Reform plans to end Public Sector Defined Benefit Pensions
Discussion
For new entrants from 2030 if they are elected
But how would this work?
The existing pension holders are (and will) need to be paid. Currently this is done from ongoing contributions there is no ‘pot’ of money invested.
The new workers going to a defined contribution scheme will need to have their contributions put away into a fund to grow to fund their pensions in time.
So surely there’s a massive black hole in this proposal?
Unlike private sector DB pensions which have successfully (from the perspective of the employer) been wound up I presume because there was an actual fund to pay the existing DB pension holders?
But how would this work?
The existing pension holders are (and will) need to be paid. Currently this is done from ongoing contributions there is no ‘pot’ of money invested.
The new workers going to a defined contribution scheme will need to have their contributions put away into a fund to grow to fund their pensions in time.
So surely there’s a massive black hole in this proposal?
Unlike private sector DB pensions which have successfully (from the perspective of the employer) been wound up I presume because there was an actual fund to pay the existing DB pension holders?
Inlineonline said:
For new entrants from 2030 if they are elected
But how would this work?
The existing pension holders are (and will) need to be paid. Currently this is done from ongoing contributions there is no pot of money invested.
The new workers going to a defined contribution scheme will need to have their contributions put away into a fund to grow to fund their pensions in time.
So surely there s a massive black hole in this proposal?
Unlike private sector DB pensions which have successfully (from the perspective of the employer) been wound up I presume because there was an actual fund to pay the existing DB pension holders?
All contributions are paid into one "big pot of money" from which pensioners get paid, there will be some investment return on that money so it does not remain static. But how would this work?
The existing pension holders are (and will) need to be paid. Currently this is done from ongoing contributions there is no pot of money invested.
The new workers going to a defined contribution scheme will need to have their contributions put away into a fund to grow to fund their pensions in time.
So surely there s a massive black hole in this proposal?
Unlike private sector DB pensions which have successfully (from the perspective of the employer) been wound up I presume because there was an actual fund to pay the existing DB pension holders?
Edited by Groomio on Thursday 23 April 08:28
Reform blue sky thinking will never result in policies. I admire the optimism of all the dreamers who put their vote gor nigel and jenrick.
This idea goes in the wish basket together with tax free allowance of £20k within next term. And the £350m per week for the nhs since brexit.
What else? Free house for all brits and bigger navy than eu combined? Anything i missed?
This idea goes in the wish basket together with tax free allowance of £20k within next term. And the £350m per week for the nhs since brexit.
What else? Free house for all brits and bigger navy than eu combined? Anything i missed?
Edited by Blue_star on Thursday 23 April 08:45
Groomio said:
Inlineonline said:
For new entrants from 2030 if they are elected
But how would this work?
The existing pension holders are (and will) need to be paid. Currently this is done from ongoing contributions there is no pot of money invested.
The new workers going to a defined contribution scheme will need to have their contributions put away into a fund to grow to fund their pensions in time.
So surely there s a massive black hole in this proposal?
Unlike private sector DB pensions which have successfully (from the perspective of the employer) been wound up I presume because there was an actual fund to pay the existing DB pension holders?
All contributions are paid into one "big pot of money" from which pensioners get paid, there will be some investment return on that money so it does not remain static. But how would this work?
The existing pension holders are (and will) need to be paid. Currently this is done from ongoing contributions there is no pot of money invested.
The new workers going to a defined contribution scheme will need to have their contributions put away into a fund to grow to fund their pensions in time.
So surely there s a massive black hole in this proposal?
Unlike private sector DB pensions which have successfully (from the perspective of the employer) been wound up I presume because there was an actual fund to pay the existing DB pension holders?
Edited by Groomio on Thursday 23 April 08:28
Inlineonline said:
For new entrants from 2030 if they are elected
But how would this work?
The existing pension holders are (and will) need to be paid. Currently this is done from ongoing contributions there is no pot of money invested.
The new workers going to a defined contribution scheme will need to have their contributions put away into a fund to grow to fund their pensions in time.
So surely there s a massive black hole in this proposal?
Unlike private sector DB pensions which have successfully (from the perspective of the employer) been wound up I presume because there was an actual fund to pay the existing DB pension holders?
Sounds like a Ponzi scheme from your first sentence.But how would this work?
The existing pension holders are (and will) need to be paid. Currently this is done from ongoing contributions there is no pot of money invested.
The new workers going to a defined contribution scheme will need to have their contributions put away into a fund to grow to fund their pensions in time.
So surely there s a massive black hole in this proposal?
Unlike private sector DB pensions which have successfully (from the perspective of the employer) been wound up I presume because there was an actual fund to pay the existing DB pension holders?
Agent57 said:
Inlineonline said:
For new entrants from 2030 if they are elected
But how would this work?
The existing pension holders are (and will) need to be paid. Currently this is done from ongoing contributions there is no pot of money invested.
The new workers going to a defined contribution scheme will need to have their contributions put away into a fund to grow to fund their pensions in time.
So surely there s a massive black hole in this proposal?
