Solution to Public sector pensions
Discussion
Having created my point within the Teacher strike thread I believe it needed a seperate thread.
Anyway the point is - lets assume that the Teachers and all other public sector workers all agree to the full cuts the Govt are requesting.
In return for actual funds to be set up which are wholly seperate to the Govt and are managed in the usual way a Pension fund is.
There will then never again be any debate about if a scheme is or is not in defecit as it will be checked by acturay's every few years.
The Govt then couldnt backtrack on previously agreed contracts with its employees.
If a defecit does appear which could only happen due to average life increasing then at those points employees would have to decide to either delay pensionable age OR pay in more themselves. There would have to be a sliding scale as those within a few years of current retirement would lose out the most. Or have a split say beyond 55 you pay more below 55 you delay pension.
Or give the choice to the individuals (could be a cottage industry in admin)
Anyway the point is - lets assume that the Teachers and all other public sector workers all agree to the full cuts the Govt are requesting.
In return for actual funds to be set up which are wholly seperate to the Govt and are managed in the usual way a Pension fund is.
There will then never again be any debate about if a scheme is or is not in defecit as it will be checked by acturay's every few years.
The Govt then couldnt backtrack on previously agreed contracts with its employees.
If a defecit does appear which could only happen due to average life increasing then at those points employees would have to decide to either delay pensionable age OR pay in more themselves. There would have to be a sliding scale as those within a few years of current retirement would lose out the most. Or have a split say beyond 55 you pay more below 55 you delay pension.
Or give the choice to the individuals (could be a cottage industry in admin)
Welshbeef said:
If a defecit does appear which could only happen due to average life increasing then at those points employees would have to decide to either delay pensionable age OR pay in more themselves.
Unfortunately, it's not quite that simple. An actuarial valuation is trying to predict future cashflows up to 60-70 years into the future. In order to do that you need to make all sorts of other assumptions about interest rates, inflation, salary increases and investment returns. Theses will almost always turn out to be wrong in practice.Mortality is a key assumption, but it is some way from being the only important one.
As an aside. The police pension had for many years been in profit due to the 4-5 year life expectancy. However there never was a fund. So no profits. No investment was made. Now it'll never be cost effective.
In my career I'll pay in about 150-170,000. Which after the commutation of about 100k pays about 3-4 years of half pay. Which for many years was enough. Now it isn't.
Public sector pensions will never be funded as it will always be better to leave it to future tax payers. As it is a hidden cost from today's.
I'd be happy to just have my contributions back as of today. Then I'd pay no more in and invest in property. It won't be as big a return but with a 70k deposit and £500 a month to invest from now I think I could make good provision.
Problem is that's not going to happen.
In my career I'll pay in about 150-170,000. Which after the commutation of about 100k pays about 3-4 years of half pay. Which for many years was enough. Now it isn't.
Public sector pensions will never be funded as it will always be better to leave it to future tax payers. As it is a hidden cost from today's.
I'd be happy to just have my contributions back as of today. Then I'd pay no more in and invest in property. It won't be as big a return but with a 70k deposit and £500 a month to invest from now I think I could make good provision.
Problem is that's not going to happen.
Mr_annie_vxr said:
In my career I'll pay in about 150-170,000. Which after the commutation of about 100k pays about 3-4 years of half pay. Which for many years was enough. Now it isn't.
3 - 4 years life expectancy after retirement? Are you a policeman in Sierra Leone? Considering most coppers don't work much past 55, I would guess life expectancy after retirement has been somewhere between 15-20 years for quite some time now.As for the rest of your sums, cash commutation is at a rate of 25% of the deemed value of the pension pot and you're also completely ignoring the impact of compound investment returns over a 30 year period. But if you'd like to take a refund of your contributions and forego your police pension, as a tax-payer, I'm more than happy for you to do it!
Mr_annie_vxr said:
Public sector pensions will never be funded as it will always be better to leave it to future tax payers. As it is a hidden cost from today's.
I used to work for a company which shall we say liked to play in the gray area of capitalising costs..... (largely salaries.... etc).I was there for 3/4 years and always the objective was to capitalise it and it would be over a 30/40/60 year life. Therefore the effective future cost of it decreases due to inflation.
Anyway as it turns out this behaviour had been going on since the 60's. Result because its been going on fo so long the depreciation charge is now so high profits are very small and it will take decades for all those years to be fully depreciated.... so low profits for maybe 30/40 years to come...
All because they wanted to mortgage future years to pay for today.
Same story with pensions.
I guess Whitehall MUST know the effective defecit of all Public sector pensions and state pension but will not publish due to the fact the money markets would be sounding the alarm bells.
When the going was good (tax revenue) why didn't the govt use that extra income to close that funding gap or close some gaps - instead Brown raided the pension funds for £90 billions.... and clearly once imbeded within an annual budget to remove that kind of funding proves hard to fill.
