Public sector pensions are still a great deal

31% of my Council Tax bill goes to fund the Local Government Pension Scheme.How much more are we expected to pay. And, if they do go on strike .............. how will we be able to tell ??

whats all this rubbish about how lucky people are when something has been taken away that is part of thier pay package i think it is about time people stopped being envious and started doing something about their own situation

Deb Wilson

Although some comment may be due to envy a lot are to do with the reality of the situation. It would be great for everyone to have final salary pension schemes but someone has to pay for that and the money is running out!

My employer doesnt even offer us a pension scheme and the company I work for claims to be one of the best pensions companies in the market!

Deb Wilson

Read the article again and then ask yourself how ordinary people in the private sector can ever hope to accumulate the sums of money needed to provide themselves with the pensions their taxes are helping to provide for public sector workers.

Good article, Lorna - it was about time somebody bit the bullet and said how fortunate public sector workers are.

Index-linking of pensions in payment is a nonsense, anyway. One of the characteristics of index-linking is that the pension rises throughout retirement. But when the pensioner wants most money is just after he's retired, not when he reaches 93 with no teeth and precious few marbles.

Deb Wilson,

Yes some people are envious, but not all, and in any case that does not mean that:

the figures quoted are wrong, or

that the country can continue to live on its credit card, or

that as a country we can continue to live with our head in the sand.

The cuts being made are only addressing the excess of spending over income. This spending was increased further by the last government when it made unsustainable promises to the 700,000 new public servants that the taxpayer would always bail out the pensioners in the public sector whatever the economic conditions, at the same time as not dealing with the existing problem of an unsustainable promise. The problem is indeed the promise. It goes to show how irresponsible it was to compound the problem by employing yet more public servants. It would have been better to reduce the workload by removing some of the soppy red tape and box ticking.

I agree strongly that we need to protect the very low paid public sector workers but as I am sure you are aware, there is a very wide range of public sector employees in terms of salary and I am sure that this is the reason for conflict in threads like these.

Sandy,

I did that and came to the conclusion that within a ten year period, I need to put £850,000 into my pension pot.

The union reaction is typical, they just have not moved on from the 70's. The Hutton report is very fair, accumulated rights under the old system will be protected and in effect all he has done is to reduce the disparity between public and private pension benefits but still left the public sector better off with the continuation of defined benefit based schemes. I hope the government grasps the nettle and gets on with implementing the reforms. I wonder how successful the call for strike action will be? Many union members have family who work in the private sector and see for themselves how lucky they are. I cannot see the strikers getting much support from the general public, the majority of whome live in the real world.

dd

I've been saving- and paying tax- for 30 odd years,I've done the arithmetic and I know,even if their recipients do not,what a fantastic deal index-linked final salary public sector pensions (still) are.

The statement "Paying NI contributions is one of the best investments you can ever make" seems dangerously misleading.

Firstly your calculations are based on someone earning an average income only. The more you actually earn above the average, the less good NIC contributions get as an investment.

More importantly, the decision to exclude growth because the government does not invest the contributions is totally spurious. The correct comparison would be that if I kept my contributions to fund my own retirement I most certainly would invest them and would benefit from significant growth over 30 years.

These two glaring errors leave a gaping hole below the waterline of your argument.

The answer is simple. If these pensions are such a bargain, apply for a job in the public sector (unless, of course, other aspects of the package don't appeal)!

All workers should pay in the same contributions and receive the same pension at retirement. Those who wish to have more money in retirement should bloody well save for it out of their astronomical wages.

When Gordon raided private pensions to the tune of £8 billion a year he applied the change in dividend tax to ALL private pension funds not just to funds built up after his tax raid. When Gordon raised the minimum age that a private pension could be drawn from 50 to 55 it affected EVERYONE not just those starting new personal pension. The coming reduction in maximum drawdown from 120% GAD to 100% GAD will affect ALLthose in drawdown not just those new onesfrom April

So its alright for the Govt to make retrospective changes to private pension contracts taken out in good faith by the policyholders

But woe betide the Govtmenent for making changes retrospectively to public sector pensions.

