Public Sector Pensions Are Affordable And Set The Standard For Others

[Guest absolutezero]

groundless hearsay

that would be a shame if it were that simple. it's just the country's f*cking bankrupt and everyone else is having to make cutbacks - be the whipping boy, call it what you will

we're all equal in this - or we should be.

That'll be the opposite of the public sector having a whale of a time during the boom!

Let me assure you, we didn't and while the private sector was enjoying payrises of 5-10% (as reported by many on here at the time), I was getting 2.5%.

Seems like the ones throwing their rattles out of the pram and stamping their feet are the private sector who want their cake and to eat it.

EDIT

Ask yourself who bankrupted the country.

Oh yes... The private sector.

Edited July 31, 2009 by absolutezero

[Guest happy?]

groundless hearsay

that would be a shame if it were that simple. it's just the country's f*cking bankrupt and everyone else is having to make cutbacks - be the whipping boy, call it what you will

we're all equal in this - or we should be.

Right.

There was previously an unwritten assumption that in the good times the public sector lagged behind the private and got paid less, but job security in economic decline and a steady income offset the lower pay rates. What now appears to be being called for is a process by which public sector employees are worse-off in both peaks and troughs of the economic cycle - the justification for this is as I say, the politics of envy.

This is delusional.

It's perfectly possible to have a rational debate about how to fund final salary schemes (in both public and private sectors) HPC just doesn't appear to be that forum.

[Si1]

That'll be the opposite of the public sector having a whale of a time during the boom!

Let me assure you, we didn't and while the private sector was enjoying payrises of 5-10% (as reported by many on here at the time), I was getting 2.5%.

since this site has started? not my experience - low payrises have been common in the private sector since early 2000s, altho I can't speak for all jobs

EDIT

Ask yourself who bankrupted the country.

Oh yes... The private sector.

very foolish - were the govt and the FSA public bodies overlooking the banks? was a deficit built up during the good times of roughly £1000 billion by the public sector, based on never never land economics? and how does £ 2-300 billion bank bailouts compare to that? do you not count as part of society? do you think 99% of people in private sector jobs are as culpable as the top dogs in banks?

[Si1]

Right.

There was previously an unwritten assumption that in the good times the public sector lagged behind the private and got paid less, but job security in economic decline and a steady income offset the lower pay rates. What now appears to be being called for is a process by which public sector employees are worse-off in both peaks and troughs of the economic cycle

untrue.

you yourself say lower public sector pay was offset by better conditions - I would add, fairly, better pensions - so tacitly say it wasn't poor at all. Then you go on to say it was poor. You contradicted yourself.

[Guest absolutezero]

very foolish - were the govt and the FSA public bodies overlooking the banks? was a deficit built up during the good times of roughly £1000 billion by the public sector, based on never never land economics? and how does £ 2-300 billion bank bailouts compare to that? do you not count as part of society? do you think 99% of people in private sector jobs are as culpable as the top dogs in banks?

Why should they have the public sector looking over their shoulder? Are you saying the private sector is somehow dodgy?

You'll notice the money was pretty much instantly available to bail out the failed private sector.

Of course I count as part of society. I don't think I should be used as a scapegoat though.

Do you think that 100% of people who work in the public sector should suffer because of the private sector's greed and inability to regulate itself?

[Injin]

Why should they have the public sector looking over their shoulder? Are you saying the private sector is somehow dodgy?

You'll notice the money was pretty much instantly available to bail out the failed private sector.

Of course I count as part of society. I don't think I should be used as a scapegoat though.

Do you think that 100% of people who work in the public sector should suffer because of the private sector's greed and inability to regulate itself?

I think you need to have a decent, concrete definition of what public and private mean and also what the difference is.

[Si1]

Why should they have the public sector looking over their shoulder? Are you saying the private sector is somehow dodgy?

are you not audited and monitored? completely reasonably?

