Who is paying for your pension ?

In my last salaried employment (public service sector), my pension contribution was 7.2% and my employers declared contribution was 10.8% making 18% overall.

When I left University in the late 60’s I noticed that starting wages for professional engineers and many other salaried jobs) were about half those of professionals approaching retirement. My youngest daughter noticed this a couple of years ago when she qualified as an architect. In real terms, and stripping out “growth”, the “average” life-time salary for many salaried professionals appears to be about 0.75xFinal Salary.

Using the above figures, the present day value of contributions to a 40 year, two thirds final salary pension scheme would be (Final Salaryx0.75x0.18x40) = (5.4x Final Salary)

Deducting 12.5% for pension admin costs would leave 4.725xFinal Salary to cover pension payments.

In the late 60’s, life-expectancy was c. 72 so that retirement would equal c.7 years. This was nicely covered by the 4.725xFinal Salary savings in the pension fund.

The current life-expectancy is c.82 so that retirement equals c. 17 years. At 2/3 Final salary and adding in 12.5% admin costs, the pension fund needs 12.6xFinal Salary to feed the 17 years retirement ie 2.33 times as much as the declared contributions to the scheme.

There are plenty of well known pension schemes that have “black holes”. Some of these are ex-public sector organisations such as BA who are still trying to find ways of dealing with the problem. The private sector has largely chosen to solve the problem by closing down final salary schemes and telling people to use the “open market” to buy a compulsory pension delivering a small fraction of what was originally envisaged.

I presume that the Public Sector solution is to simply whack up taxation to “top up” their pension funds and keep paying civil servants, LA workers, and the defence staff the full 2/3 Monty.

Why doesn’t the Government simply provide the same level of “top up” to the Private Sector workforce, who through no fault of their own, are receiving pitiful pensions ?

This solution would satisfy the very reasonable cry of HH and others that we should raise Private Sector pensions rather than bring down public sector pensions.

I thought the scum-bag coalition were reducing the direct tax burden. Certainly no tax increase is paying for public sector pensions - which are changing: http://resources.civilservice....s-Update-Feb2014.pdf

Rather than use public money to top-up pensions schemes decimated by rapacious businesses to boost shareholder value, why not force them to meet their liabilities in that regard and perhaps also get them to pay the other taxes they seem so easily to avoid.

Public Sector pensions are topped up (massively) by taxpayers' money. You seem to want to avoid recognising that.

The link you posted simply says that public sector pensions are moving to a CARE type scheme. Big deal. It says nothing at all about how current pensions, banked pensions or future defined benefit pensions will be funded. They will largely be funded by the tax-payer.

My last job (public sector) had a CARE pension scheme. Because I was only in it for 5 years, it was pretty much as good as if i'd been able to join the Final Salary scheme.

The tax-payer contibuted about 1.5 times as much as myself/employer did. This was clearly reflected in the value of the pension pot that had to be declared to HMRC to demonstrate I was within the £1.8m tax-free savings limit and annual limits etc

Most professional people in the private sector started paying into their schemes at age 25, assuming they would contribute for 40 years and get a 2/3 final salary pension ay age 65. Until about 15/20  years ago, that seemed to work.

Having worked in both the private and public sectors, I can tell you quite clearly, the public sector has no idea what hard work looks like. As always, there are occasional exceptions.

I was there...........it was common practise.

Some contributed to SERPS, others had contracted-out contributary final salary pensions schemes.

Come on Don, be reasonable. There are hard workers and those with lazyitis in both sectors. A relative of mine recently started an apprenticeship in a large and very well known private sector organisation and one if his first lessons was how to walk around with a clipboard so that the management would think he was busy. Everyone in my team works fantastically hard and does more than their contracted hours without grumbling. 

It would appear that a small minority in this ridiculous thread have descended into pedaling the usual cretinous idea that the evil of public sector pensions is in some way depriving other people of a reasonable retirement or is in some miraculous way the source of our current financial woes.

I don't suppose there is any point drawing attention to either the small minded nature of this argument or its breathtaking intellectual irrelevance.

But I will anyway.

Tog

As usual, you've completely missed the point and simply posted a load of irrelevant drivel.

Not even close. we are talking about a factor od 2.5 to close the gap. Not 2.5 %, two and a half times as much !

True, as I said, there are exceptions. Luka just needed to be aware that the NHS doesn't have a monopoly on hard work, and I do recognise that a few consultants actually are in theatre at weekends as opposed to directing operations from home by phone.

But we digress...........

You're going to have to do your own searching.

Who is paying for your pension ?

I ask this of anybody with a UK public servant pension, which includes Gov Officers, Local Authority Officers, NHS staff, Teachers, Policemen, Firemen, etc etc

Don

having read all your vituperative attacks on public sector not sure whether it is really worth responding-after all i am just a public sector servant ( because that is how you seem to think is what we are, serving you and we should be grateful)-I am a teacher-retired- last summer, answer is simply working teachers pay for my pension-end of story

All contributions from working teachers (+ employer contribution ) ( as would be for a private pension) pay for current pensions- no drain on you the taxpayer. And yes-just like NHS there have been many years when the scheme has been in surplus.

The average teacher pension is around £9k, to get full pension of 50% final salary was 40 yrs ( few ever achieve this) at 1/80ths, in 2007 changed to 1/60th with retirement age of 65 and from 2015 1/57th accrual CARE scheme,  retirement linked to state pension age with increased employee rates for all ( around 9.9-9.9% for most teachers)

Steve

Oh gawd ! just type "final salary pensions" or something like that into Google and look at something like the Telegraph (or other) source. You'll get plenty of evidence. I've even cut and pasted a simple abstarct to get you started............

At the heart of the controversy is the “final salary” or “defined benefit” type of pension where an employer promises to pay workers a pension linked to the wage at which they retired. The arrangements factored in years of service, too, so longstanding employees could typically hope to retire on a maximum pension equivalent to two-thirds of their final salary, set to rise in line with inflation until their death.

These schemes were rolled out by big employers after the war, and rapidly became the norm for workers of all pay grades during the Sixties, Seventies and Eighties. In 1963, £1 in £4 of all pension savings in the private sector was in a final-salary type scheme. By 1979, which was the peak of this form of pension saving, this proportion had rocketed to £9 in every £10.

Then came the great reversal. Increased lifespans, successive changes to legislation which made the arrangements more costly to employers, and poor investment returns came toegther to make the schemes unaffordable.

Steve,

There is nothing vituperative about my posts or my initial questions.

You seem to forget that my employment/pensions are shared by the public/private sectors. I have clearly used my own figures to illustrate the tremendous difference between Public Sector pensions and Private Sector pensions. Even some of those in the public sector on this forum have conceeded that the tax-payer is topping up the funding for their generous pensions. (other than Bruce's NHS scheme which is solving the nation's economic crisis  

The fact that the government is now starting to do something is no excuse for denying that public sector pensions are still incredibly generous compared to the private sector and still only possible because the government fills the inevitable deficit from the public purse. 

I have used my own personal circumstances to illustrate these differences. And my circumstances are far from unique in either the public or private sectors.

My early public sector pension is based on 1/80th final salary per annum - a bit like yours. My last one is based on 1/60th in a CARE scheme. I know what my contributions into these schemes was and I know what my employers' declared contributions were. Together, they were well short of the funds needed to provide the acquired pensions. The tax-payer has topped them up by adding c.1.0 to 1.5 times as much again.

Quite separate is the question of whether this arrangement is fair.

 Hilarious - at least this proves beyond doubt that you aren't even bothering to read your own posts.

 grab yourself a copy of the Daily Mail on the way out .....

Tog