Unsustainable public sector pensions

[IroningMan]

///ajd said:

sidicks - deflect, avoid, etc.

are you a member of the SNP?

of course funded by the taxpayer, where did I say it shouldn't be?

So, how much should a nurse expect with career average of £30k?
How would the taxpayer fund it - make higher contributions? how much higher?

Outline a solution.

How much should a truck driver/farm labourer/sub-editor or anyone else with a career average of £30k receive as a pension? And how should it be funded?

[Rovinghawk]

mph1977 said:

and completely ignores the employers contribution ...

This is still taxpayer funded, regardless of any mechanisms by which the money is shunted around.

Jesus bloody wept- where else do huge amounts of money enter the NHS system but from the goddamn taxpayers?

[sidicks]

mph1977 said:

you seem to be incapableof distingi#uishing three seperate concepts

1. the costs of the pensionscheme as built into the current wage bill

The total cost is not built in - only the notional employer contribution (which, as anyone who actually knows what they are talking about will tell you, is insufficient to meet the promised cost of benefit even after allowing for the employee contribution.

mph1977 said:

2. the fact that PAYG is a political decision

As explained already, the funding mechanism makes no difference as to the ultimate cost.

mph1977 said:

3. the difference between the taxpayers money that pays for the costs of the services provided and tax payer monery being used solely as support at the point where a PAYG scheme outflow exceeds inflow / where a funded scheme cannot meet it's obligations

Still nonsense. Taxpayer's money is taxpayer's money and a temporary excess of contributions in versus benefit outgo is not a surplus.

[sidicks]

mph1977 said:

employer contributions in the NHS scheme are not that low for professional staff - the 30 k salary person would be paying 9.3 % employee contribution...

http://www.nhsbsa.nhs.uk/Pensions/Documents/Pensio...

and completely ignores the employers contribution ...

hence the chicken little figures floating around ...

It's almost as if you are too stupid to realise that the taxpayer is your employer.

Edited by sidicks on Sunday 29th November 22:25

[sidicks]

///ajd said:

sidicks - deflect, avoid, etc.

are you a member of the SNP?

of course funded by the taxpayer, where did I say it shouldn't be?

So, how much should a nurse expect with career average of £30k?
How would the taxpayer fund it - make higher contributions? how much higher?

Outline a solution.

Sorry, I've been out.

Defined contribution scheme:
5% taxpayer contribution plus matched contributions up to a further 10%.

[///ajd]

sidicks said:

Sorry, I've been out.

Defined contribution scheme:
5% taxpayer contribution plus matched contributions up to a further 10%.

The NHS scheme contribution is basically 5-15% depending on earnings.

At £30k, the contribution now is 9%.

The matched govt contribution never really gets made, but the pay out just comes out of govt current spend. This makes sense when you think about it.

I'm not sure what you are saying should change - put the actual govt contribution in some kind of fund? What would be the point, the government creates its own growth in tax receipts by managing the economy "well" (in theory). It doesn't need to invest in a third party to generate returns on a fund, does it? It seems like the similar logic to why the government e.g. self insurers hire cars. Why pay a policy premium - its not like they can't cover the risk, cost of a car accident is buttons to a government!

Is that your main point, that it is unfunded?

[sidicks]

Downward said:

I'm intrigued . Let's have an explanation on this one then.

Are you saying that because 15% of the population live in London and create 22% of wealth we have to subside them getting to work ?

There are more cities than just London, that was an example.

[Downward]

sidicks said:

There are more cities than just London, that was an example.

Yeah I know I just don't agree with these subsidies that are given so Londoners get cheap travel because they choose to live in an overly priced area which the rest of us taxpayers are not getting value for money for.

Why can't we move public sector areas not required to be in the countries most expensive area to another part of the U.K. With cheaper rent and cost of living ?

The Houses of Parliament are going to cost a fortune to repair but could be rebuilt elsewhere

[sidicks]

///ajd said:

The NHS scheme contribution is basically 5-15% depending on earnings.

At £30k, the contribution now is 9%.

The matched govt contribution never really gets made, but the pay out just comes out of govt current spend. This makes sense when you think about it.

It still costs the taxpayer 25-30%. This money doesn't magically appear from nowhere!

///ajd said:

I'm not sure what you are saying should change

see above.

The option has the option not to pay into the scheme themselves and hence receive a higher basic salary.
You could even just increase salaries by 5% and then offer a matching contribution up to 15% for the taxpayer.

///ajd said:

- put the actual govt contribution in some kind of fund? What would be the point, the government creates its own growth in tax receipts by managing the economy "well" (in theory). It doesn't need to invest in a third party to generate returns on a fund, does it? It seems like the similar logic to why the government e.g. self insurers hire cars. Why pay a policy premium - its not like they can't cover the risk, cost of a car accident is buttons to a government!

Because a DC scheme caps the government's liability, and aligns employee's interest with the real world.

///ajd said:

Is that your main point, that it is unfunded?

No, i've explained on numerous occasions that doesn't really impact the cost.