You'll notice the money was pretty much instantly available to bail out the failed private sector.

you may be surprised that everybody else was pretty disgusted too - but your stupid stupid stupid view that banking somehow constitutes the whole private sector is absurd and frankly disturbing. Have you gone into your local florist lately and told them off for selling 5x salary mortgages? Blamed the record store for seling dodgy CDOs? Do you think they are deserving scapegoats for your comforts, or just coping?

Of course I count as part of society. I don't think I should be used as a scapegoat though.

Do you think that 100% of people who work in the public sector should suffer because of the private sector's greed and inability to regulate itself?

illogical baseless selfish entitled dangerous and feeble minded. sorry but your projection of blame for a few nasty people onto the whole private sector belies the fact that you appear totally unaware of where the f*cking money comes from. You haven't addressed the deficit built up during the good times - you took the paycheck, now you just wash your hands as if you couldn't be implicated.

[Guest absolutezero]

are you not audited and monitored? completely reasonably?

Yes. But I am paid with what you would desribe as public money so that's not entirely unreasonable.

Banks until recently weren't paid for with public money.

you may be surprised that everybody else was pretty disgusted too - but your stupid stupid stupid view that banking somehow constitutes the whole private sector is absurd and frankly disturbing. Have you gone into your local florist lately and told them off for selling 5x salary mortgages? Blamed the record store for seling dodgy CDOs? Do you think they are deserving scapegoats for your comforts, or just coping?

No but I do hear about car companies and other private sector firms sniffing around the public money pot. Where does it end?

illogical baseless selfish entitled dangerous and feeble minded. sorry but your projection of blame for a few nasty people onto the whole private sector belies the fact that you appear totally unaware of where the f*cking money comes from. You haven't addressed the deficit built up during the good times - you took the paycheck, now you just wash your hands as if you couldn't be implicated.

Quit with the insults. It just shows you're losing the argument.

I can't be held accountable for a spendthrift government's policy and they should have built up reserves in the good days. Just as the private sector should - but didn't.

By your logic (as a private sector worker) you should be held accuntable for the failure of the banks but you choose to wash your hands. Tut. Double standards.

I see no reason why the government should not honour its commitments because of poor financial planning.

I also think failing private sector businesses should be left to go to the wall rather than being bailed out by public money.

There were clearly defined boundaries between what was the government's responsibility and what was businesses responsibility. Those lines are now blurred.

[Si1]

Yes. But I am paid with what you would desribe as public money so that's not entirely unreasonable.

Banks until recently weren't paid for with public money.

private companies are audited too for varuious reasans, laws need to be upheld, honest business done. Reasons banks need, and have always needed, regulation is because they are intrinsically, from the nature of the work they do, selfish greedy b*stards of one form or another. The Bible identified this with the money lenders, this is nothing new. The nature of the work they do will always require regulation.

No but I do hear about car companies and other private sector firms sniffing around the public money pot. Where does it end?

agreed. it is outrageous. I am for small govt in all forms and unfettered (and unsubsidised) markets.

Quit with the insults. It just shows you're losing the argument.

either that or I am genuinely frightened at the state the world is coming to. It depends whether you think I care that much what you think anymore.

I can't be held accountable for a spendthrift government's policy and they should have built up reserves in the good days. Just as the private sector should - but didn't.

true, so why should you as an individual have a greater right NOT to shoulder part of the - unjust - burden as we all do?

By your logic (as a private sector worker) you should be held accuntable for the failure of the banks but you choose to wash your hands. Tut. Double standards.

no. accepting a shared financial burden is not the same as being held accountable.

I see no reason why the government should not honour its commitments because of poor financial planning.

because the money isn't there. that is a perfectly good reason. I am genuinely sorry about this, for all of us.

I also think failing private sector businesses should be left to go to the wall rather than being bailed out by public money.

agreed

There were clearly defined boundaries between what was the government's responsibility and what was businesses responsibility. Those lines are now blurred.

also agreed. this is dangerous and scary.

Edited July 31, 2009 by Si1

[Wayo]

a few qs:

(1) are you assuming annuity rates will fall in the future?