Unlike private sector DB pensions which have successfully (from the perspective of the employer) been wound up I presume because there was an actual fund to pay the existing DB pension holders?
Sounds like a Ponzi scheme from your first sentence.But how would this work?
The existing pension holders are (and will) need to be paid. Currently this is done from ongoing contributions there is no pot of money invested.
The new workers going to a defined contribution scheme will need to have their contributions put away into a fund to grow to fund their pensions in time.
So surely there s a massive black hole in this proposal?
Unlike private sector DB pensions which have successfully (from the perspective of the employer) been wound up I presume because there was an actual fund to pay the existing DB pension holders?
Until you do what credits are proposing and stop new entrants which collapses the whole thing!
Inlineonline said:
The existing pension holders are (and will) need to be paid. Currently this is done from ongoing contributions there is no pot of money invested.
To slightly correct you, current employees will be making a contribution to their pension which effectively goes back into the government's current spending pot, but the majority of the money paying existing pensioners will be from general taxation.Also, in addition to those already receiving pension will be the pension liability that will continue to be built up by those who joined before Reform's proposed 2030 cut off would occur, and will also need to be paid for in the future from general taxation.
Inlineonline said:
The new workers going to a defined contribution scheme will need to have their contributions put away into a fund to grow to fund their pensions in time.
So surely there s a massive black hole in this proposal?
Exactly.So surely there s a massive black hole in this proposal?
In addition to the current ongoing payments to existing public service pensioners that are made from general taxation, they would need to hand over to the new public sector employees the cash to put into their DC pensions, plus they would not be receiving the pension contributions those new employees would have been making - that would be a serious increase in government spending on pensions and would seem to be a weird thing for a government to want to do.
Plus there is a risk of needing to be pay higher wages to attract workers to public sector jobs, and I doubt there would be a willingness of the workers and unions to accept that only the new employees received the higher pay.
Overall there is potentially a saving, but that saving would come in 60+ years time when all the existing pensioners no longer need to have their pensions paid for from general taxation and the government would only be funding the DC pensions and not both, and governments rarely look 60+ years into the future for spending and tax commitments.
All in all it is fantasy economics either dreamt up by someone who doesn't understand the system, or more likely dreamt up by someone who does know the system but knows full well that those they are trying to appeal to don't understand it - and by the time they are have been voted into a position to have to do it then they can make some excuse as to whey they can't.
Inlineonline said:
The existing pension holders are (and will) need to be paid. Currently this is done from ongoing contributions there is no pot of money invested.
Unlike private sector DB pensions which have successfully (from the perspective of the employer) been wound up I presume because there was an actual fund to pay the existing DB pension holders?
A lot of Public Sector schemes ARE funded and many (I daresay most) are currently in surplus. If Reform were succesful then the schemes would be closed to future accrual and wound up.Unlike private sector DB pensions which have successfully (from the perspective of the employer) been wound up I presume because there was an actual fund to pay the existing DB pension holders?
Countdown said:
Agent57 said:
Sounds like a Ponzi scheme from your first sentence.
Much like the current State Pension.So it’s a stable form of Ponzi scheme, until someone kicks around with it that is!
I presume it also allows the public sector pension liability to be kept off book when considering government debt, which has some advantages.
Politically though it’s ripe for abuse by a populist party like Reform who can pledge to reform (sic) it while kicking the real cost of such reforms many years down the line, well beyond the scope of norms electoral accountability (like pfi etc)
It’s a big problem with our political environment, especially as the institutions that might normally shine some light on these types of proposal such as the OBR are now routinely distrusted and dismissed.
The blob will put a stop to anything that goes against the "correct order of things" Farage and his buddies are aware of that, but obviously they have to spout red meat polices in order to get themselves in a position that they can start a Trump lite grift, they won't be able to change things but they have recognised they can enrich themselves.
Nothing warms the cockles of their political arsonist base than the thought of a public sector worker not getting a pension....
Are there any public sector final salary schemes left? I thought most were reduced to career average in the 2010s. Presumably Reform could attempt to reduce the benefits in unfunded schemes, but that s likely to result in large scale industrial action from the unions, which perhaps is what they want.
The worrying thing is, they’re probably stupid & populist enough to actually attempt to move the unfunded DB schemes to funded DC, despite the astronomical (albeit declining over time) cost to the taxpayer.
Worth saying that moving fully funded DB schemes over would be straightforward enough, but that just smacks of vandalism for the sake of it. Cap the employer contribution, yes, but don’t bin a scheme purely because of envy/spite/any of the other idiotic reasons driving some of Labour’s policies, eg VAT on school fees.
The worrying thing is, they’re probably stupid & populist enough to actually attempt to move the unfunded DB schemes to funded DC, despite the astronomical (albeit declining over time) cost to the taxpayer.
Worth saying that moving fully funded DB schemes over would be straightforward enough, but that just smacks of vandalism for the sake of it. Cap the employer contribution, yes, but don’t bin a scheme purely because of envy/spite/any of the other idiotic reasons driving some of Labour’s policies, eg VAT on school fees.
