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Public sector pension bill £2.4 Trn


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https://www.ft.com/content/9d9b03d0-55ff-4e2a-8ec7-2caab0a89381



The average cost of all UK public sector pensions for 2021 is 63 per cent of the salaries. Some of this is paid by employee contributions, averaging 8 per cent, leaving the balance — 55 per cent of salary — to be paid by taxpayers. (This financial year, to April 2022, the percentage cost will be even higher).

The total public sector pensionable payroll is about £175bn, so the total annual cost to taxpayers is £95bn.

I think the earlier post by byron78 mixedup his billions with millions.

 

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1 hour 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… 🙄

I think we are both right.  At least with the funded pensions you are right, but I think with the unfunded ones it is just a promise to pay part of the employees' salary, post retirement age.

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33 minutes ago, spyguy said:

https://www.ft.com/content/9d9b03d0-55ff-4e2a-8ec7-2caab0a89381



The average cost of all UK public sector pensions for 2021 is 63 per cent of the salaries. Some of this is paid by employee contributions, averaging 8 per cent, leaving the balance — 55 per cent of salary — to be paid by taxpayers. (This financial year, to April 2022, the percentage cost will be even higher).

The total public sector pensionable payroll is about £175bn, so the total annual cost to taxpayers is £95bn.

I think the earlier post by byron78 mixedup his billions with millions.

 

No 55% is not all paid by taxpayers.  Most of it is paid by the employer contributions.  In the teachers' pension this is 23% of salary.

As I've said many times before, it depends how you look at it.  Taxpayers pay the teachers' salaries and their pensions.  No difference.  You might as well lump all future teachers' salaries as well as their pensions onto your liability side of the account.

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12 minutes ago, scottbeard said:

kzb still seems to think that quantifying the future payments in respect of PAST accrual is fundamentally unsound

So yes he seems to be debating that 

People on this forum think the unfunded pensions are to be paid by future taxpayers.  In a way they are, but only in the sense that all public sector salaries are also to be paid by taxpayers.

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Just now, hughjass said:

The pensions will  be paid, its The Daily Mail causing trouble again. Theres more chance of the state pension being done away with or means tested than a default of Government pensions.

The sure fire way to end up with a means tested state pension is to carry on like this lot on here.

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2 hours ago, spyguy said:

********.

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.

 

 

Jesus. What an incompetent bunch of bastards we have running the show right now!

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41 minutes ago, kzb said:

Taxpayers pay the teachers' salaries and their pensions.  No difference.  You might as well lump all future teachers' salaries as well as their pensions onto your liability side of the account.

Again, no.

Future salaries are in respect of FUTURE work. They are not a liability today because the work hasn’t been done yet.

Future pensions already earned are in respect of PAST work and hence are a liability already today. 

Its the difference between saying “I owe Bob £100 for painting my garage last week” (a liability you already have today) and “if I hire Bob next week to paint the garage I will have to pay him £100” (a cost you might one day incur but not a liability today)

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42 minutes ago, kzb said:

People on this forum think the unfunded pensions are to be paid by future taxpayers.  In a way they are, but only in the sense that all public sector salaries are also to be paid by taxpayers.

The major difference though is that the future taxpayers get direct benefit from the future salaries they pay because they are the ones who benefit from FUTURE work.

But they also have to pay pensions in respect of PAST work that they did not enjoy the benefit of.

There is a difference (especially if they standard of service they enjoy is worse than the people who did benefit from that past work - for example I am paying the pensions of binmen who did weekly collections yet my bin is only collected fortnightly etc)

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22 minutes ago, byron78 said:

Jesus. What an incompetent bunch of bastards we have running the show right now!

The pension probably goes waay back, mid 90s, by which time it was obvious that life expectancy was rising at a rapid clip.

The private sector DB schemes were shutdown in the early 2000s as it became obvious just how expensive those pension promises were.

The notable event was Boots switching to bonds in 2001 -

https://www.hymans.co.uk/insights/blogs/blog/boots-investing-100-in-bonds-20-years-on/

 

 

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1 hour ago, Confusion of VIs said:

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.   

Only unfunded pensions are deferred pay, for funded pensions there is no deferment from the perspective of the employer.

Yes, it was the government's choice to operate unfunded pension plans for most of its employees. Perhaps a future government will make a different choice.

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1 minute ago, scottbeard said:

The major difference though is that the future taxpayers get direct benefit from the future salaries they pay because they are the ones who benefit from FUTURE work.

But they also have to pay pensions in respect of PAST work that they did not enjoy the benefit of.

There is a difference (especially if they standard of service they enjoy is worse than the people who did benefit from that past work - for example I am paying the pensions of binmen who did weekly collections yet my bin is only collected fortnightly etc)

Pension costs need to fall when the benefit is accrued - same year.

As it stands, today's and tomorrows Police services are being stripped down to nothing bare bones to pay for a service used 20-30 years ago.

It isnt just the pension oro ise that us costly, it's the piss poor operation on public services, allowing an average if 30 days sick plus large numbers retire 'sick'.

