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Public sector pension bill £2.4 Trn


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I see a default coming:

https://www.dailymail.co.uk/news/article-10101989/Total-bill-gold-plated-public-sector-retirement-funds-stands-2-4-TRILLION-study-suggests.html#article-10101989

£2.4Trn is more than the national debt.

Any public sector worker who thinks they'll get their pension is delusional.

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It is the shrinking younger population that will be left to pick up the bill, on top of paying rent, student loans etc......what can be done to address this?.......higher taxes, higher council taxes, lower spending power state pensions to be taken later.....AFAIA no pension is guaranteed until it is taken.;)

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1 hour ago, Mikhail Liebenstein said:

I see a default coming:

Any public sector worker who thinks they'll get their pension is delusional.

I strongly suspect they will all get SOMETHING.  The government is clever with its defaults - for example moving from RPI to CPI in 2010 was effectively a 20% default right there overnight.

44 minutes ago, winkie said:

.AFAIA no pension is guaranteed until it is taken.;)

Private sector pensions have a number of protections that mean most people would get at least a good number of pence in the pound from the PPF.

These don’t apply to State pensions - but of course the State can print money to pay pensions too.

Not sure what you mean by “taken” but even pensions in payment can see their future inflation increases scaled back if the employer defaults.

However, it’s is very unlikely these days you would get the old scenario of just losing your pension completely - no government wants those headlines back in the papers.

 

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2 minutes ago, scottbeard said:

I strongly suspect they will all get SOMETHING.  The government is clever with its defaults - for example moving from RPI to CPI in 2010 was effectively a 20% default right there overnight.

Private sector pensions have a number of protections that mean most people would get at least a good number of pence in the pound from the PPF.

These don’t apply to State pensions - but of course the State can print money to pay pensions too.

Not sure what you mean by “taken” but even pensions in payment can see their future inflation increases scaled back if the employer defaults.

However, it’s is very unlikely these days you would get the old scenario of just losing your pension completely - no government wants those headlines back in the papers.

 

Taken is drawn, the T&C's can change until drawn....there will always be a pension it is the level of pension and how it is to be serviced and what increments added over time.;)

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1 hour ago, Mikhail Liebenstein said:

I see a default coming:

https://www.dailymail.co.uk/news/article-10101989/Total-bill-gold-plated-public-sector-retirement-funds-stands-2-4-TRILLION-study-suggests.html#article-10101989

£2.4Trn is more than the national debt.

Any public sector worker who thinks they'll get their pension is delusional.

I was saying to Someone on Saturday that this is why the UK will collapse, these pensions are unfair and unpayable

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1 hour ago, scottbeard said:

I strongly suspect they will all get SOMETHING.  The government is clever with its defaults - for example moving from RPI to CPI in 2010 was effectively a 20% default right there overnight.

Also the way CPI is calculated is fiddled. Peter Schiff says letting the government calculate inflation is like letting the Mafia compile crime statistics 😂

True inflation is 10%+ here, right now and getting worse 

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1 hour ago, TheCountOfNowhere said:

I was saying to Someone on Saturday that this is why the UK will collapse, these pensions are unfair and unpayable

Just DM nonsense, same story is dragged up ever few years. 

Projected payments are estimated to reach a peak of 1.9 per cent of GDP between 2018-19 and 2033-34 then fall to 1.7 per cent by 2059-60. This compares with a rise from around 1.5 per cent to 1.7 per cent over the last decade. The cost of public service pensions - National Audit Office (NAO) Report

As for unfair that sounds a bit whiney, it's just part of the pay for the job.  

If it was such a great deal why didn't you get a public sector job. I went the other way because the pay, even allowing for the pension was so shit. 15 years later now earning 3 times what I would have if I had stayed in the civil service.   

 

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9 minutes ago, Confusion of VIs said:

Just DM nonsense, same story is dragged up ever few years. 

Projected payments are estimated to reach a peak of 1.9 per cent of GDP between 2018-19 and 2033-34 then fall to 1.7 per cent by 2059-60. This compares with a rise from around 1.5 per cent to 1.7 per cent over the last decade. The cost of public service pensions - National Audit Office (NAO) Report

As for unfair that sounds a bit whiney, it's just part of the pay for the job.  

If it was such a great deal why didn't you get a public sector job. I went the other way because the pay, even allowing for the pension was so shit. 15 years later now earning 3 times what I would have if I had stayed in the civil service.   

 

You have to be very very careful - 

The Treasury has not undertaken any systematic analysis of the impact of changing the assumption about zero public service workforce growth, although it did consider doing so. In our view, such an analysis is needed to understand the potential impact on public service pension costs of plausible alternative outcomes

...

