Public Sector Pensions Are Affordable

[robo1968]

Try the x47 rule (it used to be the 25 rule)

I.e. if you want £10K a year from your pension, your pension fund needs to be 47 times more than the pension you want to draw when you retire. Therefore if you get £10K per year pension when you retire and your pension fund isn't £470,000 then you've not paid fully into your pension for the benefit you receive. 25x£3500 grossed up for 25 years falls way short of £470K even assuming massive massive yearly growth.

Sounds like you ought to be the teacher! You'd think it was obvious really wouldn't you

[Injin]

You can have YOUR contribution as your pension anytime you like.

How much does your employer add on top?

Why aren't pensions capped either at something approaching an average amount?

Because they are never going to be paid, they can promise whatever they want.

"Will you work for 25% cheaper today if I promise you a yacht I don't actually have tomorrow? Awesome. You can have two."

[Timak]

Always amazes me when people of my generation tell me they have retired. Invariably they are all public sector workers. I wonder what they are going to do with the rest of their lives. Someone retiring at say 55, may have worked less than 35 years (assuming they went to university) and in all likelihood have another good 30 years of life ahead of them. That's a lot of funding for an increasing number of pensioners from a diminishing pool of workers.

Many people with private sector pensions keep working. My Dad is still working and will be 70 next year. Not sure I will ever retire, unless I am forced to through lack of work or ill health.

Do you really lack the imagination to think of an alternative to being in an office 9 hours a day?

My parents are both retired retired and are having the time of their lives, they aren't sitting in armchairs watching TV all day they are going on holiday, playing with their grandchildren and meeting up with friends to do stuff.

[gimble]

Last year I paid in £3.5k into my teacher's pension: fact

And have made similar (inflation adjusted) payments every year for the last 25 years

So, it's OK for the rest of the population to go along with the government's plan to default on its obligations to me, and in effect, steal my money.

Yes, of course its going to be OK with you lot - you get to enjoy £3.5k of my money every year via public services that you've not paid for.

In all honesty I'm expecting to receive nothing from the governmnent, and I'm actively trying to get my money + compound interest owed out - counterparty risk sucks!

haha nice one chum, you're not a maths teacher are you? You've paid 87.5K into your pension in today's money. At current annuity rates that will buy you a pension of .... wait for it .... £3,700 a year. If you continue to work for another 15 years then you'll get £5,600 per year from that pension pot. Even assuming that your pension pot will 'grow' (it won't, it's not invested it's just used to pay towards the pensions of currently retired teachers) it won't get close to what you'll actually be enjoying, which will be somewhere around £20,000 I would guess. Compared to many that don't work in the public sector you're very, very lucky.

[Injin]

I think Francis Maud just said on BBC news, the avg civil servent contribution to their pension is just 1.2%!

Not strictly true tho, as most of them have hefty amounts of degrees, training and so forth which meant they could have had higher salaries in the past if they had gone private sector which they have forgone to get their shiny state pension.

Which won't be there! Ooops!

You makes your bets, you takes your losses.

[robo1968]

Do you really lack the imagination to think of an alternative to being in an office 9 hours a day?

My parents are both retired retired and are having the time of their lives, they aren't sitting in armchairs watching TV all day they are going on holiday, playing with their grandchildren and meeting up with friends to do stuff.

That comes back to money, don't you think?

[noodle doodle]

I'm with the teachers on this, regardless of the sums they were promised this as part of their job package so it's theirs by right. Tough if it's a better deal then yours or mine.

There's been umpteen threads on here recently about how NS&I is the place to put your money because the return is government guaranteed or to get into generating micro-power because the government will pay you a feed-in tarriff guaranteed for the next 25 years etc, and you'd all be squealing like backwoods piggies yourselves if you lumped in there and the government went back on its word.

Edited June 15, 2011 by noodle doodle

[exiges]

I'm sorry but what about the private sector types who have been cheated for years and years with no big leg breaking thug to back them up? So my general attitude is to let them rot, as they are quite happy to let me rot.

Did you read my post in it's entirety ? You'll see my post was very much in line with your thinking.

Namely: "I think they should be given it.. so long as the government also enjoys the same outcome of its expectation, namely people only live until they're 70.. I'm sure if workers keep that end the bargain the govt will be happy to keep theirs. "

Edited June 15, 2011 by exiges

[Democorruptcy]

I saw the Teacher's were carrying posters "We are not paying for your crisis"

They just don't get it that the government's been spending money it didn't have, including on their pay and pensions. What their posters should really say is

"We want our children and their children to pay for the overspending necessary to keep the current public sector in a lifestyle that is completely unaffordable."

[The Masked Tulip]

There is a phone in now about this on Fivelive - the sense of entitlement from the public sector workers and the anger from private sector workers calling in is very obvious to a listener.

[abaxas]

Just pay them back their contributions.

Job done.