 

 

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2 minutes ago, Dorkins said:

Only unfunded pensions are deferred pay, for funded pensions there is no deferment from the perspective of the employer.

Yes, it was the government's choice to operate unfunded pension plans for most of its employees. Perhaps a future government will make a different choice.

Theres nothing wrong with payg - pensions paid from 20% of a services current payroll.

But you cannot guarantee payout.

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53 minutes ago, hughjass said:

The pensions will  be paid, its The Daily Mail causing trouble again. Theres more chance of the state pension being done away with or means tested than a default of Government pensions.

I fully expect the state pension to go bye bye for many.  It will reach a point where they say everyone needs £xxx a week to live on, if you get that figure or above, no state pension for you.

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8 minutes ago, FTB-house-hunter said:

I fully expect the state pension to go bye bye for many.  It will reach a point where they say everyone needs £xxx a week to live on, if you get that figure or above, no state pension for you.

I'll likely cop for this, and sadly I think you're right as it's the direction of travel. University use to be free, unemployment benefit use to be able to be claimed by students during term breaks, child benefit use to be universal, as did the tax free allowance. I know in history income tax has been higher then now, but I do feel like we're the most highly taxed of modern history, say 1900 onwards. 

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1 hour ago, scottbeard said:

Again, no.

Future salaries are in respect of FUTURE work. They are not a liability today because the work hasn’t been done yet.

Future pensions already earned are in respect of PAST work and hence are a liability already today. 

Its the difference between saying “I owe Bob £100 for painting my garage last week” (a liability you already have today) and “if I hire Bob next week to paint the garage I will have to pay him £100” (a cost you might one day incur but not a liability today)

Yes but we assume there will always be teachers.

Anyway I think you are nit picking.

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1 hour ago, scottbeard said:

The major difference though is that the future taxpayers get direct benefit from the future salaries they pay because they are the ones who benefit from FUTURE work.

But they also have to pay pensions in respect of PAST work that they did not enjoy the benefit of.

There is a difference (especially if they standard of service they enjoy is worse than the people who did benefit from that past work - for example I am paying the pensions of binmen who did weekly collections yet my bin is only collected fortnightly etc)

You are paying for a much more sophisticated waste disposal service, because that is what everyone wants.

Back then it got carted off to landfill.  Now it is sorted into waste streams for recycling.

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3 hours ago, FTB-house-hunter said:

I fully expect the state pension to go bye bye for many.  It will reach a point where they say everyone needs £xxx a week to live on, if you get that figure or above, no state pension for you.

Yes.

And quite right too.

Why should the workers subsidise the economically inactive, other than to ensure they are adequately housed, fed and free? I'm getting on a bit, but I don't want to have a standard of life that is beyond that of the average worker, if the average worker is paying for it.

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9 hours ago, spyguy said:

The pension probably goes waay back, mid 90s, by which time it was obvious that life expectancy was rising at a rapid clip.

The private sector DB schemes were shutdown in the early 2000s as it became obvious just how expensive those pension promises were.

The notable event was Boots switching to bonds in 2001 -

https://www.hymans.co.uk/insights/blogs/blog/boots-investing-100-in-bonds-20-years-on/

 

 

I should imagine all the investment and improvements to the NHS under Blue Labour also raised life expectancy.

I'm guessing it's been going down again since 2010?

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9 hours ago, kzb said:

Yes but we assume there will always be teachers.

Anyway I think you are nit picking.

Honestly, I don't think that I am.

What I take issue with is not the way that Public Sector pensions operate (which is a model that can work) but your challenge that capitalising future pension liabilities is in some way an inappropriate calculation, and especially "capitalising future salaries would be silly so capitalising future pension payments is silly".

In practice both sets of payments will be made using taxes raised in the future.  So in that way I agree with you there are likely to be funded the same way.

However, as you say, there will always be teachers.  Saying "the future value of salaries due to all teachers for the rest of humanity's existence is £infinite" is not a meaningful calculation.  Neither would be saying "the future value of pension payments due to all teachers for the rest of humanity's existence is £infinite".

However, saying "the future value of pension payments to public sector workers in respect of work that they have already done is £2.4 Trillion" is not meaningless.   It is noting, quite rightly, that this is liability that already exists today.

Yes there will be teachers forever, but the cost of teachers is reasonably proportional to the population - if the UK population doubles its taxpayer base doubles and its number of children doubles, and vice versa if it halves.

But no matter what happens in the future there is a £2.4 Trillion albatross around the future taxpayers' necks.  Even if (as we are seeing) the Eastern Europeans go home and the UK mothers stop having as many children, the reduced number of taxpayers left would still have to pay £2.4 Trillion PLUS the costs of future services.

That, to me, is why it's different.

It's not actually as big a problem in my view for exactly the reason you say - it's a big number, but at the moment I'd expect we will have the population of taxpayers to cover it.  But the £2.4 Trillion calculation is sound.

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I would say that paying public sector pensions make up a large percentage of spending power in the economy......I wonder what the breakdown of public v private pensions is........pensioners, their pensions and their savings must make up a big and important part of the money in the economy being spent.;)

 

 

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