Britain Risks Default Unless Government Cuts Public Sector Pensions - Telegraph

[White Craw]

Actually, in the late 90's, financial advice was widely given in the press, Telegraph, Mail on Sunday from my readings that if you were a well paid director in a final salary scheme you should remove your share, and transfer the money into a private scheme.

Yes I can remember in the early nineties that rank and file NHS workers were being advised by insurance company representatives that the NHS pension scheme was unadventurous and "for wimps", and that much better returns would be available by switching their contributions to a personal pension and of course taking a transfer value of their accrued NHS pension and putting it into these personal pensions.

I know several people who took this advice and later were successful, after a struggle, in having these insurance companies pay the full costs of reinstatement of these contributors back to the NHS scheme on the grounds of inappropriate advice.

[libspero]

Yep - a notional fund. Doesn't actually exist. Pretty smart with respect to the Government, because war could actually wipe out the countrys assets.

If the money had been invested, the fund now, would be so massive that it would destabilise economies.

Interesting that large pension funds could destabilise economies. Better get those banned.

At least you're happy with the way your pension's been handled though. That at least will be a small comfort.

[pandabear]

I know several people who took this advice and later were successful, after a struggle, in having these insurance companies pay the full costs of reinstatement of these contributors back to the NHS scheme on the grounds of inappropriate advice.

I'd forgotten about "mis-selling". It was a win-win situation then.

[goldbug9999]

I think the point is that its not fair to ring fence public sector pensions when the rest of the economy is going down the pan. They should take a hit the same are the rest of us

[SHERWICK]

The average pension in the NHS is £3800 / pa.

Proof please.

[mightytharg]

So to avoid default on some state liabilities the government should default on others.

What happens when there is nothing left to steal ?

The clue is in the title.

When there's nothing left for the greedy public sector scum to steal, we'll have to cut their pensions.

[headmelter]

I think the point is that its not fair to ring fence public sector pensions when the rest of the economy is going down the pan. They should take a hit the same are the rest of us

What 'hits' would they be then ?

[Guest sillybear2]

The average pension in the NHS is £3800 / pa.

What's the average for full time employees that have worked in the service for all (or the majority) of their career? Public sector patsies like to pull tricks like including the pensions of part time dinner ladies that only built up small entitlements in order to drag the averages way down, thus disguising the fact many finish on two thirds of a ~40k salary.

Averages are meaningless unless put in context and also include details of the distribution.

Edited June 3, 2010 by sillybear2

[MongerOfDoom]

It seems grossely unfair that public sector pensions should be reduced

It's not that I am in favor of plundering pensions, but it does actually seem perfectly fair. Alternatively, you would need to tell people in the private sector who still have a pension:

i) your pension is now taxed more than it used to be because the dividend tax credit is gone,

ii) you can invest either in a stock market that has fallen since the peak 10+ years ago because the economy is so good, or in bonds that are exposed to QE,

iii) you won't get tax relief on the contributions any more if you are a high-earner and use your pension to "avoid" tax,

iv) you will be taxed massively (i.e. similarly to the taxes needed to service the official national debt) to pay for substantially more generous pensions promised to others,

v) you won't benefit from the minimum income guarantee that you pay for either, and

vi) remember SERPS? Well, it's about to disappear so we can afford the public sector pensions (but of course, the public-sector employees pay for they own pensions, and will lose SERPS too, so it is actually perfectly fine and you have nothing to complain about ....)

just because private funds have been appropriated by the Labour government IMO. We have a race to the bottom situation. 'I don't have a pension - so why should you?' scenario.

There. Fixed it for you.

[SNACR]

I think it was on the Daily Mail website I read an article a couple of weeks ago. Retired copper (51 - Yes 51) been occupying himself with his BTL portfolio of half a dozen houses.

Probably spent quite a bit less than 3 decades of his life actually working. Will now be paid by a pension for potentially 4 decades plus of work-free existence. Not content with this he's got to borrow a load of money, based on a credit rating his previous gilt-edged employment conferred upon him, to deprive young familes of their own home and further line his already bulging pockets.

In the war, coppers would've arrested spivs.

[ingermany]

Would you rather have your pension cut, or would you rather be paid in devalued currency? That appears to be the choice.

I'll have the devalued currency option please. Where do I sign?

[Bruce Banner]

If I was in the P/S I'd be hopping mad.

The governments past effectively said, "you can't be trusted to save for your retirement, so we'll force you to pay X% of your salary into a pension that we will guarantee for you".

So everybody diligently paid.

Did the government invest the money? No. Did they even save the money? No.

The government spent your money in the belief that they'd just get some other poor idiot to pay further down the line.. talk about genius!

Problem is, they don't have enough money coming in to pay you now, and they already spent the money you paid in.

Would you rather have your pension cut, or would you rather be paid in devalued currency? That appears to be the choice.

It isn't just Public Sector pensions, what you say equally applies to the State pension scheme funded by your National Insurance payments, except it's not, as National Insurance is just another general tax :angry:.

[Cogs]

How is a pension payable in 30 years time a debt? Its a liability but it isn't a debt, it doesn't come due in the next year whatever the comedy value super-mini piechart suggests. What you need is an analysis over time and despite the quote in OP, I don't see how he substantiates the claim.

