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Injin

Gold-Plated Public Sector Pensions To Lose Their Shine

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http://www.telegraph.co.uk/news/politics/8363213/Gold-plated-public-sector-pensions-to-lose-their-shine.html

An independent government commission on public sector pensions is expected to recommend that many state employees should see cuts in their final salary pensions.

Many public sector staff are part of pension schemes that guarantee them a pension payment in retirement that is a fixed proportion of their salary on the day they retire.

Such “gold-plated” pensions are extremely costly and are largely denied to private sector workers.

Ministers have promised that workers already enrolled in such schemes will not lose the pension rights they have already accrued.

However, pensions experts believe that Lord Hutton’s independent commission will still set out ways that the pensions paid to members of existing schemes could be reduced.

Actuaries predicted that Lord Hutton will recommend a technical change to the way future pensions are calculated, so payments are based on a worker’s

current salary instead of their salary at retirement.

Towers Watson, a firm of actuaries, said that future pension payments for existing “final salary” scheme members should instead be calculated by taking their salary today increased in line with inflation until retirement.

Because wages generally grow more quickly than inflation, such a change would significantly reduce the final pension payments for today’s public sector workers.

According to Towers Watson, under current rules, a 40-year-old worker earning £30,000 today can expect a pension of £8,400 a year from age 60, with an additional lump sum of around £25,000.

But if that worker’s final pension rights were to be based on today’s salary uprated in line with inflation, retirement income would be around £5,600 with a lump sum of £17,000.

John Ball, the head of UK Pensions at Towers Watson, said that applying the change to the pension rights of teachers, civil servants and NHS staff could reduce the final costs of paying for public sector pensions by up to £70  billion.

“Breaking the link between future pay growth and pensions earned to date could save the taxpayer billions of pounds over the coming decades, at the expense of today’s public sector employees,” he said.

“What sounds like a technicality could have a far bigger impact on the public finances and on the incomes of the people affected than some of the most contentious deficit-reduction measures.”

Another technical change expected to follow the Hutton report could significantly increase the payments public sector staff have to make into their pension schemes.

more at the link...

People are going to want more wages if this goes through......

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People always want more. It is the human condition.

But 'I want' doesnt get these days. Or, if it does, not in any meaningful sense unless you are a banker or other protected elite, of course.

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note the comment that the government has promised that current members will not lose what they have accrued.

an accruel is something already paid, and "accrued" to your account.

and yet, public sector pensions dont work like an accruel...they pay what is based on your final salary or final years.....so what the Government has said..is, your account is safe, but the AMOUNT you are going to get is NOT promised.

Looks like cash purchase schemes for all...not ministers of course.

Even then this is not going to cut it.....these schemes are not set aside like a personal pension. they are accounted for, and people pay into them. Instead of buying an investment, the money goes to Wine Collections in the Houses of Parliament, £1000 chairs for MOD staff and stepladder training sessions for firemen.

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People always want more. It is the human condition.

But 'I want' doesnt get these days. Or, if it does, not in any meaningful sense unless you are a banker or other protected elite, of course.

Yep the only people who can scream I want I want I want are the bankers, a very delicate breed they are. We can never tell them they've failed instead if they make a mistake and fail uncle taxpayer gives them a hug and a big bonus.

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Yep the only people who can scream I want I want I want are the bankers, a very delicate breed they are. We can never tell them they've failed instead if they make a mistake and fail uncle taxpayer gives them a hug and a big bonus.

No, there are plenty of people screaming like that, and getting. From the bankers/ footballers/ BTL assholes at the top, the gold plated public sector pensions in the middle and the benefits cheats and scroungers at the bottom.

Edited by blackgoose

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yeah, pay them less and then make sure what they do get is devalued by a hefty bout of inflation.

got to be careful with the inflation genie though once its out of the bottle......

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Cue whingers on the thread crying "politics of envy" and "why not campaign for better private sector pensions rather than worse public sector pensions?" and so on.

Because they are not affordable for either the public sector or private sector!

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They've got entirely the wrong spin on this!

It should've started with a lot of fuss about poor old workers stuck with working full time then instantly reducing to nothing. They want to wind down more gently, moving to part-time rather than going all at once to nothing. But the way their pension is determined on final salary means they'd make huge losses by doing that. So we're revising the pension rules to help them manage their lifestyles without losing out unfairly.

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Because they are not affordable for either the public sector or private sector!

Yes they are.

Just so long as we go back to pensions being for those too old to work. So maybe an average of five years on a pension, rather than twenty.

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Guest sillybear2

"Future pension costs are calculated using a “discount rate”, effectively an estimate of how much today’s funds will grow between now and the date they are paid out. The current discount rate is set at 3.5 per cent above RPI inflation."

So that's currently 8.6% implied annual returms, that's in Madoff territory. Who audits the governments books, Arthur Andersen?

