Public Sector Pension Reform

[Edwards]

Blackbike may I respectfully suggest you find out just how many of the legions you are mentioning do get such a pension you talk of.
As nobody has yet to come up with any figures for the numbers of people that get such wonderful pensions having retired before 60.

[Jonty]

Jonty I am taking the pills.Just to clear up something for you I was not a Teacher.
Is the system I suggested not the fairest of any of that have been mentioned?

Edwards - I've never said you were a teacher.

Pensions are a difficult subject for all sorts of reasons. They are long-term and people tend to think short-term; many people have understandably been put off them (here I'm taking about defined contribution or so-called money purchase pension scheme typical of many private sector schemes) because of mis-selling; and many women have lost out for a number of reasons.
Also pensions have been plagued by bad decisions such as many firms going for pension holidays when schemes seemed to be over-funded in the 1990s and Gordon Brown's raid on pension dividends, to name two.
I'm broadly in favour of the Government's approach which seems to be 1) change public sector pensions to make them more affordable 2) increase the State Pension 3) make it easier for women to obtain the full state pension by reducing the number of years and 4) bring in measures to actively encourage more people to suscribe to a pension which is properly regulated (many private sector workers don't have an occupational pension).
If I were starting from a clean sheet however I would probably incorporate some of the elements you suggest.
I think I would go for a good State Pension (say £8k) which would be available to all with 30 years NICs. In addition to that everyone would be required to contribute to an occupational pension along with their employer. This could be called The Second Pension, or TSP. The amount of contributions would vary, say from 3% to 10% for both employer and employee respectively. This money would be invested in the form of a personal portable pension pot which could be transported when the employee moves between jobs and sectors.
Everyone would therefore have the same pension arrangements but the level of contributions to the TSP would depend on their pensonal cirumstances and their employment/contractural arrangements.
What the TSP paid out would depend on the level of contributions, number of years worked and investment performance. Charges would be keep low and regulated firmly.
There would not be one pension arrangement for senior management, MPs, Company directors and public sector workers - and another for everyone else. Everyone would have the same arrangement.
The pension age would be extended and people who retire early would be required to do "voluntary" work 3 days a week. Every effort would be taken to try and ensure that people who retire through ill health could be given useful and productive part-time work which they could cope with.
I would abolish off-setting pension contributions against tax in order to reduce Exchequer outgoings given our financial position. Final salary and average salary pension schemes with defined benefits would be abolished.
But this is hypothetical. As I say I'm broadly in favour ofthe way things seem to be shaping up and impressed that the Government is at last taking action.
jonty

[thirdcrank]

I presume we can all agree that any occupational pension is a form of deferred pay - part of what it's now fashionable to call a "package." Whether in the public or private sector, that package is ultimately going to be decided by current market forces. (I've made the point that my own pay doubled overnight when Thatcher came into office because people were leaving faster than recruits could be trained. Incidentally, in those days, only a relatively small number of police officers retired on pension. Double the pay and you not only double the individual pension but a lot more people decide to stay on to qualify.) Since all public sector pay is, in the final analysis, paid by taxpayers as a whole, I suggest it may not make so much difference to the overall cost, how the package is made up. I fancy that in the case of some public sector jobs, the employer is keen to attract people for the long haul and may even seek to recruit "public sector types" if that means people who generally conform with the rules. It seems to me that the biggest difference between the public and private sectors is that the former simply has less scope to renege. OTOH, a company can reorganise, hive off the liabilities, including pensions, into a debt-laden "vehicle," export the jobs - not necessarily to the Far East - and sell off the factory site for housing development.

[blackbike]

Blackbike may I respectfully suggest you find out just how many of the legions you are mentioning do get such a pension you talk of.
As nobody has yet to come up with any figures for the numbers of people that get such wonderful pensions having retired before 60.

Civil service pensions have been available at 60 for ages, and therefore legions of people have taken advantage of that.

In the early 1990s my father, aged 60, was made redundant from a good job at an engineering firm. For 5 years he lived on benefits and the occasional low paid odd job. He could have taken his works pension at 60 but that would have reduced his pension by a large proportion for the rest of his life. His brother retired from a lower paid job at the local council two years later, also aged 60. He immediately received a better works pension than my father eventually got 3 years later at 65.