Conclusion 13 Real-terms increases of 38 per cent in the costs of paying pensions in the four largest UK public service pay-as-you-go schemes, over the last ten years, have been driven by increases in the number of employees retiring. On the basis of the Treasury’s assumptions, the total cost of paying public service pay-as-you-go pensions is projected to increase as a proportion of GDP over the next fifty years, rising from 1.7 per cent to 1.9 per cent before falling back to 1.7 per cent. Higher life expectancy and lower productivity growth would increase the cost of public sector pensions as a proportion of GDP. Conversely, lower life expectancy and higher productivity growth would reduce costs as a proportion of GDP. There is a reasonable framework in place for assessing future pension costs, including sensitivity analysis covering some significant assumptions. The Treasury has not assessed the impact of different assumptions about the size of the public service workforce, despite it being a critical driver of pension costs. Our second report will examine sensitivity analyses further.

The projection is for ~50 years.

bear in mind that the projections from ~50- years ago did not pick up on the vast increase in life expectancy. from the late 80s.

It also makes the assumption that the number of public sector employees will stay stable.

And assumes that the increase in pension payments will contnue.

At the moment,. theres a huge panic in public schemes such as the LA and TPS as well as Police and Fireman - these are running out of money. And, yes, there is a hypothetical pot i.e. not pure PAYG.

Money from the current police and fire budget being transfer to the she pension scheme.

Equally, the contribution rates for TPS, employer and employee, are rising rapidly.

And thens theres the USS - 

https://www.bbc.co.uk/news/business-56258460

Bill Galvin, USS's chief executive, told the BBC in July last year that contributions would need to rise to 40%.

The deficit had grown from £3.6bn in an official valuation in 2018, to between £14.9bn and £17.9bn. However, there has been debate between the parties involved over how that figure was calculated.

Pension regulator under fire over university fund valuation

Concerns raised after sector’s main retirement fund estimated shortfall of up to £18bn

https://www.ft.com/content/31fcf938-77c4-4f60-8ef9-4e1b60c6cf74

 

Who do I believe?
1. The trade union who just want the highest pension entitlements at the lowest cost to their members, knowing that the govt will almost certainly pick up any underfunding in the long run?
2. The Universities who know that doubling the staff contribution will lead to mass strikes, but so will scrapping the final salary scheme, and therefore have taken the cowardly decision to try & kick the can down the road and pass this issue onto their successors?
3. The Pensions regulators who have no upside from this mess, but know they’ll get the blame when the underfunded scheme collapses?
4. Or the poor people at the USS who manage the money and are being asked to pretend they can generate unrealistic long-term returns?
 
Pretty much everyone in this debate is “talking their own book”, but FWIW I’m on the side of USS / pensions regulator who are at least trying to steer away from the train-wreck.

Regulators probe claims about university pension plan

Watchdog examines whistleblower complaint about obstruction on deficit estimate

https://www.ft.com/content/96cf2da6-7ad8-11e9-81d2-f785092ab560

Something very disturbing in this article.

The Scheme Actuary advises Trustees on the effect of the actuarial basis used for the valuation, but the Trustees decide on the choice of basis. That is the law.

Deficits are not based on "Actuarial Rules", but emerge as part of the relationship between liabilities, which depends the basis chosen, and the assets. The Scheme Actuary would have indicated the expected deficit on more than one basis to the Trustees.

Such bases have to be prudent, and therefore should tend to overstate liabilities, rather than to understate them. Read the Pension Regulators' bulletins on this, if you doubt it.

What Professor Hutton describes as "an error in the retirement rate" in respect to early retirements appears to have been a margin of prudence. If such margins manifest themselves, the Trustees can choose a basis which removes that margin. However, if what Prof Hutton has spotted is a blip, then by weakening the reserve, the Scheme will actually under reserve, which is imprudent.

One wonders if Professor Hutton has adequately understood the Regulators' TKU requirements. Any scheme can, in theory, cut all its margins to the bone. That is reckless, and can put you in "BHS Land".

 

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EnglishRose
 
2 YEARS AGO
 
reply In reply to PeterCrowley

PeterCrowley That sounds right to me too although if the USS halved the expected deficit once the matter was looked at again that is such a huge difference and presumably they have not gone too close to the bone on the estimate that it does suggest they were over cautious to start with.

However they do appear to have stopped her getting information which sems a bit shortsighted - they would have been better off sitting her down and explaining how it works to her.

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2 hours ago, shlomo said:

I think it is unfunded and unplayable 

Some UK public sector pensions are funded but admittedly it's a minority. Each bit of the UK public sector has its own arrangements, there's not one single 'public sector pension' structure.