(2) do people really need that much for a comfortable retirement? there is a tax-advantage (lower income tax for pensioners) so 20k goes further anywaym, and many of the costs of a working life are circumvented

I have assumed annuity rates as a constant, which is rather optimistic. If you said life expectancy for men would rise over 43 years to that of women today, that would be about 10% lower.

The are some small income tax advantages, and yes the mortgage is probably paid for.

As might be expected I made a huge mistake earlier and only calculated pay increases at 3.5% instead of 5%. This had the effect of making investment return rise much faster than salaries.

A male retiring at 65 after 43 years contributing at current annuities, with no lump sum, would need by my calculation to save:

20% to get 2/3 of final salary, 25% to get their starting salary + inflation, 30% to get their full final salary

Working for 40 years: 22%, 27%, 33%

Assuming approx 10% decline in annuities to the current female rates working 40 years: 24%, 30%, 37%

And assuming retirment at 60yrs after 40yr service: 30%, 37%, 44%

So even under the newer schemes like the teachers, new entrants who joined after 2007 paying 6.4% for 2/3 final salary at 65yr with 40yr service looks about 4% underfunded based on the current female annuity rates, with further downside risk. And so far everyone in the scheme before 2007 (retiring before ~2047) will keep the right to retire at 60 under the old lump sump / pension arrangements.

New entrant employee contribtions of 6.4% look to cover about a quarter of their employment retirement costs with the taxpayer paying the remainder and the state pension to boot. Those who joined before 2007 far less.

[Guest absolutezero]

either that or I am genuinely frightened at the state the world is coming to. It depends whether you think I care that much what you think anymore.

So from that I shall assume it's all about envy.

I imagine you're a member of the "I have a crappy pension and he has a better one than me so we should make his crappy as well" brigade.

The private sector pretty much got rid of its unions with the false appearance of growth and false promises of good pay rises for the forseeable future.

Now the picture has turned sour and the private sector employees realise they can't fight the bosses on their own, it's all getting a bit unpalatable that some sectors had the sense to stick together and fight rather than every man for himself.

Hence, envy.

true, so why should you as an individual have a greater right NOT to shoulder part of the - unjust - burden as we all do?

no. accepting a shared financial burden is not the same as being held accountable.

I've already shouldered my bit by having below inflation pay-rises and lower rises than the public sector.

because the money isn't there. that is a perfectly good reason. I am genuinely sorry about this, for all of us.

Incorrect. The money is there. Lots of it.

[FreeTrader]

It's perfectly possible to have a rational debate about how to fund final salary schemes (in both public and private sectors) HPC just doesn't appear to be that forum.

I'd agree with that, but probably not for reasons you'd be comfortable with.

Instead of accusing those who argue that the UK will not be able to afford these pensions as being driven by envy, let's stick to the financial position.

Perhaps the principal proponent of the argument that the Government is not adequately recognising the escalating funding cost of public sector pensions is former BoE economist Neil Record, who has published his research on the subject through the Institute of Economic Affairs. His January 2008 report on the issue can be found here (PDF).

A quote from this research piece:

The public sector pension liabilities we are dealing with are unfunded. The

Government has created liabilities (debt) in the future against which it has not

provided any assets, even though it has charged employers and employees an

annual cost, albeit one which is far too low.

What happened to the pension contributions received by the Treasury? It has

spent them. They have been spent as if they were current income, instead of a

payment to cover a future liability. The effect of this ‘hidden borrowing’ is to hide

not only a much larger Government deficit than is reported, but to also hide the

interest cost of the borrowing.

Now, I'll freely admit that I'm no expert on public pensions and I've only chimed into this thread as a somewhat dispassionate observer. However I do understand the concept of present day value of future liabilities. So, do the critics of Mr. Record understand this too?

Here's a very recent piece from David Lipsey, Chairman of 'Straight Statistics', who is noted as "a member of the House of Lords, a political journalist and former Deputy Editor of The Times". His article is in response to a document from a group named 'The British North-American Commitee' which no doubt has its own agenda, but the basis of this group's argument was based on Neil Record's research.