If they're serious about paying out these obligations they will have to indefinitely freeze hiring or start sacking more doctors, nurses and teachers as increasing numbers of people retire.

It's going to be like Detroit :-

http://www.cbsnews.com/stories/2011/02/21/national/main20034397.shtml

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Yes they are.

Just so long as we go back to pensions being for those too old to work. So maybe an average of five years on a pension, rather than twenty.

that is not the point of 50 year old retirees....we need to reduce their working life so promotion and even simply jobs are available to a new cohort every year.

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"Future pension costs are calculated using a “discount rate”, effectively an estimate of how much today’s funds will grow between now and the date they are paid out. The current discount rate is set at 3.5 per cent above RPI inflation."

So that's currently 8.6% implied annual returms, that's in Madoff territory. Who audits the governments books, Arthur Andersen?

If they're serious about paying out these obligations they will have to indefinitely freeze hiring or start sacking more doctors, nurses and teachers as increasing numbers of people retire.

It's going to be like Detroit :-

http://www.cbsnews.com/stories/2011/02/21/national/main20034397.shtml

Gonna wind up with a tax system that exists purely to funnel cash to ex-public sector workers if it were to carry on unimpeded.

Never going to happen. Joe Public thnks he's pays this years tax for this years services.

Edited by Injin

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Gonna wind up with a tax system that exists purely to funnel cash to ex-public sector workers if it were to carry on unimpeded.

Never going to happen. Joe Public thnks he's pays this years tax for this years services.

Erm, isn't it time to reconsider your use of the future tense there?

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Guest sillybear2

Gonna wind up with a tax system that exists purely to funnel cash to ex-public sector workers if it were to carry on unimpeded.

Never going to happen. Joe Public thnks he's pays this years tax for this years services.

Nearly all taxes raised will be used to service debt interest payments and pay out entitlements, with nothing left over for real service provision. They're going to have to default by stealth over the next decade or so. The US is in the same position.

It's not even a public v. private thing, most of our government debt is held by private insurers and pension funds, so they're hoping to meet their private obligations using tax payers money. It's all gonna go a bit Greek, innit? Oh well, at least we still have plenty of cheap oil to fuel growth.

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Nearly all taxes raised will be used to service debt interest payments and pay out entitlements, with nothing left over for real service provision. They're going to have to default by stealth over the next decade or so. The US is in the same position.

It's not even a public v. private thing, most of our government debt is held by private insurers and pension funds, so they're hoping to meet their private obligations using tax payers money. It's all gonna go a bit Greek, innit? Oh well, at least we still have plenty of cheap oil to fuel growth.

I don't see how they can default by stealth.

If the services stop, so will the workers and the only people with any assets to steal to keep the gamr going are the pensioners!

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note the comment that the government has promised that current members will not lose what they have accrued.

an accruel is something already paid, and "accrued" to your account.

and yet, public sector pensions dont work like an accruel...they pay what is based on your final salary or final years.....so what the Government has said..is, your account is safe, but the AMOUNT you are going to get is NOT promised.

Looks like cash purchase schemes for all...not ministers of course.

Even then this is not going to cut it.....these schemes are not set aside like a personal pension. they are accounted for, and people pay into them. Instead of buying an investment, the money goes to Wine Collections in the Houses of Parliament, £1000 chairs for MOD staff and stepladder training sessions for firemen.

So suddenly public sector pensions will have to go into the stockmarket.

Good for the index and for commissions.

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Guest sillybear2

I don't see how they can default by stealth.

If the services stop, so will the workers and the only people with any assets to steal to keep the gamr going are the pensioners!

They'll do an Argentinian (it's a bit like a Brazilian but more painful), so they'll run the inflation rate at 10% for a few years and lie about it by rigging the RPI at 3% or something, thus steadily eroding the real value of these entitlements. It also reduces the real value of the national debt.

I can't see how else they can get out of it, though even that path isn't pain free, they risk raising the ire of older voters at the ballot box and the bond vigilantes.

Edited by sillybear2

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They'll do an Argentinian (it's a bit like a Brazilian but more painful), so they'll run the inflation rate at 10% for a few years and lie about it by rigging the RPI at 3% or something, thus steadily eroding the real value of these entitlements.

I think that's an incredibly rose tinted view of things, to be honest.

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Guest sillybear2

I think that's an incredibly rose tinted view of things, to be honest.

Agreed, I guess that's why the government will ensure the police and army will always be kept sweet.

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So suddenly public sector pensions will have to go into the stockmarket.

Good for the index and for commissions.

sorry, but to buy stocks you need money.

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Agreed, I guess that's why the government will ensure the police and army will always be kept sweet.

I think that's an incredibly rose tinted view as well.

If only because that doesn't work practically. You can't bully wealth into existence.

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  • 312 Brexit, House prices and Summer 2020

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