[Bob Loblaw]

haha nice one chum, you're not a maths teacher are you? You've paid 87.5K into your pension in today's money. At current annuity rates that will buy you a pension of .... wait for it .... £3,700 a year. If you continue to work for another 15 years then you'll get £5,600 per year from that pension pot. Even assuming that your pension pot will 'grow' (it won't, it's not invested it's just used to pay towards the pensions of currently retired teachers) it won't get close to what you'll actually be enjoying, which will be somewhere around £20,000 I would guess. Compared to many that don't work in the public sector you're very, very lucky.

You are not taking into account employers contributions which are generally *2 the employee contribution. Chum.

I think what this boils down to is that teachers who were promised one thing are now being expected to accept another thing just because successive governments have made bad financial decisions. No doubt the hindsight experts on here would be crowing if teachers had not signed up to the pension.

Begs the question what is the point of taking pension advice if the goalposts can be moved at will by the people who make the rules? Still, since teachers in general are insufferably left wing in their outlook living hand to mouth in old age poverty whilst those who have never worked are looked after by the state will give them the chance to live the socialist dream.

[leicestersq]

I'm with the teachers on this, regardless of the sums they were promised this as part of their job package so it's theirs by right. Tough if it's a better deal then yours or mine.

There's been umpteen threads on here recently about how NS&I is the place to put your money because the return is government guaranteed or to get into generating micro-power because the government will pay you a feed-in tarriff guaranteed for the next 25 years etc, and you'd all be squealing like backwoods piggies yourselves if you lumped in there and the government went back on its word.

Nothing is guaranteed. And no I wouldnt be squeeling if I lost money on it, there is a risk associated with it, and you have to accept that.

As for promises being made, well tough, things change. These pensions cannot be afforded. It doesnt matter what you promise, if it aint there it aint there.

[Lepista]

A lot of the problem is when these plans were put in place it was assumed that investments made by the pension funds would return 8.5% a year after inflation(and that remains the assumption). So if for arguments sake a teacher started working at 25 and retired at 60, that is 35 years intervening. £3,500 contributed that first year would grow to £60,000, and the £3,500 contributed the second year would grow to £56,000.

This powerful growth would also make up for the lower income during the first years, the increasing life expectancy, and the lower percent contribution of the first years.

If we take a more modest growth of the investment, say 2% a year after inflation. The £3,500 invested in that first year, would grow to only £7,000 pounds 35 years later.

growth by definition must revert to 0% above inflation, surely?

[General Melchett]

I've been promised all sorts of shit over the years by private sector pension funds (Inequitable Life, disappearing, take it or leave it FS schemes, money purchase schemes that seem to steadily drain into some fund managers pocket etc). Welcome to my world, public sector employeees.

[noodle doodle]

Nothing is guaranteed. And no I wouldnt be squeeling if I lost money on it, there is a risk associated with it, and you have to accept that.

As for promises being made, well tough, things change. These pensions cannot be afforded. It doesnt matter what you promise, if it aint there it aint there.

The teachers will win this. As soon as they go on strike and effectively withdraw the free childcare that state schooling is for about a third of the working population, there will be clamouring to pay them whatever to get them back to work. Enough people moan about in-service days and holidays and thats known months in advance, a couple of weeks of short-notice strikes will get the populace and the government on-message, whether they like it or not as the teachers are one of the few unions left that have the power to actually make the general populace notice something has changed.

[leicestersq]

Well if there is going to be a strike, there ought to be something worth having a strike over. Seems to me that the government are just making delicate changes when butchery is required. Nowhere in that debate on Newsnight did the minister mention the truth, public sector pensions are not affordable. Wealth providing companies can no longer afford to produce in the UK, as they dont have to put up with the onerous taxation burden that public sector remuneration is trying to place on them. Net result, they are leaving or going bust. Instead of rolling back this madness, new labour, and now the Tories are trying to make up the gap by hoisting ever greater taxes on those that remain, a strategy doomed to fail.

Instead what they should be doing is not only cutting the deficit, but taking an axe to taxes. That probably means taking a third off of the public expenditure tab. And that means huge cuts to salaries and benefits, no way around it.

So what they should be doing, is cutting salaries, say 10% off amounts earned from 20-30k, 20% off 30k-50k, and 70% off anything over 50k.

And as far as pensions go, just bite the bullet and privatise the whole thing. At the moment I think that the teachers pension plan is not fully funded, I have seen the phrase 'notionally funded', which no doubt means it is off balance sheet and is financed through future taxation. Well lets just put the lot into the private sector, print the money, give it to each scheme member (at a reduced rate of course, the taxpayer cannot afford the full amount, say about 35% of what they think they need is about right), and let them either buy an annuity if they are retired, or put it into a private pension scheme if they are working.

Then from this point on, let the teachers make their own contributions and fund their own pensions. They want parity with the private sector, give it to them.