Here's what Mr Lipsey has to say in his article entitled "Nonsense about public sector pensions":

The British North-American Committee sounds a solid enough organisation and its document “The need for transparency in public sector pensions†sounds staid, even dull. Yet The Guardian  headlined  the report “Cost of Public Sector Pensions equal to 85 per cent of GDP, thinktank warns.†This is spin on a scale worthy of the late Joseph Stalin.

The figure is based on an assessment of the total net liabilities of UK public pensions put at $1,267 billion dollars. It then compares this with Britain ’s current GDP to come up with – hey presto! - the 85 per cent  figure.

 

The innocent might think that this means 85 per cent of our GDP in future is going to go to support those getting public sector pensions, leaving just 15 per cenr for the rest of us. This is plain rubbish (as Polly Toynbee briefly pointed out in a subsequent Guardian article).

 

The liability to pay public sector pensions is stretched over many, many years – from now until the last existing public sector employees dies. It is a statistical howler that would make an “O†level student blush to compare this with the figure for GDP for a single year. To make matters worse, we can safely expect GDP to increase over the years to come (if it does not neither will pensions, reducing the actual liability). So the proportion of present GDP represented by the liabilities is even less relevant. What matters if anything is the proportion of future GDP that they represent.

 

Such nonsense does nothing to forward the important debate on the affordability of public sector final salary pension schemes.

So, who's right? Let's ignore prejudices, moral arguments about contractual entitlements etc. and stick to the points raised in Record's piece regarding discount rates and funding, and your refutation of his analysis. I'd also like to know whether you and AZ agree or disagree with Lipsey's arguments against Record's claims, and in particular whether you agree that Mr. Record (indirectly) is "guilty of a statistical howler that would make an 'O' level student blush."

[Guest absolutezero]

I stand by what I said.

Public sector pensions ARE affordable, ARE deferred salary, ARE a contractual entitlement and people who try to say otherwise ARE jealous that someone has a better deal than them.

Edited July 31, 2009 by absolutezero

[Si1]

I have assumed annuity rates as a constant, which is rather optimistic. If you said life expectancy for men would rise over 43 years to that of women today, that would be about 10% lower.

The are some small income tax advantages, and yes the mortgage is probably paid for.

As might be expected I made a huge mistake earlier and only calculated pay increases at 3.5% instead of 5%. This had the effect of making investment return rise much faster than salaries.

A male retiring at 65 after 43 years contributing at current annuities, with no lump sum, would need by my calculation to save:

20% to get 2/3 of final salary, 25% to get their starting salary + inflation, 30% to get their full final salary

Working for 40 years: 22%, 27%, 33%

Assuming approx 10% decline in annuities to the current female rates working 40 years: 24%, 30%, 37%

And assuming retirment at 60yrs after 40yr service: 30%, 37%, 44%

So even under the newer schemes like the teachers, new entrants who joined after 2007 paying 6.4% for 2/3 final salary at 65yr with 40yr service looks about 4% underfunded based on the current female annuity rates, with further downside risk. And so far everyone in the scheme before 2007 (retiring before ~2047) will keep the right to retire at 60 under the old lump sump / pension arrangements.

New entrant employee contribtions of 6.4% look to cover about a quarter of their employment retirement costs with the taxpayer paying the remainder and the state pension to boot. Those who joined before 2007 far less.

2 other things:

(1) annuties aren;lt the only (or the best) option nowadays - the fact that state pensions do not need to ACTUALLY buy an annuity should work in their favour - they can effectively fund the same for less, direct from the economy - no middlemen or insurance component, the insurance is implicit in the scale of the scheme

(2) what are you assumed investment growth rates? I would have thought a fair assumption would be, for unfunded public sector pensions, something akin to the 7-8% above inflation of the FTSE, taking into account capital growth and income growth of the economy at large that will pay these bills?

[Si1]

Incorrect. The money is there. Lots of it.

hard to reply to this really...

[FreeTrader]

Ignore.

Sorry, but I read the comment.