ALL public sector pensions including MPs and judges should be made paid up with immediate effect and replaced with membership of NEST

Let them all go on strike no one would notice

As a public sector working im consider to be very lucky that I have a great pension. I agree that we all have to pay more and work longer to achieve the same benefits that have been enjoyed my millions of workers who have already retired. The point I would raise is that when I worked in the private sector I received shares and other benefits which more than made up for the fact I did not have such a good pension. To compare the public sector pensions against the private sector pensions forgets to point out that private sector employees have access to other benefits that will never be received in the public sector. I also worry that the debate should be more focused on how can the private sector pensions be improved to stop the potential race to the bottom because its clear the state is not going to be able to provide for us in are old age

I am a Public service pensioner (ILEA) and am fed up of this argument. Local Authority pensions are simply the result of careful money management and investment in the sometimes quite crooked 'market' The spreading of incorrect and malicious comment by some writers needs to be challenged. Remember BCCI, Equitable Life? Never mind the near fraudulent private pension scandal.

It really makes me laugh when these public sector workers say ' if it is so good then get a job in the public sector ' !! It just shows how clueless they are about the real job environment and their own artificial environment - too busy on training courses, fact finding missions, applying for ' early release ' (Another public sector scam), building their empires, attending meetings and attending meetings about meetings, I guess !! In my experience, the public sector recruiting system is heavily biased / exclusive to existing workers and ' outsiders ' are very rarely let in at anything other than the bottom. Even people doing EXACTLY the same job (e.g a serviceman on secondment to the Defence Procurement Agency (DPA) or a senior trainer / manager in a training college ) are not let in to the DPA or a senior teaching role because of this biase - it is usually dressed up as not having the right ' competencies' !!

I think that public sector pensions are generous.

However to see self employed people to come on critising them is a bit rich.

People in the public sector pay more of their income in taxes whether they like it or not.

As a self employed person I can remember telling my accountant I wanted to invest a lump sum at the end of the tax year in a private pension only to be told I couldn't because I wasn't paying tax .

After working most of my life in the City, I worked for a number of years for a local authority, until I retired a few years ago. Even at that time there was talk of reforming the pension scheme and unions were trying to stir us up to feel aggrieved at the prospect of reform. I tried not to get involved in this, as, like many of the correspondents above, I knew that the Local Government Pension Scheme was underfunded and would not be viable in the long term. Reform had to come and the present proposals seem very moderate in the light of the experience of workers in the private sector.

Just one thing I would like to say, not on the subject of pension schemes: why, when they are talking on television about council workers, do they always seem to show dustmen, who these days are almost always employed by private sector contractors. If they are still working for the first contractor that took over the refuse collection, they may still have the equivalent of public sector pensions, but I believe that if they are transferred again, to a second company, they lose that benefit. As far as I know, these workers do not have a say in the process, they are transferred willy nilly under the Transfer of Public Employee rules (TUPE).. I suppose it is that dustmen are easier to film than say social workers or invoice clerks.

Just as one side of the argument focuses on pensions of the average and the better paid public servants, the other side often quotes private sector final salary schemes. ("I know someone who ..." in the past.)

We haven't yet seen the scale of the damage to the private sector because many of those with dc pensions haven't retired yet.

Sandy,

I read that we need approx £35,000 in our pot to produce £1,000pa index-linked pension.

Please correct me if I am wrong, anyone.

Abosolutely correct dd - try Hargreaves Landsdown annuity quotes.

Deb Wilson - those in the private sector have taken pay cuts. lost their jobs and so on without a decent accrued pension. No one has a right to continued employment if the employer cannot afford to employ them. Those in DB schemes have seen an unprecentated rise in their accrued benefits as life expectancy has increased, annuity rates have fallen and so on - far beyond that expected by them and the public when they were enrolled in the present pension schemes. So there is no question of breaching the original expectations.

I put it to you fair and square - should others - mainly our children and grandchildren - live in poverty to pay for unexpected grossly increased costs of funding your pension, whilst their parents and they see all they have worked for disappear in the rampant inflation and demise of Sterling?