My father had contributed to his employer pension scheme for 34 years. His brother had contributed to the council pension scheme for 29 years.

As for people retiring before 60, a few years ago teachers were given the chance to retire at 50 with lots of years pension credits added to their pot, courtesy of the taxpayers. My sister's ex-husband was one of them. He was 51 when he retired.

The only person I know at my firm who was able to quit work so early on a nice pension was a woman who had cancer. She's dead now.

[philg]

As nobody has yet to come up with any figures for the numbers of people that get such wonderful pensions having retired before 60.

OK here's one

My father retired from the Police after 30 years service, aged about 49, on 2/3 pay, index-linked

My mother, who survived him, continues to live on a proportion of that pension over 40 years later

[Jonty]

Not long ago some teachers could retire at 50 with added years. If they had 25 years service they were given an added 6.66 years on their pension.
They were often asked to bid to be made "redundant".
They weren't deployed to other schools, or to other educational authorities or to schools in Inner City areas which have a shortage of teachers. Needless to say the schools involved continued to recruit new staff.
Things only changed several years ago.
Now instead of been able "to retire" at 50 they have to wait to 55 before having the option to retire but take the hit of a 5% actuarial reduction for every year they retire before 60. So a teacher retiring at 58 would have his or her pension and lump sum reduced by 10%.
Still an amazing deal of course. According to the information on the BBC website on the Teachers' Pension Scheme the average teacher's occupational pension is £10k which would equate to a private sector pension pot of over £300k to provide a pension with similar benefits ie index-linked and 50% of pension going to surviving spouse among other things (see BBC website).
Teachers' pensions are not of course funded by a pension fund; the pension payments come directly out of current taxation.
Most teachers I have spoken to don't even think their pensions arrangements are very good which just show how uninformed some educated people can be.
I think teachers do a demanding and difficult job but I don't see why as recently as several years ago many were allowed to retire at 50 on generous terms at the taxpayer's expense.
jonty

[thirdcrank]

Just to continue my package theme, afaik, it's never been a secret that a police pension comes with the job and so anybody looking for work who put a pension high on their list could apply (subject to being over 5' 8" no convictions etc) and be almost guaranteed a job, prior to 1980. Among those who did join, plenty decided that the pension wasn't enough to stay for and quit pdq. High on the list of attractions in some other jobs was the infamous company car. (Incidentally, largely popular because it was paid for "by the rest of us" out of tax breaks.) For an awful lot of younger people a car now is a much more attractive proposition than a pension later, but easy to forget with the passage of time.

Actually, one of the biggest police perks used to be the free accommodation or "a generous allowance, effectively tax free" as the numerous recruiting ads used to say (not seen many of them for a while, come to think of it.) That was summarily terminated for new recruits and frozen for everybody else, by Waddington when he was Home Secretary and needed to cut pay against Thatcher's promise to honour Edmund Davies. The irony is that it was locally negotiated and so recognised the difference between living in say London and some depressed part of the North East, so a government opposed to national pay negotiations reinforced them for reasons of opportunism.

Now, what was it everybody used to moan about teachers.....?

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ps philg

I'm not sure whether you approve of your late father's pension arrangements or not, but had he died in service while you were still in full time education, you would have been entitled to a police pension as well. The levels vary according to the circumstances - the highest being murdered dealing with crime.

[jan19]

I can see a case for some public employees to be given some form of taxpayer guaranteed pension levels for relatively short periods of service. We can't expect firemen, soldiers or even policemen on the beat to work until they are 65. But for the legions of council and civil servant office staff and many other public employees doing normal jobs, why should the rest of us pay higher taxes so they can retire at 60 or even earlier on pensions unavailable to us at 65 or even older

Present retirement age in Local Government is 65 for both men and women (unless you were 50 when reforms came in in 2006 in which case you can go at 60). Final salary schemes are being abolished, and scheme is already moving to an average career earnings pension.

NHS retirement age is 65, as agreed in Agenda for Change. Employees over 50 between 2006-2012 could opt to remain on the old scheme or move to the new one, terms and conditions as with Local Government.

I can't speak for the Civil Service.