[sidicks]

Downward said:

Yeah I know I just don't agree with these subsidies that are given so Londoners get cheap travel because they choose to live in an overly priced area which the rest of us taxpayers are not getting value for money for.

Why can't we move public sector areas not required to be in the countries most expensive area to another part of the U.K. With cheaper rent and cost of living ?

The Houses of Parliament are going to cost a fortune to repair but could be rebuilt elsewhere

Doesn't that already happen in some areas? I'm sure that there was some headline fairly recently about x% of a certain area employed by the taxpayer.

[///ajd]

sidicks said:

///ajd said:

The NHS scheme contribution is basically 5-15% depending on earnings.

At £30k, the contribution now is 9%.

The matched govt contribution never really gets made, but the pay out just comes out of govt current spend. This makes sense when you think about it.

It still costs the taxpayer 25-30%. This money doesn't magically appear from nowhere!

///ajd said:

I'm not sure what you are saying should change

see above.

The option has the option not to pay into the scheme themselves and hence receive a higher basic salary.
You could even just increase salaries by 5% and then offer a matching contribution up to 15% for the taxpayer.

///ajd said:

- put the actual govt contribution in some kind of fund? What would be the point, the government creates its own growth in tax receipts by managing the economy "well" (in theory). It doesn't need to invest in a third party to generate returns on a fund, does it? It seems like the similar logic to why the government e.g. self insurers hire cars. Why pay a policy premium - its not like they can't cover the risk, cost of a car accident is buttons to a government!

Because a DC scheme caps the government's liability, and aligns employee's interest with the real world.

///ajd said:

Is that your main point, that it is unfunded?

No, i've explained on numerous occasions that doesn't really impact the cost.

In the nurse example today, the nurse pays 9% contribution from salary, and the govt contributes a virtual 14%. This makes the scheme a 23% contribution in total at this salary point.

http://www.nhsemployers.org/your-workforce/pay-and...

So what is the specific issue with this; it already appears to match your criteria?

You seem hung up on the "money has to come from somewhere". Yes it does, the taxpayer. The 23% contribution is clearly set out and comes from the taxpayer but just never gets put in a fund.

So what is the problem? Are we talking at cross purposes about it being unfunded?

Edited by ///ajd on Sunday 29th November 23:13

[barryrs]

///ajd said:

barryrs said:

///ajd said:

Hmm. So you don't think nurses and firefighters deserve pensions? I thought you thought they did? Which is it?

What sort of pension do you think a nurse working for 40 years and average earnings of £15k deserves to retire with? How should it be funded? What would you change? Pay the nurse more to make more contributions (from taxpayers of course)? Or just slash their pension to a level difficult to live on in retirement? It seems like it is only the latter that will keep you happy.

A nurse on £15k, seriously?

My sister works as a theatre assistant and earns considerably more than that.

No, my bad. Average of £30k say. What should they be allowed to expect as a pension after 40 years service?

Sidicks seems to suggest only £5k or less given current contribution levels. Should a nurse live on £5k a year in retirement?

£5k plus £6k state should be adequate to pay the bills with the right life choices.

[Ali G]

///ajd said:

sidicks said:

Sorry, I've been out.

Defined contribution scheme:
5% taxpayer contribution plus matched contributions up to a further 10%.

The NHS scheme contribution is basically 5-15% depending on earnings.

At £30k, the contribution now is 9%.

The matched govt contribution never really gets made, but the pay out just comes out of govt current spend. This makes sense when you think about it.

I'm not sure what you are saying should change - put the actual govt contribution in some kind of fund? What would be the point, the government creates its own growth in tax receipts by managing the economy "well" (in theory). It doesn't need to invest in a third party to generate returns on a fund, does it? It seems like the similar logic to why the government e.g. self insurers hire cars. Why pay a policy premium - its not like they can't cover the risk, cost of a car accident is buttons to a government!

Is that your main point, that it is unfunded?

For the purposes of simplicity....

Assuming 45 years of service (20 + 45 = 65) @30K with 9% contribution, builds a fund of £121,500

Assuming 20 years of life in retirement (65 + 20 = 85), dividing 121,500 by 20 provides £6,075 pension per annum, on a defined contriution basis.

If a defined benefit were to provide 60% of final salary based upon 30k, then the pension would be £18,000 per annum.

The fund required to provide a 20 year pension of £18k would be £360k, resulting in a deficit of £238,500 to be funded elsewhere.

This disregards investment growth in funds set aside for pensions, which may be realistic, since no such funds have been set aside - allegedly.

This also disregards any inflationary aspects of pay, for the purposes of simplicity, and also index linking of pension entitlement, for the purposes of simplicity.

The maths is very simple, regardless.

[mph1977]

///ajd said:

This implies you don't think they need pensions.

If you want to clarify you just mean they should have lowered benefits than they enjoy now, then please give us an example of a solution for the theoretical nurse on average salary of £30k over 40 years, with 7% contributions today. Lets say they expect a £15k pension. What would you change, and what would be the outcome?

let';s get the figures representative for the NHS scheme ...

9.3 % contribution today , plus 14 % employers contribution and tax treatments ....