As has been said before, many changes were retrospective on private pension funds. We, the members have taken the hit. Now selfish public employees are complaining about changes which are minor in comparison. Now. if ALL public and DB pensions were to be reduced by 50% THEN THAT MIGHT BE EQUITABLE :-)

I have been drawing an NHS pension for 2 years and it feels as if I won a draw. When I was a civil servant I had a nil contribution scheme, 6 weeks holidays, a subsidised restaurant, profitable expenses, air conditioned offices, limitless training, (almost)forced promotion! This cant go on - for others of coarse! Some also took advantage of the no questions asked following reported sickness absence.

When are we going to stop the robbing private pension fund managers? And, I wouldn’t touch Hargreaves Landsdown with a barge pole.

Has anyone noticed that the gold plated pension scheme enjoyed by MPs has been excluded from the Hutton report ? Was it a condition of his appointment that MPs pensions were not to be mentioned ?

RippedOff

"When are we going to stop the robbing private pension fund managers?"

Have you got any evidence to illustrate just how private pension fund managers are ripping people off?

Si

This "race to the bottom" meme is a red herring played up by the unions to disguise what an incredibly good deal their members get from the rest of us.Similarly,it is often said that the only reason private -sector pensions are so poor ,relative to the public sector,is because of robbing employers,fund managers etc.etc.

This clouds the facts,which are that people are living longer and that the defined benefit pension schemes ,set up in a different age when life expectancy was much lower,can no longer be afforded without substantial changes.

This has been recognized by private- sector companies who,in order to protect their financial viability,have been obliged to make changes to bring their future liabilities into line with their ability to meet them.

There is only one way that private sector pensions can be improved and that is for people to contribute more to their own pension.Most people are not in a position to do that,as the unions know very well yet still they keep pushing this line that it is the private sector which is out of line here.

Personally,I have no objection to anyone ,private or public sector,receiving a decent pension.

What I do object to,bitterly if you haven't already guessed,is being so heavily taxed in order to help provide as a taxpayer approximately 80%of the cost of public-sector pensions,that I have so little left over to provide for my own pension.

As has been pointed out before,many private sector workers are now contributing more in tax toward public-sector pensions than towards their own pension.

Frankly,it adds insult to injury to realise how many in the public sector still fail to understand by how much the rest of us are subsidising their retirement at the cost of our own, as evidenced by some contributions here.

"I have no objection to anyone ,private or public sector,receiving a decent pension."

- Agree.

" ...it adds insult to injury to realise how many in the public sector still fail to understand by how much the rest of us are subsidising their retirement at the cost of our own." from above.

- Agree.

Well done to those in the public sector who have acknowledged the good deal they have! Well said and I genuinely wish you well.

The anwser is straight forward.

1/ Change the current Strike Legislation to a 100 % ballot of members and 55 % in favour of a strikebefore it can go ahead..

2/ Privatise the lot of them.

1st of all we had greedy bankers now we have GREEDY PUBLIC SERVICE UNIONS . This is a politically motivated strike and nothing whatsoever to do with pensions.

John why don't you send the army in you don't know what you are talking about.

Your probably a fund manager or financial advisor laughing your way to the bank while us who have private pensions suffer your arrogance and complete failures.

Pension Man

Fund holders are getting ripped every time beating the benchmark triggers a bonus for the Fund manager even though the fund has made a loss and the benchmark in cases has dropped 32% over the last 2 years

Sandy (19th March, 11:07): Good points, well-articulated.

My former employer, a private-sector organisation, changed its final salary scheme back in mid-2007, to combat the £130m pension-fund shortfall.

Regrettably the company's insolvency, end-2008, has meant that my 14 years' contributions may - if I'm fortunate - give me around 80% of the pension value I would have received. This, however, is not yet confirmed - I may receive far lower.

Regardless of what decision is eventually made by the Pension Protection Fund, I've opened a SIPP and I take responsibility for my pension hereon in.

Everyone seems to be missing the point here. The pension landscape in this country has changed. This has come about for a variety of reasons, the main one being the cost. It has been obvious for some time that civil service and local council pensions will have to be altered just as private pensions have. Eventually we arrive at a point where national insurance contributions are far higher and so is the state pension. This will mean that there is far less reliance on any non-state pension.

