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Call For Public Sector Pensions Overhaul

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http://www.ft.com/cms/s/0/116be3d2-d0b1-11df-8667-00144feabdc0.html

Public sector pensions must move closer to adopting the methods used to calculate the value of private sector retirement benefits to help close the gap between the two, a key advisory report is expected to recommend.

The report, prepared by Lord Hutton – the former Labour cabinet minister conducting a review of public sector pensions for the coalition government – is expected to recommend to George Osborne, chancellor, that a complete overhaul of scheme design is required for civil servants and others on government payrolls.

Advisers in the private sector have long criticised the assumptions about discount rates and investment returns used in the public sector, because these give rise to calculations of pension costs far lower than private employers would be allowed to use, obscuring the full cost of final salary pensions for civil servants.

“There is a need for a common vocabulary,” said one adviser familiar with the report.

The report is also expected to recommend a review of measures that make private sector companies reluctant to bid for government outsourcing contracts. Current rules require an employer taking over a government function to provide the same level of pension benefit as workers would receive in the public sector doing the same work. The CBI employers’ body has been especially critical of these rules and has long called for a rethink.

An interim report from Lord Hutton, expected later this week, is expected to say there is no “quick fix” that will help cut government pension costs quickly.

But it will note that public sector workers pay a wide range of contribution rates, and it will ask for a review of “total reward” for a particular job function. According to advisers familiar with the report, Lord Hutton has concluded that an across-the-board rise in contributions would not work, since some workers already pay more in exchange for higher benefits.

The report is also expected to recommend a closer look at the implications of the switch to inflation-proofing in line with the consumer price index, rather than the retail price index, which historically has proved more volatile.

It will urge clarity on whether the switch alters what are known as “accrued rights” that are protected under the Pensions Act of 1995.

It is expected to urge continuation of defined benefits to the lower paid – but on a career average and not on a final salary basis – while above a certain threshold, possibly a salary of £30,000, defined contribution benefits should accrue, rising in line with an inflation index.

Copyright The Financial Times Limited 2010. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.

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I'll believe it when I see it!

Also, I've corrected the following bit: "Advisers in the private sector have long criticised the assumptions about discount rates and investment returns used in the public sector, because these give rise to calculations of pension costs far lower than private employers would be allowed to use are completely fabricated, pie-in-the-sky numbers, obscuring the full cost of final salary pensions for civil servants.

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The cuts are needed, but just try to make them and see the results.

The public won't stomach it. Labour will be back in in 4 years time on the back of promises to make it all better and it'll be back to spunking the money up the wall. Cameron's valiant efforts to turn this ship around will all be wasted.

Great outlook for gold though :D

Edited by General Congreve

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He really has to tread carefully with this. Public sector pensions can be viewed as an almost voluntary tax taken from the members.

If the move makes the pensions even close to comparable with personal pensions then it will no longer be worthwhile opting for the state pension. Not much use if you wish to reduce a deficit.

Sorry folks, the public sector have you all by the short and curlies!

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He really has to tread carefully with this. Public sector pensions can be viewed as an almost voluntary tax taken from the members.

If the move makes the pensions even close to comparable with personal pensions then it will no longer be worthwhile opting for the state pension. Not much use if you wish to reduce a deficit.

Sorry folks, the public sector have you all by the short and curlies!

what?

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It is expected to urge continuation of defined benefits to the lower paid – but on a career average and not on a final salary basis – while above a certain threshold, possibly a salary of £30,000, defined contribution benefits should accrue, rising in line with an inflation index.

That is actually an incredibly good idea. I've never seen that idea proposed to split pension into two parts. A guarunteed amount up to a certain amount.. then above that working on a defined contribution.

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He really has to tread carefully with this. Public sector pensions can be viewed as an almost voluntary tax taken from the members.

If the move makes the pensions even close to comparable with personal pensions then it will no longer be worthwhile opting for the state pension. Not much use if you wish to reduce a deficit.

Sorry folks, the public sector have you all by the short and curlies!

Um, public sector pensions and the state pension are two completely different beasts. We are talking about public sector pensions here.

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That is actually an incredibly good idea. I've never seen that idea proposed to split pension into two parts. A guarunteed amount up to a certain amount.. then above that working on a defined contribution.

Agree, very clever I think. Tough for Liebour and their paymasters in Unison etc to argue when the lowest paid are least impacted. Nasty impact for the overpaid parasites at the BBC though so don't expect to see that fact to get out clearly from there.

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That is actually an incredibly good idea. I've never seen that idea proposed to split pension into two parts. A guarunteed amount up to a certain amount.. then above that working on a defined contribution.

Yes, it's so obvious when you think about it, makes you wonder why they haven't thought of this before. It would stop all those PCs getting suddenly and rapidly promoted to Inspector a few years before retirement!

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I too think that is a good idea (the splitting the pension one), I don't think there would be much protest from the rank and file public sector workers.

I've said before I have retired headteacher relatives on £35k a year pensions (retired at 60) and doctors could be on £60k in retirement FFS.

My other idea is a declining pension whereby you get your final salary pension for the first 15 years after retirement and then half of it until death.

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My other idea is a declining pension whereby you get your final salary pension for the first 15 years after retirement and then half of it until death.

Also, a good idea. It could even be final salary first year, then final salary minus x% for the next year and so on until they reach the 50% point - gives people time to adjust their lifestyle.

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With the CB proposals at the weekend, the unforeseen problem was the proportion of national print, TV and radio journalists who would be affected (and so did a lot of wailing) rather than the proportion of the population.

With the pensions reform, it will be just the BBC journalists making an audible fuss.

The Union guys of the radio this morning were struggling a bit - they sort of know they should be opposing reforms, but weren't numerate enough to put forward any coherent argument.

I've hopped about jobs over the last 20 years so have a motley collection of deferred rights and now have started a public sector defined benefits scheme (teaching). I would prefer to save up properly and know that the scheme, in whatever form, is properly resourced including by me, so I can rely on it even for less than it would have been.

Y

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  • 244 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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