commission.org.uk/wp-content/themes/pspc/images/Public-Sector-Pensions-Commission-Report.pdf

"In addition to saving significant sums of money, the changes are projected to stabilise costs in the long-term around their current level as a proportion of GDP.?

The problem with displaying results as a percentage of GDP is clear with recent reduction in GDP. In fact page 8 alone of the NAO document you refer to makes two references to GDP and how a change will effect costs:

"We found that the changes (ie to the pensions in 2007/2008) improve the management of the key financial risk related to longevity, but not the risk related to any permanent change in GDP growth"

"The cost sharing and capping mechanism does not manage the risk that the cost of public service pensions, as a proportion of GDP, will rise if GDP growth is permanently lower than expected."

Well said Iggly. Yes I agree it's saying a reduction but would still have grown unsustainable.

I'm a bit lost on the people saying it's just a backdoor way of getting us to contribute in future towards our services. Well yes it is always the elephant in the room. There is no way it can carry on all being free - we will have to contribute.

It doesn't mean having to pay more taxes just to keep it in it's present shape/carry on with excellent pensions for the workers etc. It's not a right wing view it's a common sense view.

No one can surely think public services as they stand are working and will work in the future without big changes.

The pensions argument won't ever be won. It feels very much like watching a toddler having a massive tantrum over the "unfairness". Yes we can see from the toddler's point of view why it seems unfair and possibly is even unfair. (When I say "possibly" I'm referring to the fact that the private sector faced real life on pension schemes a good time back - so debatable really whether it's unfair).

However it doesn't change the fact that "that's the way it is". Not much point in intervening in said tantrum really unless you want a black eye.

You wait for the tantrum to pass and then talk to them once they've calmed down. Then you reiterate: that's the way it is. They can throw another tantrum of course, however, it still won't change anything. That's what is happening I'm afraid. It won't be won.

I do keep hearing intelligent people, when challenged on why they're supporting strikes etc., saying "I don't really understand the economics I just know it's not fair".

Common sense is all you need not an economics degree. If you struggle with any concepts of it then bring it back down to how you run your own family and finances/interact within local community as wider world. Same thing except on a massive scale. Doesn't change whether's it's fair or not - it's just real life.

niceguy2 - actually, I have close relatives and friends who ARE in banking who candidly report that the banking industry and what they did are indeed are largely to blame for the economy and jobs being lost in the private sector. Not to blame for the over borrowing by Brown et al, but certainly for the problems in the private sector.

You say we should get the best MP we can vote in. Regardless of whether they are a 20 year old with no qualifications, or a 50 year old professor who has done volunteer work and worked in industry. But should we not also get the best teachers, nurses and physios? Starting salaries on average (rounded to nearest 5K):

Nurse = 20K + student loan debt + 4 years of degree and post qualification training
Physio = 25K +student loan debt + 4 years of degree and post degree training
MP = 60K, regardless of age and previous work experience. No qualifications necessary, hence no student loan debt.

If I were to get very ill or had to send offspring to school, I'd rather go for the best teachers and nurses than the best MP. IME, whoever the MP is (regardless of qualifications, age, experience or none), I've never seen any of them make any difference to daily lives of our community. If someone complains about poor lighting or lack of policing, it is still the public sector workers who come in to get the job done......

When we had serious flooding in the Southeast in early 2001, hardly any nurses were available to turn up for duty in the morning in our nearest London hospital. Why? Accommodation (even rented) was so unaffordable that they were commuting 2hour journeys and back from the outskirts just to be able to do their jobs in London, including nightshifts and 12hour work days. Flooding meant their trains were all cancelled till late morning. They did not own cars - couldn't afford one. So procedures, operations and care were delayed. In 2011 things are no better.

(Am not a nurse by the way, just in case anyone thinks I'm biased for personal reasons).

Kipper, i'm not saying the banks were blameless. Obviously they caused a tremendous amount of damage and left a massive mess.

BUT...what I am saying is the current deficit and the reason why pensions have to be cut down to a more realistic size is NOT the fault of the bankers.

I get tired of people blaming the banks for everything and assume that prior to the banking crash that everything was sweet. The pensions blackhole and the deficit would have happened sooner or later. The only question was when. For decades, people have been talking about the cost of the population getting older but whilst money was cheap, not enough people cared.

We have been borrowing money regularly for over thirty years. All under the illusion that "economic growth" would sort the problem out. That's like saying "I'll keep extending my overdraft because I'm due a payrise and that will sort it out". Except that day never comes because when you do get a rise....you borrow more and put off paying it back.

The banking crisis happened only a few years ago. And if you look at countries like Germany where they were prudent with their budgets, you can see they are recovering much faster.

Don't blame the banks blame Gordon Brown. HE deregulated the city. He also destroyed the private pensions which doesn't seem to ever get mentioned any more as it's such an old story. However it's worth reminding ourselves quite how shit Labour were.

Brown raiding private pension back in the early 2000s. Read the quotes below from 2004 and really start to understand the shit creak that Labour have led us all up. It was Labour that shafted private pensions and they borrowed heavily in the hope of future good times (current deficit).

Ros Altmann, a pensions expert who campaigns for workers who have lost their final salary pensions.
She said: "It is clear the ACT move has contributed heavily to the problem. The demise of our final salary schemes began in earnest in 1997. Brown saw pension funds as an easy target ? so he raided them.
"He either doesn't understand private pensions or he doesn't care about them, which is hardly prudent."
George Osborne, the shadow chancellor, said: "Gordon Brown's pension raid was one of his first and worst acts as Chancellor. Pensioners will be paying a heavy price for many, many years to come."

Sorry should say 2006. Also yes niceguy the pensions crisis has being talked about for a very, very long time. Have been very aware of it since I started work 25 years ago. It has been a very long time comign which is why I'm 100% certain there is no alternative and I'm pleased that finally a government are acting like a grown up and tackling it.

People really must have selective hearing and choose to ignore what they don't like it seems if you think that pensions reform is a reaction to the banking crisis.

Do a bit of research back on Brown and private pensions raid - see what you make of it? Does it make you angry? It should. Well despite said raid the dreaded day of not being able to borrow any more money still came.

(Obviously I'm referring to people who heard about the pensions raid back then but didn't take any notice as it didn't affect them i.e. public sector workers). Not a tit for tat argument I'm making - merely that your labour alternative people think is out there is a folly. Labour are a very big part why UK in more of a mess than we need to be.

Gordon Brown did not destroy private pensions. It doesn't matter how often conservatives and their supporters claim this, it won't make it true. Private pensions were destroyed by the pensions act which was passed by the Major government, and by the impact of FRS17. The game was already over for final salary schemes when the ACT raid happened.