The injustice of Local Government Pensions.
Posted by: Don Atkinson on 15 March 2015
BBC Radio 4 – so it MUST be true – at17:00 today.
4.5 million workers and pensioners are part of Local Government Pension Schemes. The aggregated value of these pension funds is c.£180bn and their liabilities are c.£230bn ie they have a deficit of c.£50bn. 98% of all the schemes are in deficit.
The schemes are funded jointly by employees (past, present, future) and the LAs. Employees make fixed (%) contributions as do the LAs as part of the employment contract. The deficit is made up by the LAs, not the employees.
Funding by the LAs is derived from Local taxation plus the Central Government allocation. You, me and all the rate-payers and tax-payers are therefore subsidising these Local Government Pension Schemes whether we like it or not. In turn therefore, we are all subsidising 4.5milloin LA employees and pensioners. We are forced to pay, either by increased taxation or by a reduction in the services provided by central and local governments.
This is grossly unfair and unsustainable.
Which political party will put an end to this injustice? They will have my vote in May !
And your solution is what exactly?
steve
Most Public Workers I know have factored their pensions into their lifelong plans i.e. prepared to be paid less when working knowing their retirement will be OK in relation to their working wage. I'm more concerned that the rules are being rewritten part way through their working lives so they can't readjust their plans. This just means that they'll be a burden on the state through other 'handouts' instead.
Not so sure on this next bit, but I believe one of the Govt's at least raided the public sector pension pots during times when there was a 'surplus'. I they hadn't done that then the pensions would perhaps be perfectly capable of doing what they were setup to do.
I also think we're all being played wonderfully to just deflect attention from the real reason there is no money left - the left blame the private sector and the right blame the 'scroungers' - including, amazingly, the entire public sector which apparently does no work all day long.
It's dangerous game that's being played at the moment and I fear it won't end well.
Anyway, I hope that was what you were looking for - and hope that your original post was a deliberate fish and not you just regurgitating tabloid rubbish.
And your solution is what exactly?
steve
Depends what each Political Party offers to do about it.
In the Private sector there is no Fairy Godmother (aka tax-payer). So pensions paid have been cut to suit the funds available. A similar arrangement with LGPSs would resolve this injustice for taxpayers.
I'm sure that there are other possibilities, such as changing the LGPS fund managers and advisers so that the funds are better managed and become self supporting.
Or asking the employees to increase their contributions to eliminate the deficit.
No doubt you agree the problem needs to be addressed, otherwise why ask what ideas I have for a solution. Perhaps you know of proposed solutions being put forward by Political parties, if so please do share so that I can give the matter more detailed consideration and decide who to vote for.
The Government did not 'raid' local government pension schemes, rather, and stupidly, it said that they did not need to be fully funded. That has now changed, and contributions are adjusted at each triennial revaluation to ensure that the overall contributions are sufficient to meet future liabilities.
The local government scheme is a funded scheme, whereby funds are invested. This is different to the schemes for civil servants, teachers and NHS employees, under which pensions are funded directly from taxation.
I recall Don trotting out this rubbish a couple of years ago. Maybe he has nothing better to do.
Most Public Workers I know have factored their pensions into their lifelong plans i.e. prepared to be paid less when working knowing their retirement will be OK in relation to their working wage.
The average wage in the Public Sector is actually higher than in the Private Sector. And most Private Sector workers that I know, also factored their 2/3 Company Pension Scheme into their lifelong plans.
No Fairy Godmother (aka Taxpayer) to help out the Private Sector
I'm more concerned that the rules are being rewritten part way through their working lives so they can't readjust their plans. This just means that they'll be a burden on the state through other 'handouts' instead.
Tough !
Private Sector and some ex-government sector employees have found their existing pension situation "frozen" and been offered alternative (less attractive) schemes for their future continued employment.
For example, most Final Salary schemes are closed to new entrants and many are also closed to existing members although their accrued benefit to date is frozen. They are offered CARE schemes for new starters and existing members for the balance of their employment.
The Government did not 'raid' local government pension schemes, rather, and stupidly, it said that they did not need to be fully funded. That has now changed, and contributions are adjusted at each triennial revaluation to ensure that the overall contributions are sufficient to meet future liabilities.
The local government scheme is a funded scheme, whereby funds are invested. This is different to the schemes for civil servants, teachers and NHS employees, under which pensions are funded directly from taxation.