Pension Man

bb42 put it well. Except beating the benchmark is quite a novelty for most! Perhaps, if they fail 2 yrs in a row, they should forgo all fees.

Other "professionals" are expected to take on the responsibility of an "expert" in their feild. EG an electrical engineer designs a system based on likely use (for the sake of economies) not maximum demand. If he gets this wrong, he can be held to account.

The Fund Manager just reports under performance (those who can see thro the jargon) and ist business as usual.

Anonymous 5.

I hope that you are right, at least for my children. I have said before that that should happen.

I wonder if any improvement in state pension would be applicable to all age groups including those who have been hit by the closure of final salary schemes/Equitable Life saga etc?

My other observation is that this still does not deal with the public sector workers who feel aggrieved that their pension contract is not being honoured - so it doesn't fix the problem of strikes and union activity.

Do you have any idea about these points?

How many people in the private sector have 15% of their salary put into pension payments from their first day of employment like teachers? I did not have the starting salary of friends who had similar qualifications when I took up a job as a teacher. I did not have a company car, subsidised canteen facilities or rapid promotion and my salary was considerably below theirs. When the teachers superannuation scheme was massively in surplus in the late 70s and 80s I did not hear anyone complaininmg about this money subsidising government spending then. I relied on the government carrying out its promise to provide an adequate pension after 40 years in the job.

Why has there been a massive shortage of teachers especially in science and maths if the pensions were so good?

There seems little to add, I have a small public sector pension [only small because I only stood working with such overstaffed overpaid underworked ungrateful people for 8 years]. I also have several private pensions where I know what the real cost was. Unfortunatly there are far too many uninformed unrealistic people such as deb wilson. It is high time the puiblic sector unions had their powers curtailed and that there membership were given no option but to accept the real figures rather than living in cloud cuckoo land, together with a large section of the labour party.

John - you fail to note the percentage contribution the taxpayer makes, and you appear to have a very rosy picture of private industry.

I am semi-retired working part time for a small consultancy to make ends meet. They employ graduates starting at £17k and rising to £33k for a senior consultant. There is a gym membership BIK, but no cars, car allowances, pension contributions or subsidized lunches. And if the work dries up then there are redundancies with only statutory pay. There is just 4 weeks holiday, and long hours travelling to clients is expected.

There are thousands of people working for private companies like this. Do not confuse yourself with the few generous large companies. The reason these people work for such low rewards is that they enjoy the work, the excellent camarade, and the experience they gain.

There are very many good teachers, but also far too many bad ones, who rarely get fired. And there are few science teachers as it is so hard to teach many kids with short attention spans which means that there are few science graduates and so it goes in a circle. The best graduates rarely want to teach under current conditions in our schools, so often the ones who do are second rate - I have been amazed at the lack of basic knowledge displayed by many teachers when I was selecting schools for our offspring.

Stand by for an explosion of wrath from the teachers now :-)

One sign of an advanced civilised society is the provision it makes for citizens in their retirement and old age.

When 5% of the UK population control 95% of the wealth, it means employers satisfy their already rich shareholders at the expense of employee benefits such as decent pensions.

It is wrong to scoff at public sector pensions as "too generous", when the real problem is the disgraceful level of provision of private sector pensions by employers - a situation condoned and encouraged by governments.

The real problem is the level of poverty in UK pensioners, which really weakens the economy and makes the country appear to be the workhouse of Europe.

The question of "affording" these pensions seems absurd - how can the country not afford to provide decent pensions for all?

Anonymous 6:

Most private sector pensions are not provided by their employers! Whatever made you think they are? Final salary pensions are a dying (almost dead) breed. They exist amongst those who have retired mainly. This is what is visible and causes misunderstandings, I believe. No, the existing private sector workers take the market risk themselves - and most of them are not "already rich" shareholders. Yes, they are shareholders because they are desperately trying to build up a pension pot which will provide a respectable income at retirement. Don't forget - £35,000 is needed in the pot to provide £1,000 index linked income ... per year.

