Unsustainable public sector pensions

Unsustainable public sector pensions

Author
Discussion

Welshbeef

49,633 posts

197 months

Thursday 31st March 2016
quotequote all
When is the time someone with a final salary be it public sector or private sector request a transfer value and move it into a Pensions ISA to ensure its safe.

I'm thinking if your in a company or have left a company where its finances are not in the best condition so the promise might be broken by the time you need to draw it or the goal posts keep moving.


It's an interesting option - shall we explore it?

sidicks

25,218 posts

220 months

Thursday 31st March 2016
quotequote all
Welshbeef said:
When is the time someone with a final salary be it public sector or private sector request a transfer value and move it into a Pensions ISA to ensure its safe.

I'm thinking if your in a company or have left a company where its finances are not in the best condition so the promise might be broken by the time you need to draw it or the goal posts keep moving.

It's an interesting option - shall we explore it?
Im not sure it really make much sense as:
1. Pension protection fund will step in if the employer goes bust, protecting 90% of pensions for most people
2. If the scheme funding is greater than the protection provided by the PPF then you have even less to worry about
3. If the scheme has a significant deficit, the transfer value will reflect that, and be suitably reduced compared to the value of benefits expected!
4. Anything in a pension ISA will have market risk and provider risk (covered by the FSCS<, but not dissimilar to the PPF)

Welshbeef

49,633 posts

197 months

Thursday 31st March 2016
quotequote all
sidicks said:
Im not sure it really make much sense as:
1. Pension protection fund will step in if the employer goes bust, protecting 90% of pensions for most people
2. If the scheme funding is greater than the protection provided by the PPF then you have even less to worry about
3. If the scheme has a significant deficit, the transfer value will reflect that, and be suitably reduced compared to the value of benefits expected!
4. Anything in a pension ISA will have market risk and provider risk (covered by the FSCS<, but not dissimilar to the PPF)
I wasn't aware of point 3.

Couldn't you put it into a SIPP and then say purchase commercial property/fine wines/art/classic cars and yes take the risk associated but you own them

sidicks

25,218 posts

220 months

Thursday 31st March 2016
quotequote all
Welshbeef said:
I wasn't aware of point 3.

Couldn't you put it into a SIPP and then say purchase commercial property/fine wines/art/classic cars and yes take the risk associated but you own them
You could do pretty much whatever you want with it (investment wise), but then you have removed all of the guarantees which make DB schemes so attractive - no investment risk, no inflation risk, no expense risk, no longevity risk, no interest rate risk...

(Of course some of these factors could work in your favour, but it's a very different proposition, particular if you've taken a 30% haircut on the transfer value because the fund is in deficit!)

Welshbeef

49,633 posts

197 months

Thursday 31st March 2016
quotequote all
sidicks said:
You could do pretty much whatever you want with it (investment wise), but then you have removed all of the guarantees which make DB schemes so attractive - no investment risk, no inflation risk, no expense risk, no longevity risk, no interest rate risk...

(Of course some of these factors could work in your favour, but it's a very different proposition, particular if you've taken a 30% haircut on the transfer value because the fund is in deficit!)
The unions if they had any balls should use the weapons they have to deploy. Imagine all public sector workers who are in dispute demanded transfer values to move the funds out to a personal pension scheme. The govt would have to borrow vastly overnight and the cost of interest payments to do that could vastly outweigh the short term ask of the unions. But they will not as they have little balls

sidicks

25,218 posts

220 months

Thursday 31st March 2016
quotequote all
Welshbeef said:
The unions if they had any balls should use the weapons they have to deploy. Imagine all public sector workers who are in dispute demanded transfer values to move the funds out to a personal pension scheme. The govt would have to borrow vastly overnight and the cost of interest payments to do that could vastly outweigh the short term ask of the unions. But they will not as they have little balls
DB schemes are not obliged to provide transfer values.

basherX

2,464 posts

160 months

Thursday 31st March 2016
quotequote all
Welshbeef said:
The unions if they had any balls should use the weapons they have to deploy. Imagine all public sector workers who are in dispute demanded transfer values to move the funds out to a personal pension scheme. The govt would have to borrow vastly overnight and the cost of interest payments to do that could vastly outweigh the short term ask of the unions. But they will not as they have little balls
I'm a corporate sector pensions monkey so a little knowledge etc but thought that the pensions freedoms had specifically not been extended to members of unfunded public sector schemes (?)