[sidicks]

///ajd said:

In the nurse example today, the nurse pays 9% contribution from salary, and the govt contributes a virtual 14%. This makes the scheme a 23% contribution in total at this salary point.

http://www.nhsemployers.org/your-workforce/pay-and...

So what is the specific issue with this; it already appears to match your criteria?

For the 4 millionth time, the true total cost of the scheme is not 23% - it's more like double that. The 14% employer contribution is just an indicative number that doesn't represent the true economic conditions.

If the government could offer public style DB schemes to the private sector for a 23% contribution rate, those who understand the true value of these schemes would bite their hands off!

//adj said:

You seem hung up on the "money has to come from somewhere". Yes it does, the taxpayer. The 23% contribution is clearly set out and comes from the taxpayer but just never gets put in a fund.

So what is the problem? Are we talking at cross purposes about it being unfunded

The taxpayer's total contribution is NOT capped at 14%, it is whatever is required to meet the benefits promised. Based on current economics, it's more like 30% for some schemes and 40% or more for others.

Do the maths - set up a spreadsheet and work out the implicit investment return to provide guaranteed future pension payments for life, based on the contributions paid pre-retirement!!!!

[sidicks]

mph1977 said:

let';s get the figures representative for the NHS scheme ...

9.3 % contribution today , plus 14 % employers contribution and tax treatments ....

"Tax treatments"

[mph1977]

Ali G said:

For the purposes of simplicity....

Assuming 45 years of service (20 + 45 = 65) @30K with 9% contribution, builds a fund of £121,500

Assuming 20 years of life in retirement (65 + 20 = 85), dividing 121,500 by 20 provides £6,075 pension per annum, on a defined contriution basis.

If a defined benefit were to provide 60% of final salary based upon 30k, then the pension would be £18,000 per annum.

The fund required to provide a 20 year pension of £18k would be £360k, resulting in a deficit of £238,500 to be funded elsewhere.

This disregards investment growth in funds set aside for pensions, which may be realistic, since no such funds have been set aside - allegedly.

This also disregards any inflationary aspects of pay, for the purposes of simplicity, and also index linking of pension entitlement, for the purposes of simplicity.

The maths is very simple, regardless.

also disregards the employer contributions , but as the sole aim of these assaults on the Schemes is to ptry and prove with chicken little sums that the schemes are 'unaffordable' this is unsuprising ...

[sidicks]

mph1977 said:

let';s get the figures representative for the NHS scheme ...

9.3 % contribution today , plus 14 % employers contribution and tax treatments ....

Plus the required additional taxpayer contribution to fund the actual benefits promised - say a further 15-20%...

[Ali G]

mph1977 said:

Ali G said:

For the purposes of simplicity....

Assuming 45 years of service (20 + 45 = 65) @30K with 9% contribution, builds a fund of £121,500

Assuming 20 years of life in retirement (65 + 20 = 85), dividing 121,500 by 20 provides £6,075 pension per annum, on a defined contriution basis.

If a defined benefit were to provide 60% of final salary based upon 30k, then the pension would be £18,000 per annum.

The fund required to provide a 20 year pension of £18k would be £360k, resulting in a deficit of £238,500 to be funded elsewhere.

This disregards investment growth in funds set aside for pensions, which may be realistic, since no such funds have been set aside - allegedly.

This also disregards any inflationary aspects of pay, for the purposes of simplicity, and also index linking of pension entitlement, for the purposes of simplicity.

The maths is very simple, regardless.

also disregards the employer contributions , but as the sole aim of these assaults on the Schemes is to ptry and prove with chicken little sums that the schemes are 'unaffordable' this is unsuprising ...

'Employer' contributions are irrelevant if the scheme(s) is/are unfunded.

Do the chicken little sums.

I have avoided introducing actuarial complexities of the time value of money, assumed rates of investment growth, increases in vested interests and mortality rates inter alia, since these would provide unneccessary complications.

[sidicks]

Ali G said:

For the purposes of simplicity....

Assuming 45 years of service (20 + 45 = 65) @30K with 9% contribution, builds a fund of £121,500

Assuming 20 years of life in retirement (65 + 20 = 85), dividing 121,500 by 20 provides £6,075 pension per annum, on a defined contriution basis.

If a defined benefit were to provide 60% of final salary based upon 30k, then the pension would be £18,000 per annum.

The fund required to provide a 20 year pension of £18k would be £360k, resulting in a deficit of £238,500 to be funded elsewhere.

This disregards investment growth in funds set aside for pensions, which may be realistic, since no such funds have been set aside - allegedly.

This also disregards any inflationary aspects of pay, for the purposes of simplicity, and also index linking of pension entitlement, for the purposes of simplicity.

The maths is very simple, regardless.

I know you've tried to simplify things for the hard if thinking on here, but you've made a few important mistakes:

1) contributions are based on actual salary, which will be much lower at the start of the period, so a much lower fund.

2) It's also not fair to ignore investment return - for a fair comparison you'd need to allow for a guaranteed return consistent with the risk free nature of the public scheme.

3) the expected future lifetime at age 65 is on the pessimistic side and you've ignored the value of the spouse's pension.