I am a fortunate recipient of a public sector pension. And indeed a member of the baby boomer generation which has been accused of pillaging the legacy of future generations. So guilty on both counts! Unfortunately we only become aware of these things in retrospect so not a lot we can do! I don't intend to use this post to join in the sniping and petty resentments sadly evident in many of the previous posts. It is disappointing that some choose to personalise an important debate with such perjorative statements as “ selfish public employees” and “overstaffed overpaid underworked ungrateful people”. I can only assume that the authors of these remarks have experience of a public sector that I didn't come across in 38 years, or have simply swallowed the perceived myth about the public sector. I can't argue that many of the current public sector pension schemes are no longer affordable by a country in a very different economic situation than the one which obtained when these schemes were first introduced but the debate needs to be conducted objectively and without being skewed by the politics of envy and personal enmities evident above. Needless to say I will use the good fortune of my pension and what modest wealth I have accumulated as far as I can to relieve the taxpayer of the burden of my old age and for the benefit of my children whose financial outlook is a lot tougher than mine was at their age.

Geoff S,

I thank you for acknowledging that you are fortunate and in your position I would do the same (re children) so this is not criticism. I agree that:

"the debate needs to be conducted objectively and without being skewed by the politics of envy"

However, if it were left to the recipients of the public sector pensions, would any debate about affordability be had? The taxpayer can always pay! Sadly, it is only by comparing with the private sector schemes (which can only pay out what is affordable) that lessons will be learned. Certainly there are some misconceptions in both camps. Top earners are the visible ones, always quoted.

On one side, I am aware that there are many different public sector schemes and also that there are a wide range of employees in the public sector in terms of salary, with differing contribution levels.

On the other side, to have a (private sector) employer paying my pension (as was believed above)? Wow, that would be nice! I wouldn't have to worry about all the vagaries of the stock market, I wouldn't have to take risks with the investments in my pension pot, I wouldn't have to spend time reviewing markets and trying to make switches at the right time or deciding whether action is needed in response to a world political or geological event, I wouldn't have to put up with comments by people assuming that I am rich because I own shares through my pension pot or that I am insensitive because at a time of world crisis I also need to pay attention to my pension investments. I could spend time talking about the humanitarian issues. Yes, it would be nice if an employer simply paid a pension monthly and took all the risk. Actually, it is what I was promised by my main employer, before the final salary pension was closed. The transfer value into a dc scheme will now buy about one fifth of what I was promised. I don't want sympathy. I am simply saying that this is how the numbers work out and I wish that there were more people like you who acknowledge the situation and do not deny its existence.

(Sorry, that was not very objective.)

RippedOff and bb42.

Your comments relate to fund managers - not pensions managers. Two very different things.

Thanks.

PensionMan,

Pension Managers = even worse performance

RippedOff

Why do you use pension managers then? Get a SIPP, choose your own investments, instead of having a swipe at all pension managers.

ripped off,

Pension managers are supposed to be professionals with their finger on the

button managing our pensions.

Bankers are supposed to be professionals looking after banks thats what they are overpaid for.

They are supposed to do what they tell you they will do.

You don't ask a builder to build a house and then say oh just leave it i'll do it myself.

PensionMan & bb42

I use an exicution only broker and most of the fees are rebated to me.

Even a builder, if he carries out shody work, can be sued. But underperforming "financials" !!

Nearly one third of all Council Tax goes on indexed linked Pensions. No wonder they paint white lines over pot holes. The number of Policemen who are only in it for the over generous pension plus the final capital pay out at around the age of fifty is legion. They all have little businesses waiting for them in some congenial occupation with plenty of free time to supplement their over generous payouts. No need for promotion keep your head down get a cushy number for the last 4 years(Schools liason officer) Better still Press officer or spokes person.. What about the Superannuated Mandarins with multi million pound Pension Pots? Not to mention the thousands of so called workers in the Inland Revenue who are pressing Buttons on ill conceived Software Programme which makes the Computer spill out million of incorrect code numbers with an invitation to telephone as to why it is wrong. Then to add insult to injury it is nigh on impossible to ever get through. This all adds up in my book of taking Tax Payers' money as INDEX LINKED pensions under false pretences. Everybody now knows unequivocally that the Tax Payers cannot afford to pay these grotesque Pensions unearnt anymore.