I recall Don trotting out this rubbish a couple of years ago. Maybe he has nothing better to do.
The programme was about Local Authority schemes. Not to be confused with central government.
BBC Radio 4 usually reports accurately. In what way was today's programme "rubbish" ?
They will have my vote in May !
Or they will not.
The Government did not 'raid' local government pension schemes, rather, and stupidly, it said that they did not need to be fully funded. That has now changed, and contributions are adjusted at each triennial revaluation to ensure that the overall contributions are sufficient to meet future liabilities.
The local government scheme is a funded scheme, whereby funds are invested. This is different to the schemes for civil servants, teachers and NHS employees, under which pensions are funded directly from taxation.
I recall Don trotting out this rubbish a couple of years ago. Maybe he has nothing better to do.
The programme was about Local Authority schemes. Not to be confused with central government.
BBC Radio 4 usually reports accurately. In what way was today's programme "rubbish" ?
It's the way you repeatedly mither on about how it's unfair that public sector workers get public sector pensions. If you want a public sector pension, work in the public sector. The pressure needs to be on the private sector to provide a better deal for their employees instead of pandering to their shareholders, rather than dumbing things down to the lowest common denominator. I'm a local government officer with a local government pension. I'm very well qualified and work bloody hard. Why the hell shouldn't I get a decent pension when I retire?
It's the way you repeatedly mither on about how it's unfair that public sector workers get public sector pensions Typical avoidance of the truth tactic. You can't face up to your unjustified position so you try to berate others. The Radio 4 programme was factual.
If you want a public sector pension, work in the public sector.I did (at least in part but not in the LA sector), as you know from my past posts. But unlike others, I can see the injustice of the current situation.
The pressure needs to be on the private sector to provide a better deal for their employees instead of pandering to their shareholders, That is true and I expanded on that last time.
rather than dumbing things down to the lowest common denominator.I'm not dumbing things down to the lowest common denominator. Simply pointing out the injustice and suggesting that it should be resolved. If you and your employer haven't put enough aside for the pension that you thought you would secure, then don't look to the taxpayer to sort out your problem.
I'm a local government officer with a local government pension. I'm very well qualified and work bloody hard.Nobody, especially me has suggested otherwise. Why the protest ?
Why the hell shouldn't I get a decent pension when I retire? You seem to link this to working hard. People in the private sector also work hard. You should get the pension that you and your employer have provided for. Not some unrealistic expectation based on a scheme that has to be significantly funded by press-ganged taxpayers. But if you consider this to be a fair solution for LA workers, then you will no doubt agree it is a fair solution for Private sector workers and thereby avoid the dumbing down that you so fear. A poition that you accepted last time.
In the area where I work, in a few years time, 35% of people will be over 65, and unless pensions are taken seriously we are building up massive social problems.
Desire this, the Government is going in the opposite direction with its crazy scheme to allow people to get at their pension pots early. All it will achieve is to prevent first time buyers getting a house, as people will use their money to purchase buy to let properties. Osborne says it's about personal freedom, but just watch it go horribly wrong......
This is grossly unfair and unsustainable.
Which political party will put an end to this injustice? They will have my vote in May !
Don
You raise the same about public service pensions on a tediously regular basis. You always complain, but never seem to have any idea what you want doing about it.
Either try thinking for yourself or give up on the jealousy.
This forum gets more like UKIP at prayer every day...
With a few decent people trying to intervene....
... not worth it guys....
Don, beautiful downtown York
In the area where I work, in a few years time, 35% of people will be over 65, and unless pensions are taken seriously we are building up massive social problems.Agreed.
Despite this, the Government is going in the opposite direction with its crazy scheme to allow people to get at their pension pots early. All it will achieve is to prevent first time buyers getting a house, as people will use their money to purchase buy to let properties. Osborne says it's about personal freedom, but just watch it go horribly wrong......Again I agree.
I agree with much of what you say above Nigel.
However, none of it addresses the injustice of taxpayers being press-ganged into subsidising under-funded LA pensions which are now in deficit.
Don
You raise the same about public service pensions on a tediously regular basis. You always complain, but never seem to have any idea what you want doing about it.
Either try thinking for yourself or give up on the jealousy.
Perhaps you didn't read my opening post properly. I was reporting a BBC Radio 4 factual broadcast.