[Jack's Creation]

Last year I paid in £3.5k into my teacher's pension: fact

And have made similar (inflation adjusted) payments every year for the last 25 years

So, it's OK for the rest of the population to go along with the government's plan to default on its obligations to me, and in effect, steal my money.

Yes, of course its going to be OK with you lot - you get to enjoy £3.5k of my money every year via public services that you've not paid for.

In all honesty I'm expecting to receive nothing from the governmnent, and I'm actively trying to get my money + compound interest owed out - counterparty risk sucks!

Christ, I hope you're not a maths teacher.

[exiges]

I saw the Teacher's were carrying posters "We are not paying for your crisis"

The best thing the Labour party did was to blame the bankers (capitalist right wing types) for the parlous state of the economy, and have the BBC then relay that as fact.

[leicestersq]

The teachers will win this. As soon as they go on strike and effectively withdraw the free childcare that state schooling is for about a third of the working population, there will be clamouring to pay them whatever to get them back to work. Enough people moan about in-service days and holidays and thats known months in advance, a couple of weeks of short-notice strikes will get the populace and the government on-message, whether they like it or not as the teachers are one of the few unions left that have the power to actually make the general populace notice something has changed.

There is no money. The battle has to be fought against the teachers, lose here, and it will be impossible to get any public sector worker to back down. As there is no money, there is no retreat from the government. Even if the government falls, there is still no money, the private sector cannot afford it.

Best hope for the nation is for the government to just sack anyone who goes on strike. It will be a lesson for anyone else considering taking on the government. I am sure that there will be no shortage of people willing to fill the few vacant positions that result.

[Timak]

There are a huge number of different public sector pension schemes. To say they are "all unaffordable" is to ignore reality.

Central government Civil Servants (including MPs lest we ignore their ludicrous scheme which they never seem to mention reforming) get a ridiculously good deal - a close relative of mine is one, she earns about £50k, pays about 1% into her pension pot and will retire on 50% of final salary. If you knew her job title and what she does you would explode in rage!

On the other hand my wife got her pension statement through this week for another civil service scheme. It is a fully funded scheme and it currently reporting a surplus.

The current proposals would see both my relative and my wife having to increase their contributions and work longer. However that would mean my relative would still get a fantastic deal and my wife would be paying in far more than she needed to for the benefits she'd receive. I accept my wife's scheme has a taxpayer backed guarantee which private schemes do not have.

[leicestersq]

You are not taking into account employers contributions which are generally *2 the employee contribution. Chum.

I think what this boils down to is that teachers who were promised one thing are now being expected to accept another thing just because successive governments have made bad financial decisions. No doubt the hindsight experts on here would be crowing if teachers had not signed up to the pension.

Begs the question what is the point of taking pension advice if the goalposts can be moved at will by the people who make the rules? Still, since teachers in general are insufferably left wing in their outlook living hand to mouth in old age poverty whilst those who have never worked are looked after by the state will give them the chance to live the socialist dream.

It isnt bad financial decisions. People are living longer, which means that the total payout on the amount invested is increasing, as people get the benefit over a longer period of time. Add in falling real wages in the private sector and increased ones in the teaching profession, where those wages are linked to the payout, and you have a bit of a massive problem that is nothing to do with 'financial decisions'. Things change.

In the free market, there are automatic adjustments for things like increased longevity, that happen without people even noticing. What happens is investment returns go down.

[Goat]

haha nice one chum, you're not a maths teacher are you? You've paid 87.5K into your pension in today's money. At current annuity rates that will buy you a pension of .... wait for it .... £3,700 a year.

Christ, I hope you're not a maths teacher.

Given the current state of the education system he probably is.

Well worth a £500,000 golden goodbye IMO

[winkie]

My brother is a copper - he also feels cheated. Unfortunately, your £3.5k of contributions p.a. does not even begin to pay for the pension you will receive. The rest is made up by the increasingly burdened taxpayer.

In the private sector we have had to shrug and get on with it.

We can't afford these pensions anymore - it's FACT.

...I would prefer my council taxes and other taxes to pay the quality teachers a good living worthwhile wage than pay 30 to 40 years of index linked inflation proof final salary pensions, pay them well and then they can save towards their own futures like most of the rest of us have to.

[Timak]

There is no money. The battle has to be fought against the teachers, lose here, and it will be impossible to get any public sector worker to back down. As there is no money, there is no retreat from the government. Even if the government falls, there is still no money, the private sector cannot afford it.

Best hope for the nation is for the government to just sack anyone who goes on strike. It will be a lesson for anyone else considering taking on the government. I am sure that there will be no shortage of people willing to fill the few vacant positions that result.

Or how about they increase the tax rates on all earnings over £30k to 99% and jail/execute anyone who takes on the government?

Or is brutal repression over people's rights only OK for right leaning governments?

Hypocrisy thy name is leicestersq