In fact why did he raid the pension funds? Structual debt was DECREASING anyway so it was unrequired.
Where has all the money gone? I dont really know - apart from the fact doctors/nurses/teachers/civil servants now get paid far higher proportionally than previously. So it was to me used as a pay rise.
Why no investment in infrestructure? Resurface all our UK roads (they badly needed doing long before all the snow).
What about disposing of all our gold ----- and the best bit TELLING the markets your going to do it so prices plumet (sell at the bottom of the market - genious).
ranting sorry.
Annie, we're just lazy, good for nothing sorts, you should know that.
I lsft the Forces as an ex-commissioned Officer, Radar and telecommunications degree and linguist amongst othet things. I was offered jobs paying twice what the Police paid. Despite that, I went for the lower pay (and the work appealed to me-then!)with the understanding that this was balanced by a better pension. I didn't bleat about the perks my mates were getting. I don't bleat now about my self-employed mates who pay bugger all tax and national insurance, despite earning a tidy whack.
There's no money left apparently. Well, perhaps if they stopped paying benefits to those that don't need it and perhaps if they ensured people actually pay tax as they should, there might be some money left.
I lsft the Forces as an ex-commissioned Officer, Radar and telecommunications degree and linguist amongst othet things. I was offered jobs paying twice what the Police paid. Despite that, I went for the lower pay (and the work appealed to me-then!)with the understanding that this was balanced by a better pension. I didn't bleat about the perks my mates were getting. I don't bleat now about my self-employed mates who pay bugger all tax and national insurance, despite earning a tidy whack.
There's no money left apparently. Well, perhaps if they stopped paying benefits to those that don't need it and perhaps if they ensured people actually pay tax as they should, there might be some money left.
Welshbeef said:
I guess Whitehall MUST know the effective defecit of all Public sector pensions and state pension but will not publish due to the fact the money markets would be sounding the alarm bells.
A number of actuarial consultancies have suggested that the 'real' national debt is anywhere between £3 and 5 trillion once accrued liabilities in respect of public sector final salary pensions, state pension and PFI etc are taken into account....
Sidicks
lauda said:
3 - 4 years life expectancy after retirement? Are you a policeman in Sierra Leone? Considering most coppers don't work much past 55, I would guess life expectancy after retirement has been somewhere between 15-20 years for quite some time now.
As for the rest of your sums, cash commutation is at a rate of 25% of the deemed value of the pension pot and you're also completely ignoring the impact of compound investment returns over a 30 year period. But if you'd like to take a refund of your contributions and forego your police pension, as a tax-payer, I'm more than happy for you to do it!
Isn't the fact the Govt dont invest the "FUND" anywhere another huge issue, as you state above the impact of compound investment returns just hasn't occured - as such the "Pay as you go" funding the Govt uses is highly inefficient & highly expensive.As for the rest of your sums, cash commutation is at a rate of 25% of the deemed value of the pension pot and you're also completely ignoring the impact of compound investment returns over a 30 year period. But if you'd like to take a refund of your contributions and forego your police pension, as a tax-payer, I'm more than happy for you to do it!
If only they had taken one years worth of pain at the beginning to set up a fund none of this would ever have happened.
lauda said:
3 - 4 years life expectancy after retirement? Are you a policeman in Sierra Leone? Considering most coppers don't work much past 55, I would guess life expectancy after retirement has been somewhere between 15-20 years for quite some time now.
As for the rest of your sums, cash commutation is at a rate of 25% of the deemed value of the pension pot and you're also completely ignoring the impact of compound investment returns over a 30 year period. But if you'd like to take a refund of your contributions and forego your police pension, as a tax-payer, I'm more than happy for you to do it!
Police have been paying in for quite some time longer. It's only the last few years it's started to cost. The surplus was squandered by you. As for the rest of your sums, cash commutation is at a rate of 25% of the deemed value of the pension pot and you're also completely ignoring the impact of compound investment returns over a 30 year period. But if you'd like to take a refund of your contributions and forego your police pension, as a tax-payer, I'm more than happy for you to do it!
I'm happy to have it back. Myself and the wife could purchase 2 or 3 properties with substantial deposits and probably another every couple of years. I think in the next 17 years I could get up a good portfolio that would provide income.
Of course you'd have to find 11% to fund all current pensioners. Oh and the money to give me my pension contributions.
That won't be on the table though. As it's all about today's tax bill. Police pension bill is very small. The whole police budget is tiny compared to just the teachers pot.
You also then have to factor in to future negotiating that you can't use the pension as a benefit to off set future pay claims.
The whole thing is a mess and has been for decades.
Mr_annie_vxr said:
That won't be on the table though. As it's all about today's tax bill. Police pension bill is very small. The whole police budget is tiny compared to just the teachers pot.