Welshbeef

49,633 posts

197 months

Thursday 31st March 2016
quotequote all
sidicks said:
DB schemes are not obliged to provide transfer values.
One rule for private sector another for the Ponzi scheme.


sidicks

25,218 posts

220 months

Thursday 31st March 2016
quotequote all
Welshbeef said:
One rule for private sector another for the Ponzi scheme.
I don't think private sector (funded) DB schemes are necessary obliged to offer transfer values, it's at the Trustees discretion.

Terzo123

4,309 posts

207 months

Monday 16th January 2017
quotequote all
Looks like the judges have delivered the first blow to the government. Their pension changes have been ruled to be descriminatory on grounds of age. No doubt there will be an appeal.

Firefighters, police etc are looking on with obvious interest.

Defcon5

6,160 posts

190 months

Monday 16th January 2017
quotequote all
Terzo123 said:
Looks like the judges have delivered the first blow to the government. Their pension changes have been ruled to be descriminatory on grounds of age. No doubt there will be an appeal.

Firefighters, police etc are looking on with obvious interest.
What is this case regarding?

Terzo123

4,309 posts

207 months

Monday 16th January 2017
quotequote all
Defcon5 said:
What is this case regarding?
Recent forced pension changes for Judges.

I believe the fire service are next inline to challenge the government followed by the Police. Hence why the government will no doubt appeal today's decision.

sidicks

25,218 posts

220 months

Monday 16th January 2017
quotequote all
It's not the first time that Judges have made a ruling which make no sense in the real world!

Terzo123

4,309 posts

207 months

Monday 16th January 2017
quotequote all
sidicks said:
Once again we see a Judicial ruling that seemingly has no understanding of economics or reality!
What has the law got to do with economics. Discriminating against someone on grounds of age because you want reduce your financial liability is not an excuse.

sidicks

25,218 posts

220 months

Monday 16th January 2017
quotequote all
Terzo123 said:
What has the law got to do with economics. Discriminating against someone on grounds of age because you want reduce your financial liability is not an excuse.
Hmmm...

So the government policy to increase the retirement ages for the state pension for females younger than a certain age are not discriminating on the basis of sex or age...?!

loafer123

15,404 posts

214 months

Monday 16th January 2017
quotequote all
Terzo123 said:
sidicks said:
Once again we see a Judicial ruling that seemingly has no understanding of economics or reality!
What has the law got to do with economics. Discriminating against someone on grounds of age because you want reduce your financial liability is not an excuse.
You do realise that the logical outcome would be to have the worst outcome for all in order to be equally unfair to everyone?

Terzo123

4,309 posts

207 months

Monday 16th January 2017
quotequote all
loafer123 said:
You do realise that the logical outcome would be to have the worst outcome for all in order to be equally unfair to everyone?
yourself and Sidekick seem disappointed. I take it you both want the government to shaft people who have public sector pensions.

loafer123

15,404 posts

214 months

Monday 16th January 2017
quotequote all
Terzo123 said:
loafer123 said:
You do realise that the logical outcome would be to have the worst outcome for all in order to be equally unfair to everyone?
yourself and Sidekick seem disappointed. I take it you both want the government to shaft people who have public sector pensions.
No - I want public sector pensions to be fair to both employees and those who pay their pensions, whether that is the employee or the taxpayer.

anonymous-user

53 months

Monday 16th January 2017
quotequote all
loafer123 said:
Terzo123 said:
loafer123 said:
You do realise that the logical outcome would be to have the worst outcome for all in order to be equally unfair to everyone?
yourself and Sidekick seem disappointed. I take it you both want the government to shaft people who have public sector pensions.
No - I want public sector pensions to be fair to both employees and those who pay their pensions, whether that is the employee or the taxpayer.


......and on the same terms as most private sector employees.

sidicks

25,218 posts

220 months

Monday 16th January 2017
quotequote all
Terzo123 said:
yourself and Sidekick seem disappointed. I take it you both want the government to shaft people who have public sector pensions.
You seem not to understand that public sector pensions are unaffordable and massively more generous than those available in the private sector, despite comparable public sector salaries being similar to or above comparable jobs in the private sector (according to the ONS).

Hence there is no justification for keeping them at current levels - by all means retain the DB element but make them more reasonable by reducing the benefit or increasing employee contributions or both.