Edited June 4, 2010 by Cogs

[Cogs]

I think the difference is that the private sector pension need a 'pot' to buy the annuity whereas the pubic sector is paid by future taxes. ie there is no 'pot' as such. with annuity rate at 6% rather than 10% a massive notional pot is required to meet the public sector obligation. With a private pension you get back what you paid in (broadly) but with the public sector the paying in bit was a low salary. Now the salaries are higher on average than the private sector but the pension bit remains. This IMHO is the problem (ie pension now payable on a HIGH salary).

So we should hire a load of a cleaners and porters? That would get the averages down. And by spending more money, it would make everything more affordable right? Good idea... Or we could stop pretending the averages are very informative when discussing them without regard to the distribution (and its qualities) that generated them. Or do you think heart surgery should pay the same as stacking shelves?

Edited June 4, 2010 by Cogs

[Tin Foil Hat]

The average pension in the NHS is £3800 / pa.

The private sector pensions were the envy of the World until Brown removed the tax breaks. Then insurance companies and private businesses plundered the funds.

Workers in the private sector felt envious that public sector pensions still had value, so started to systematically attack them.

It seems grossely unfair that public sector pensions should be reduced just because private funds have been appropriated by un-regulated capitalists IMO. We have a race to the bottom situation. 'I don't have a pension - so why should you?' scenario.

Spot on there. Many people are now using other justifications such as state debt, lack of "worth" to the greater economy/society etc. to nobble the public sector pension now they have allowed their once-great private sector pension to be shaved away by the elite and the hardcore capitalists.

[Timak]

They could very easily save the entire system by making it so that there was a maximum ANY (private or public) pension could be - this should be pegged to the national average wage.

[Si1]

How is a pension payable in 30 years time a debt? Its a liability but it isn't a debt, it doesn't come due in the next year whatever the comedy value super-mini piechart suggests. What you need is an analysis over time and despite the quote in OP, I don't see how he substantiates the claim.

indeed - trouble with that argument is it makes it even easier to default on, morally speaking.

[Si1]

Spot on there. Many people are now using other justifications such as state debt, lack of "worth" to the greater economy/society etc. to nobble the public sector pension now they have allowed their once-great private sector pension to be shaved away by the elite and the hardcore capitalists.

this does not apply to all lefties - there are plenty with good argumentsw - but this simply uncovers the nasty brutish venal greed of many, accusing losers under new labour of not having been sufficiently brutish like them.

I give you Gordon Brown.

[hilltop]

They could very easily save the entire system by making it so that there was a maximum ANY (private or public) pension could be - this should be pegged to the national average wage.

Thoroughly agree with you.

Some people have been able, in both private and public sector, to arrange large pensions which are simply deferred salary.

Pensions should be a reasonable support in old age.

Most, numerically, pensions are small.

[Injin]

Anyone else notice the morality versus reality element in these debates?

Public sector types "It's right that public pensions get paid. People have paid in, hey are owed, there is a contract" etc etc

Private sector response "It's not affordable. Can't pay, won't pay. Only question now is how the default will manifest itself."

Public sector comes back with "That's immoral, that's wrong! We worked damn hard, we were promised, public service etc"

Definitely seems to be a shortcut in thinking somewhere..... something being moral = resources instantly become available. is this how the publci sector allocates it's resources internally, by any chance?

[Si1]

Definitely seems to be a shortcut in thinking somewhere..... something being moral = resources instantly become available. is this how the publci sector allocates it's resources internally, by any chance?

from experience, I am certain, yes

I always find it hard to belkieve how these people ever made it past the age of 24 without working it out, it's the difference between being a boy and a man

[Cogs]

indeed - trouble with that argument is it makes it even easier to default on, morally speaking.

Well, public pensions cost 1.5% of GDP (-1.2% cotributions, net 0.3%) at the moment, they will rise to 2% of GDP in 2030 and then fall off again afterwards following reforms put in place some years ago. I'm not sure how an increase of half a percent of GDP will force the nation in default in 20 years time, as if anyone could predict that with any degree of certainty.

Edited June 4, 2010 by Cogs

[Timak]

Well, public pensions cost 1.5% of GDP (-1.2% cotributions, net 0.3%) at the moment, they will rise to 2% of GDP in 2030 and then fall off again afterwards following reforms put in place some years ago. I'm not sure how an increase of half a percent of GDP will force the nation in default in 20 years time, as if anyone could predict that with any degree of certainty.

It is because the economic masterminds at the Taxpayers Alliance etc never present the figures like this. Instead they like to say "pensions are going to cost us 100% of our GDP!!??!?OMG!!1!

[Si1]

Well, public pensions cost 1.5% of GDP (-1.2% cotributions, net 0.3%) at the moment, they will rise to 2% of GDP in 2030 and then fall off again afterwards following reforms put in place some years ago. I'm not sure how an increase of half a percent of GDP will force the nation in default in 20 years time, as if anyone could predict that with any degree of certainty.

2 things:

(1) that's when most of the credit-crunch debt matures and needs rolling over

(2) the debt markets look ahead - UK's current credit rating depends on our ability to cover liabilities in decades to come - reducing the future burden might shave 1% of govt debt costs and a shed load of money on top of the basic pension liabilities themselves

[Si1]

I think this used to be very common, in that the police got their pension after 25 or 30 years (can't remember which). I had a friend whose father was a police inspector who got his pension before he was 50 - joined the police straight from school. Don't know the current situation re police pensions and when they become payable.

this is one of those idiosyncrasies I actually agree with - the govt NEEDS police loyalty above almost anything else.