Other countries do it differently e.g. the Ontario Teachers' Pension Plan is one of the largest institutional investors in Canada i.e. they actually have a pot that is invested in the economy, not just an IOU as the UK teachers have:

https://en.wikipedia.org/wiki/Ontario_Teachers'_Pension_Plan

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18 minutes ago, spyguy said:

You have to be very very careful - 

You do but there are also factors that are likely to decrease the liabilities. 

The rise in life expectancy since 2010 has been less than was expected/planned for and even before Covid knocked it back appeared to be petering out.  

We may be coming out of the ZIRP that and a bit of inflation will soon make the figures look better, as investment returns rise and CPI linking devalues pensions already in payment.    

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Its going to get much worse as people living longer and public sector workforce much bigger.  Both my parents NHS nurse and Civil servant retired mid 50's going strong at 85 will easily make 105 so 50 yrs of pension ontop of their state pension. They can not spend it as too much and they were middle ranking management.

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3 hours ago, coypondboy said:

Covid doing its bit to help reduce the deficit why do you think they allowed it in the nursing homes think of all those public sector pensions no longer being paid.

Lol, yes pension regulators must love Covid 

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5 hours ago, Dorkins said:

Some UK public sector pensions are funded but admittedly it's a minority. Each bit of the UK public sector has its own arrangements, there's not one single 'public sector pension' structure.

Other countries do it differently e.g. the Ontario Teachers' Pension Plan is one of the largest institutional investors in Canada i.e. they actually have a pot that is invested in the economy, not just an IOU as the UK teachers have:

https://en.wikipedia.org/wiki/Ontario_Teachers'_Pension_Plan

My dad told me local government pensions like his (been retired for 8 years now) are completely unfunded and paid for directly out of council tax receipts. 

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Oh God here we go again with the public sector pensions bitching.  The number of times this has come up on here over the years must be astronomical.

I actually agree with Confusion of VIs on this question and he has given a good answer already.

To add to that, there is no other area of expenditure where we add up all the years into a total.  It's an unusual way of looking at it, and it is only done that way to paint a misleading picture.  Which you lot on here fall for every time.

You may as well calculate how much total state expenditure will be over the next 100 years or whatever.  That would be about £100 trillion pounds or roughly 50 times GDP. 

Does that make any sense?  No ?  Well why do it with the pensions then?

 

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6 hours ago, byron78 said:

Annual cost of 95M?

Yeah. That's F all. 

Good headline though....

********.

Heres the Police -

https://www.pensionsage.com/pa/Govt-estimates-additional-police-pension-costs-at-316m.php

The government has estimated the additional costs to police pensions from employer contributions will total £316m in 2020/21

That number will only get worse.

Police n fire pensions are canaries in the acturial mine.

Number of police is tiny compared to teachers, LA workers, teachers and civil service.

These are huge deficits, which are only going to get worse.

Pricing the pension is important as theres vast number of public sector jobs out for tender.

Roughly, public sector pensions cost 50% of salary. This vista is not fully accounted for.

Theres jobs being done by the public sector which would be far cheaper in the private sector.

In fact, 30%-50% of public sector job roles no longer exist in the private sector as theyve been long automated.

 

 

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50 minutes ago, kzb said:

To add to that, there is no other area of expenditure where we add up all the years into a total.  It's an unusual way of looking at it, and it is only done that way to paint a misleading picture.  Which you lot on here fall for every time.

You may as well calculate how much total state expenditure will be over the next 100 years or whatever.  That would be about £100 trillion pounds or roughly 50 times GDP. 

Does that make any sense?  No ?  Well why do it with the pensions then?

 

Once again it is YOU who miss the point.  
 

Pensions ALREADY ACCRUED is money that has in effect been spent in the PAST to pay for the services of all of those public sector people.

Unlike future expenditure, which could be scaled down or cancelled, these are pension promises already made.

Its like a mortgage - yes the repayments might be made in the future but the moment you take out the loan the whole debt is yours to pay due to a PAST purchase.

But you won’t listen this time either I’m sure… 🙄

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21 minutes ago, scottbeard said:

Once again it is YOU who miss the point.  
 

Pensions ALREADY ACCRUED is money that has in effect been spent in the PAST to pay for the services of all of those public sector people.

Unlike future expenditure, which could be scaled down or cancelled, these are pension promises already made.

Its like a mortgage - yes the repayments might be made in the future but the moment you take out the loan the whole debt is yours to pay due to a PAST purchase.

But you won’t listen this time either I’m sure… 🙄

Is anyone debating that?

Pensions are deferred pay, the liabilities are accrued day by day throughout an employees career. It was the  governments choice to pay pensions out of current spending rather than set money aside.   

Saying a liability that is predicted to peak at below 2% of GDP is unaffordable is clearly untrue.    

NB The median public sector pension is around £8,000

 

 

 

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