Edited by alangla on Thursday 23 April 10:43
alangla said:
Are there any public sector final salary schemes left? I thought most were reduced to career average in the 2010s. Presumably Reform could attempt to reduce the benefits in unfunded schemes, but that s likely to result in large scale industrial action from the unions, which perhaps is what they want.
The worrying thing is, they re probably stupid & populist enough to actually attempt to move the unfunded DB schemes to funded DC, despite the astronomical (albeit declining over time) cost to the taxpayer.
NHS pensions are CARE (as of 2022) however there is a large amount of final salary liability still to pay.The worrying thing is, they re probably stupid & populist enough to actually attempt to move the unfunded DB schemes to funded DC, despite the astronomical (albeit declining over time) cost to the taxpayer.
The distinction isn’t so much between final salary and CARE though as between a defined benefit (which both fina salary and CARE are) and defined contribution.
Additionally defined benefit pensions CAN be unfunded (eg NHS, although they don’t have to be eg local government) while defined contribution pensions are usually funded (ie there is pot of money from contributions invested to pay them)
Ironically for senior NHS staff, putting them on CARE for the last few years of their careers can actually work out better than final salary as it’s effectively a final salary scheme as you have reached your last increment but with a higher percentage rate.
Which is why the government fought the McCloud case (and lost)
Oh I know, I used to work in a University for many years, so I’ve got a couple of years at final salary, a few more on CARE (at a higher accrual to buy the unions off) then another couple on capped CARE with DC on top.
Exactly as you say, if you very quickly plateau in your career then final salary and CARE aren’t that different and often CARE accrues quicker. I guess my point was that the benefit of public sector schemes (and the University one is basically the last big private DB scheme left) has already been eroded quite significantly with the move to CARE and in some cases modifications to reduce accrual rates & increase employee contributions, after that, in practical terms it’s difficult to see what could, or should, be done as other than the lack of risk, the benefits for new entrants aren’t hugely different in many cases.
I guess one could further reduce employer contributions and increase employee ones, but again, more fights with the unions for little benefit. I’ll reiterate the earlier point, wholesale replacement of unfunded DB with funded DC would just be expensive, spiteful vandalism, so Reform will probably do it.
Exactly as you say, if you very quickly plateau in your career then final salary and CARE aren’t that different and often CARE accrues quicker. I guess my point was that the benefit of public sector schemes (and the University one is basically the last big private DB scheme left) has already been eroded quite significantly with the move to CARE and in some cases modifications to reduce accrual rates & increase employee contributions, after that, in practical terms it’s difficult to see what could, or should, be done as other than the lack of risk, the benefits for new entrants aren’t hugely different in many cases.
I guess one could further reduce employer contributions and increase employee ones, but again, more fights with the unions for little benefit. I’ll reiterate the earlier point, wholesale replacement of unfunded DB with funded DC would just be expensive, spiteful vandalism, so Reform will probably do it.
acer12 said:
You have to recognise that part of the appeal of the civil service is the pension, if you make this change it may be harder to hire the right people so you may end up either having to increase base pay or having a workforce of sub standard hires
Yeo, and it’s what prevents most of those people from leaving and taking their experience with them. The Private sector have been winding DB schemes up since the mid 1990 s so I m sure they will manage.
Yes, it will likely require some extra public money in the short term to top up the investment pool just as it sometimes does now, but longer term the taxpayer will benefit, in 15-20 years time.
Yes, it will likely require some extra public money in the short term to top up the investment pool just as it sometimes does now, but longer term the taxpayer will benefit, in 15-20 years time.
Tommo87 said:
it will likely require some extra public money in the short term to top up the investment pool just as it sometimes does now
In the majority of cases there is no investment pool as most public sector pensions are paid from general taxation.Tommo87 said:
but longer term the taxpayer will benefit, in 15-20 years time.
Unless you think life expectancy will dramatically shrink then your maths is incorrect, as the government would need to be paying both the new employer DC contribution, whilst not receiving the current employee DB contribution for those new employees, and funding the existing pension liability until the last 'pre-2030' public sector workers and any surviving beneficiaries are dead.Tommo87 said:
The Private sector have been winding DB schemes up since the mid 1990 s so I m sure they will manage.
Yes, it will likely require some extra public money in the short term to top up the investment pool just as it sometimes does now, but longer term the taxpayer will benefit, in 15-20 years time.
As the poster below notes, you could realistically be looking at the last of these pensions paying out around 2110 or so. If the scheme ends in 2030, there will likely be members born in 2012 in it. Realistically, there will be a very large cohort born between 2000 & 2010.Yes, it will likely require some extra public money in the short term to top up the investment pool just as it sometimes does now, but longer term the taxpayer will benefit, in 15-20 years time.
In the time between now and then, the government would need to pay all benefits accrued by current members as at present. This would, of course, decline as those members die, but realistically a significant number will still be here into the 2080s, while simultaneously having to pay employer contributions into the DC scheme, which they currently don’t, AND employee contributions, which are deducted just now, but don’t really go anywhere.
It’s possible to get away from unfunded public sector pensions, but you’re looking at the best part of a century of increased costs, not 15-20 years.
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