It is totally hypocrtical how public sector pensions can remain largely unfunded, yet private schemes have very harsh rules towards the funding of their own schemes and tie millions up for years while the government just waits and waits in the hope that a future government will make future tax payers foot the bill.

Also, I think the unions will get very little support if they try to strike. Many of my friend work in the public sector and said that while it was annoying the change from final to average salary, they accepted they had a generous pension. Albeit, salaries are slightly lower imo, in the public sector.

Personally you know the benefits when you accept a job anywhere. I would hate to work in the public sector, but for some people who are happy just to clock in and clock out and only ever have modest aspirations, it suits them.

How sad that Public and Private sector employees are at each others throats.

Adequate pensions for all are perfectly possible.

Where have you all been for the last 60 years??

You are acting as if the present scenario is permanent. It isn't. The debt crisis after 1945 was much worse but good final salary schemes were the order of the day.

There were two differences then:

1. We had a government with a social conscience.

2. We did not have the ever growing army of greedy fat cats earning £1m plus salaries for work of little value.

James - in 1945 people died in their sixties and early seventies. They retired at 65 and on average had a pension for around 5 years. Now many public employyes reture at 60 (much earlier for police and fireman) and draw their pension for over 25 years.

So we are in a completely different ball game, with a huge accrued pension deficit. And our debt crisis taken as a whole is far far worse than 1945 - take the gross acculumulated deficit published by the Treasury. Add the offsheet liabilities such as PFI, Network Rail, London Transport etc. Then add the pensions giving a total of £13 Trillion or a pile of £50 notes each 0.11mm over 600 miles high. Jo average just cannot comprehend the scale of the problem and complains of cuts, not realising that he and our government have been living beyond their means for a long time. Just work out how much we owe per person in the UK and you will be staggered.

So now we have a coalition with more of a social conscience than the last lot who are belatedly doing a littlem but not enough, to help our children and stop us carrying on in this unsustainable way.

Yes - adequate pensions are possible, but only if we all work longer and take a pay cut. Back in 1945 there were 8 years of work to fund one year of pension, so, on an average salary basis only 6.25% contributions were required for a half salary pension. Now we need 35% and quite a bit more for final salary pensions.

Yes - a different ball game from 1945

We used to have a good scheme for funding private sector pensions, which were the envy of Europe. In fact pre the arrival of Brown it was the most adequately funded in the world. I am on record on the day of the election of the Labour Party under Blair and Brown as saying "I bet Brown gets his knife into the private sector pension funds". He sure did and has taken out £5 Billion per annum throughout the life of Labour in power. This is called redistribution in left wing parlance . I call it theft. The index linking of public sector pensions, unfunded was a recipe for disaster in actuarial terms with the population age steadly rising annually. This they merely ignored to feather their own nests,and trust to unarrived growth to cover the forecastable deficit,which can only be met by increasing taxation. We clearly have utter nincompoops as politicians or are they really unscrupulous knaves?

Absolute rubbish from Jon.

Private sector final salary schemes were perfectly viable until about 20 years ago when companies were advised by their short-sighted actuaries that they good take a 'contributions holiday' which they gleefully did.

Life expectancy hasn't changed much since then and the post war spike in births (the baby boomers who are now 65 ish) will pass.

My original point, Jon, was that pensions are a long term game and we should not be blown about by a few squalls.

This is the 21st century and we are allowing ourselves to be taken back a hundred years by the doom and gloom merchants who are talking up the so-called pensions crisis. A small adjustment in contributions from both employees and employers and no more 'pensions holidays' are all that is required.

Don't throw the baby out with the bathwater!!

... but there are hardly any private sector final salary schemes left.

People who are retiring now are in many cases the last few for whom the final salary scheme was left open.

Those who will retire in a few years' time will be dependent upon their dc pensions which will pay less than half the value of the final salary schemes.