My complaint is fully justified. If the BBC considers the subject merrits a 1 hour slot on Radio 4, then my guess is that I am not alone in my view.
I have posted three potential soulutions above. You don't seem to have read those either. Perhaps you could set out your solution to this injustice.
No jealousy on my part - but you know that. As you will recall I have a good mix of Public and well-funded Private pensions, which simply puts me in a strong position to know and understand the inadequacy of many Private pension schemes and the clear injustice of under-funded Public sector schemes which the taxpayer has been forced to bail out.
I can well understand the fear that many LA employees must have if the taxpayer stopped funding their pension deficits. And I can understand the squeeling and diversionary tactics used help maintain the injustice of the staus-quo. That doesn't make the current situation right.
The actuaries are failing in their duties, according to the BBC report. The actuaries, fund managers and their advisers are all failing to meet their liabilities. They are relying on diverting tax funds to make up the shortfall.
It is absolutely factual and right to say the schemes are under funded. Deficient was the actual word used, and £50bn of taxpayers money is waht is going to be used to overcome this deficit
Most Public Workers I know have factored their pensions into their lifelong plans i.e. prepared to be paid less when working
That old myth.
Actuaries just do the calculations it is the governance bodies, ultimately the Secretary of State, that determines whether to be optimistic or pessimistic in the assumptions that support the required capital to meet future cashflows. A head in the sand approach to low interest rates, the absence of adequate long duration assets to match long duration liabilities and the increased life expectancy rates all make it a very trying time for any pension or annuity fund manager.
That said, for far too long, governing bodies were heavily discounting their liabilities with the expectation that interest rates would return to the heady days of >8% yields and totally ignored the impact of increased life expectancy. This applies equally to private sector as well, consider that GE has a defecit of >$20 billion.
Actuaries just do the calculations it is the governance bodies, ultimately the Secretary of State, that determines whether to be optimistic or pessimistic in the assumptions that support the required capital to meet future cashflows. A head in the sand approach to low interest rates, the absence of adequate long duration assets to match long duration liabilities and the increased life expectancy rates all make it a very trying time for any pension or annuity fund manager.
That said, for far too long, governing bodies were heavily discounting their liabilities with the expectation that interest rates would return to the heady days of >8% yields and totally ignored the impact of increased life expectancy. This applies equally to private sector as well, consider that GE has a defecit of >$20 billion.
Spot on. Both Private and Public sector pension funds are in deficit with respect to the expectations of beneficiaries or liabilities of the providers. The reasons for this are varied.
The Public sector just diverts taxpayer funds to make up the shortfall. Its too easy and unjust.
The Private sector just pays out less. Its too easy.
In both cases, the situation should be clarified, the public should be properly educated and the situation rectified by better management (and either taxpayer top-up or lower payout). But the rules and regulatory monitoering should be effective and the same in both the Public and Private sectors.
There is no injustice in respect of the Public Sector.
As I have said before, each time you bang on about this from the position of enjoying a Public Sector pension yourself, private sector pension providers and employers should not, and should never been allowed to, unilaterally change the terms and conditions of their pension agreements.
If private sector pensions are now so woeful, when in years gone by they were so lucrative, you would be better to ask how Government can restore private sector pensions to their former glory.
But if you feel so strongly about it, perhaps you could donate your own public sector pension to some poor private sector pension pauper?
There is no injustice in respect of the Public Sector.
As I have said before, each time you bang on about this from the position of enjoying a Public Sector pension yourself, private sector pension providers and employers should not, and should never been allowed to, unilaterally change the terms and conditions of their pension agreements.
If private sector pensions are now so woeful, when in years gone by they were so lucrative, you would be better to ask how Government can restore private sector pensions to their former glory.
But if you feel so strongly about it, perhaps you could donate your own public sector pension to some poor private sector pension pauper?
The injustice is to taxpayers, not to Private sector pensioners or future pensioners. This has nothing to do with Private sector pensions.
Clearly you have either not read or not understood my original post. There is no mention of Private sector pensions. Or, like Nigel, you have deliberately chosen to introduce the usual mis-leading , but totally irrelevant, diversionary whinging of Private sector v Public sector; Low wages v Higher pensions, Hard-working LA Employees v money-grabbing Private sector workers etc etc etc. with a bit of personal abuse thrown in for good measure.