...in which case I think you have adequately demonstrated happy's comment that "It's perfectly possible to have a rational debate about how to fund final salary schemes (in both public and private sectors) HPC just doesn't appear to be that forum."

Disappointed in your response quite frankly. Thought higher of you than that.

[IMHAL]

I can see a time where every single member of the working population is a state employee.

Doesn't mean it's going to happen.

Where is that emoticon that shows a punch being thrown - except its for real and comes out the screen and hit you on the chin.

Opps! - lost the arguement by losing my temper... but gained a nice tingling sensation on me nuckles.

I do dearly dislike the old style socialists who relish the parasitic lifestyle they have become acustomed to - so one day I can see a time when the will be no state employees and parasites like you can beg for a job cleaning my boots.

[Guest absolutezero]

hard to reply to this really...

Because you know it's true!

[Guest absolutezero]

Where is that emoticon that shows a punch being thrown - except its for real and comes out the screen and hit you on the chin.

Opps! - lost the arguement by losing my temper... but gained a nice tingling sensation on me nuckles.

I do dearly dislike the old style socialists who relish the parasitic lifestyle they have become acustomed to - so one day I can see a time when the will be no state employees and parasites like you can beg for a job cleaning my boots.

Dream on!

[Guest absolutezero]

Sorry, but I read the comment.

...in which case I think you have adequately demonstrated happy's comment that "It's perfectly possible to have a rational debate about how to fund final salary schemes (in both public and private sectors) HPC just doesn't appear to be that forum."

Disappointed in your response quite frankly. Thought higher of you than that.

Fair enough but it all boils down to envy.

People can disguise it how they like but that's what it is. Human nature.

[Si1]

Because you know it's true!

please, no. I've just given up arguing with you, you are wilfully ignorant, yet I hazard genuine in your motivation.

[Injin]

Fair enough but it all boils down to envy.

People can disguise it how they like but that's what it is. Human nature.

It's not envy, it's disgust at being treated like cattle.

[howarden]

We can't afford to bail out banks and other private sector organisations at a much higher cost, yet we do.

Higher cost at risk, yes, but much lower demand on cash. The bailouts didn't require much handing out of real cash there and then, salaries do. Entities become insolvent on a cash basis.

With the current system you can't reduce the size of the public sector and keep pensions funded on a cash basis without massively increasing employer or employee contributions, what kind of sustainable system is only able to get bigger and not smaller?

[Wayo]

Tosh or nosh and other words Noel would use.

So actuaries of final salary schemes today believe life expectancy of the scheme members is around what it was 70 years ago?

If the businesses can't provide final salary pensions for their employees then they're not going concerns.

They're just pretending to be going concerns, hiding the fact that they're systematically driving down our living standards to those of the 3rd world.

We need to knock this whole globalist agenda on the head pretty damn soon, implement capital and currency controls and import tariffs and decide whether we value our families interests' above those of our competitor nations or we don't.

At the present time those we have elected are working against our interests.

Everything flows from that.

Hoping that you're one of the lucky few at the top of the pyramid who can try and pull the ladder up behind you isn't sustainable.

Sooner or later this becomes a life and death battle - Pensions are just a temporary symptom of that. It's going to be either you and your kids and family or those of someone 12,000 miles away. You better make your mind up pretty fast whose side you're on.

At the moment wealth is incredibly concentrated in hands of the few - it is you proposing to pull the ladder up on an increasingly mobile and well educated wold population by introducing state controls.

I think pensions barely existed in the public sector 70 years ago, the public sector barely existed in fact, but the state pension is a perfect example of a scheme that has grown and grown without being restructured to reflect the fact people aged 65 in 1960 were born when life expectancy at birth was less than 50 for men and women and today it is nearer 80.

Any business that adds final salary pension costs of 20-30% to its cost base won't be a going concern for long and will need a lot more than rampant protectionism to save it from the invisible hand. As the rest of the world catches up on our decadence some equalisation of living standards is inevitable and more co2 detectors at Calais isn't going to stop that.

[Guest absolutezero]

It's not envy, it's disgust at being treated like cattle.

Ultimately we're all treated like cattle.