I don't have time to look it up now, but I believe Lord Hutton found that a majority of us will retire with pensions of between £4k and £5k? That will certainly include me. Not sure the word "superb" is applicable here. 44 years work for £4k doesn't really strike me as excessive (not all at full time and with a gap in service but I'll still get to about 32 full years for that £4k)

Jan

[Guy951]

Many public sector types seem to have an overdeveloped sense of entitlement to other people's money....

To ask us for to provide fantastic pensions which we don't have ourselves is not just greed, its bad manners.

Keep on swallowing the ordure you read in the Daily Mail boy.

[reohn2]

I chap I've know for over twenty years is always complaining about public sector pensions,you know,the usual policemen retiring at 55 and enjoying life on the golf course,similarly so firemen,and how we don't need the level of cover given by the fireservice,etc etc,usual DM stuff(he is an avid DM reader swallowing the thing whole).However I usually shut him up by informing him that he could have quite easily joined the policeforce or Fire service or even encouraged his two sons to join the job was so good or if he liked running into burning buildings or apprehending criminals etc and how would he like to be doing that at 64 year old!
He was all for the Iraq war but again shut up fairly quickly when I asked when his two sons were going to enlist.
He is also planning to move to France for 6months of the years,he doesn't like it when I point out that France is a Socialist country.
The person who kicked off this fiasco of a thread is in receipt of public pension by all accounts but seems to have the same view as the present set of clowns in charge all who had a free college and university education,though most are from privileged backgrounds well able to pay for it,but now wish to impose even greater charges on students.
Its a case of do as I say not as I do with some IMHO.

[Edwards]

R2 the person also does not like my suggestion to solve the problem. I wonder why?

[Jonty]

R2 and Edwards - the thread has generated lots of interest judging by the number of posts and hits which is not surprising given the topicality of the subject. Also many different views have been expressed.
Do serious conversations frighten you to the extent that you feel oblidged to respond in a personal and unpleasant manner?
Also I've already responded to Edward's suggestion. I don't think it would work although if I were starting from a clean sheet of paper I would adopt some of the basic ideas.
jonty

[fatboy]

Chatting with a teacher friend of mine whilst riding out on Tuesday night and it occured to me that the plans to change pensions at the moment are purely about deficit reduction rather than long term viability of schemes. What they seem to be doing is re-balancing the contributions between employer and employee. Work based pension schemes tend to be based on the employer matching what the employee puts into the pension and I assume that the public sector schemes are working the same, but now the government wants to change this balance.

It can only be about deficit reduction otherwise they wouldn't be seeking to further upset public sector workers who are going to be affected (inevitably) by government spending cuts; otherwise they'd wait for the dust to settle, wouldn't they?

[Edwards]

Jonty you wrote a lot of things about how the past was wrong (including having a dig at teachers). My suggestion is for the now not the then.
You need to think of the future and how we can come up with a better public pension system.
Can you think of a fairer system then the one I suggested. So easy to do and cheaper to administer.
The only ones who have anything to loose are the rich or selfish.

[Jonty]

Chatting with a teacher friend of mine whilst riding out on Tuesday night and it occured to me that the plans to change pensions at the moment are purely about deficit reduction rather than long term viability of schemes. What they seem to be doing is re-balancing the contributions between employer and employee. Work based pension schemes tend to be based on the employer matching what the employee puts into the pension and I assume that the public sector schemes are working the same, but now the government wants to change this balance.

It can only be about deficit reduction otherwise they wouldn't be seeking to further upset public sector workers who are going to be affected (inevitably) by government spending cuts; otherwise they'd wait for the dust to settle, wouldn't they?

I suspect it's a mixture of both.
Presumably the Treasury has made calculations which indicates that by delaying retirement, increasing contributions by 3% for those earning over £18k and changing from a final salary pension to an average pension scheme they can both save taxpayer's money and make the system sustainable. If they are right and the proposals come into effect, the pension offer to public sector workers will still be much more generous than that available to most private sector workers many of whom don't even get an occupational pension.
Tesco I believe now has a pension scheme based on average salary which they changed to from a final salary scheme but they are a highly profitable and successful company which can afford it. Many businesses in the private sector won't be in this position.
It's a great pity IMHO that the nettle of unaffordable public sector pensions wasn't addressed earlier. Now is it, and hopefully public sector pensions can be put onto a more affordable and sustainable basis to the benefit of the taxpayer and public sector workers.
The present system is simply not sustainable and if left unchanged will collapse IMO.
jonty