You also then have to factor in to future negotiating that you can't use the pension as a benefit to off set future pay claims.
The whole thing is a mess and has been for decades.
You are bang on.You also then have to factor in to future negotiating that you can't use the pension as a benefit to off set future pay claims.
The whole thing is a mess and has been for decades.
One extra I'd add to the above - as you have said up until recently (or still possibly just) the Police "fund" has been in surplus..... and is a small cost to the Govt.
Does anyone here think that the Govt have forecasted what might happen when these costs start to escalate?? They have cut police funding hugely but if this cost escalates what are they supposed to do? That would clearly have to be a cut in front line staff.
Also with the negotiating - unless the Unions are stupid they will have taken all this on board and would certainly exclude pensions from salary reviews.
What will that mean for the govt.... higher annual costs and clearly even after cutting the pensions as the salary incrases so will the govt's element of their pensions.
Mr_annie_vxr said:
Police have been paying in for quite some time longer. It's only the last few years it's started to cost. The surplus was squandered by you.
I'm happy to have it back. Myself and the wife could purchase 2 or 3 properties with substantial deposits and probably another every couple of years. I think in the next 17 years I could get up a good portfolio that would provide income.
Of course you'd have to find 11% to fund all current pensioners. Oh and the money to give me my pension contributions.
That won't be on the table though. As it's all about today's tax bill. Police pension bill is very small. The whole police budget is tiny compared to just the teachers pot.
You also then have to factor in to future negotiating that you can't use the pension as a benefit to off set future pay claims.
The whole thing is a mess and has been for decades.
Agreed.I'm happy to have it back. Myself and the wife could purchase 2 or 3 properties with substantial deposits and probably another every couple of years. I think in the next 17 years I could get up a good portfolio that would provide income.
Of course you'd have to find 11% to fund all current pensioners. Oh and the money to give me my pension contributions.
That won't be on the table though. As it's all about today's tax bill. Police pension bill is very small. The whole police budget is tiny compared to just the teachers pot.
You also then have to factor in to future negotiating that you can't use the pension as a benefit to off set future pay claims.
The whole thing is a mess and has been for decades.
I'm yet to start paying into a pension (I'm 21), I increasingly feel like just saving up, putting money aside purely for retirement and taking my chances investing.
Currently. Property is a good bet as its in a slump. That's why now would be nice to have my money back. I could maximise my return over the next 17 years. I think having 3-4 properties would provide a comfortable income and to an extent it'd be me in control and not worried about the govt changing their minds and binning my scheme the day I retire.
Mr_annie_vxr said:
Police have been paying in for quite some time longer. It's only the last few years it's started to cost. The surplus was squandered by you.
There has never been a surplus - the Police Pension Scheme is pay as you go. Employee contributions to the Scheme are somewhere in the region of 25% of the annual pensions expenditure with the rest being made up from tax revenues.The reason the Scheme is becoming increasingly expensive is that the average age at retirement has reduced whilst the average life expectancy has increased.
sidicks said:
A number of actuarial consultancies have suggested that the 'real' national debt is anywhere between £3 and 5 trillion once accrued liabilities in respect of public sector final salary pensions, state pension and PFI etc are taken into account....
Sidicks
So if that's true then structual debt to GDP is 350%...Sidicks
lauda said:
There has never been a surplus - the Police Pension Scheme is pay as you go. Employee contributions to the Scheme are somewhere in the region of 25% of the annual pensions expenditure with the rest being made up from tax revenues.
The reason the Scheme is becoming increasingly expensive is that the average age at retirement has reduced whilst the average life expectancy has increased.
That's the point. If it had been done with a fund it would have been due to the reduced life expectancy. The police have had a pension scheme with no fund for a long time. 13 years ago life expectancy of a police officer was 5 years or that's how it was all based for decades. Having just looked at the current figure it's 34 years!! That's a weight off. The reason the Scheme is becoming increasingly expensive is that the average age at retirement has reduced whilst the average life expectancy has increased.
Its not my fault there was no fund as it's a cheap way to reduce current police expenditure.
I return to my point. It's a big mess for a long time.
I'll be paying more for less. I've accepted that. I'm happy to have my investment with interest returned and take my own steps.
It'll never happen though as it's not a shirt term saving.
Welshbeef said:
I guess Whitehall MUST know the effective defecit of all Public sector pensions and state pension
From the work I have done with public sector pension schemes (I work in the pension administration industry), I would suggest that they dont have a clue of something so basic like how many people are actually in the schemes, let alone what the defecit is. There is currently a lot of data cleanse work being done to prepare the data for a thorough audit to fully assess the situation and what options are available going forward. I know that for instance in one scheme, there was approx 5000 test case members setup in the live database and being counted as true actual members.......Gassing Station | News, Politics & Economics | Top of Page | What's New | My Stuff