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Teh NHS is capped but IIRC its not as solid as the teachers one
Fully funded - there is a large pot of money invested to cover liabilities same as a private fund
Jota - many years negotiations to refoirm the NHS pension scheme to take account of the increased lifespan that makes it sustainable. this increased payements for reduced benefit.
Now the governement wants us to pay even more for much less - but the extra money will not go to pensions but instead to paying off the deficit.
Seems fair? Hardly
So further NHS pension reform seems reasonable to me, just it should include a method to ensure that any surplus actually goes to putting the pension on a solid footing for the future.
Mind, TJ - link to details on any surplus being used to pay off the deficit?
clubber - I already linked showing the surplus in the NHS pensions - so if contributions rise then a greater surplus will be generated as there is not going to be a fund created.
Why is further reform reasoanble? there is no need for it at all - it has already been reformed to make it affordable and sustainable.
teamhurtmore - Member
And FWIW, the OBR forecast sharply declining surpluses and then a deficit within the next decade. Now a basic understanding of pensions and finance can only lead you to one conclusion - unless your name is Madoff or Stanford of course.
So what to this? is that correct?
So the surpluses made can go to government coffers and be used as income and this is OK but any deficit has to be made up by the members?
Seems fair? 🙄 Heads I win, tails you lose?
in the NHS this years benefits are paid by this years contributions. there is no investment fund.
there is a large pot of money invested to cover liabilities same as a private fund
Which one is it going to be tomorrow?
Absolutely, hence the comments I made about investing surplus but since the surplus figures only go back a few years apparently (according to Z11's post above), is surplus the norm or a short term situation? If the latter and the forecast is for a consistent deficit, isn't it reasonable to look at it again to make it sustainable in a deficit position?
Mefty -NHS is revenue funded hence "in the NHS this years benefits are paid by this years contributions. there is no investment fund."
Local authority are fully funded hence "there is a large pot of money invested to cover liabilities same as a private fund"
I was answering clubbers point. I told him (as is correct) the local authorities pension is fully funded and he asked me to explain the term
Must read properly, Mefty 🙂
so
clubber - Member
Absolutely, hence the comments I made about investing surplus but since the surplus figures only go back a few years apparently (according to Z11's post above), is surplus the norm or a short term situation? If the latter and the forecast is for a consistent deficit, isn't it reasonable to look at it again to make it sustainable in a deficit position?
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Thats why contributions are increased and benefits reduced already.
The deficit will fall again in the future
Ta, link?
Its in Hutton and the links I gave before.
Note the OBR forecast is using worst case scenario assumptions and is highly questionable.
since the surplus figures only go back a few years apparently (according to Z11's post above), is surplus the norm or a short term situation? If the latter and the forecast is for a consistent deficit, isn't it reasonable to look at it again to make it sustainable in a deficit position?
Clubber - its interesting actually, when you look at those figures, the only reason that the fund appears to be in surplus at the moment is a huge, and I mean huge, massive increase in the employers (taxpayers) contributions over and above anything in previous years - I mean from one billion at the millenium, to over five billion of taxpayers money paid in last year - twice what the employee's put in to the pot.
Lets get this straight - last year, for every pound put into the NHS scheme by members, we, the taxpayer, put in two pounds.
Last year employee contributions - money paid IN by members totalled a little over two and a half billon, and outgoings were over six billion - so, TJ's "surplus" is actually a three billion deficit
Fair enough.
The overiding point remains that the [u]fundamental[/u]starting point of pension liability management is that you evaluate your long term liabilities (ignoring new joiners) that you have incurred, incomings and outgoings in any one year are only inputs into this process. You can see how the approach TJ suggests is ridiculous by looking at one of my former employers. We were relatively a young operation so despite having 750 contributors, we only had one pensioner. If we had followed the TJ approach everyone's contributions could have been reduced to £40, that is very good value for a future income in the thousands!
TJ will bleat that the NHS is different, but how? In what way is the contract between employee and employer different to that of a private sector employee with a final salary scheme. It isn't. How the liability incurred is managed may be different, but the nature of the liability that you are incurring - to pay something in the future for contributions today is not. Therefore there is no reason to ignore the fundamentals of pension liability management.
Mefty - I know its pointless explaining this to you 'cos you don't want to see it
It is fundamentally different as its a revenue funded scheme backed by the government
So no parallels with your company and ignoring new joiners is ridiculous.
If the NHS had been run as a normal pension scheme it would have a huge fund easily able to cover its liabilities but successive governments have used this money as revenue instead. this is why its different.
But surely the (simple?) reason that the NHS scheme has been in surplus, at least recently, is the vast increase in members paying in.
In 1996 its was 1,057000, and by 2010 1,431,000
http://www.bbc.co.uk/news/health-12819538
And is this creating a 'bubble' of liability, or what!
In what way is the contract between employee and employer different to that of a private sector employee with a final salary scheme?
And how would your hypothetical fund have succeeded in generating a surplus when equivalents in the US and the Netherlands didn't?
Because in a private scheme the money has to be ringfenced and invested
And is this creating a 'bubble' of liability, or what!
They should adopt a ponzi scheme approach, just keep employing more new employees, problem solved! 😉
If the NHS had been run as a normal pension scheme it would have a huge fund easily able to cover its liabilities
TJ - you keep claiming this, and I've already given you figures that show, with absolute proof, that in previous years there was [b]not[/b] always a surplus, can you please point me to figures that support your claim.
In what way is the contract between employee and employer different to that of a private sector employee with a final salary scheme?
I am not interested in how the liability is managed, try again.
I havent read this above as its too much I just want to say this:
My small business has lost 70% of its gross income since 2008 - not grown, or lack of growth, actually shrunk.
Now the worst I can see that has happened to public sector workers is that they are not getting any pay rises.
There is a big difference here and I think we need to share the pain a bit. People in the private sector, employees and owners alike are suffering severely, and the public sector are moaning about a few percent. Its selfish greed and it boils my piss.
Hello mefty - can you read?
TandemJeremy - MemberBecause in a private scheme the money has to be ringfenced and invested
Wheras in the NHS scheme its revenue funded.
this is the fundamental difference that means your comparisons are not comparable
Do you want me to rephrase so you understand the question? And are you going to have a go answering the one about your daedalic pension fund.
I think that's a good point TJ but it doesn't affect the liability issue does it? As I see it you're talking about different things in whether it's different to a private pension or not.
I think my concern based on how I understand it is that if there's isn't a consistent surplus (if there even is now - according to Z11 there's a significant defecit once you take out tax payers' money (proof Z11?) or just the fact that numbers paying in but not yet taking out were increased significantly) then it's not sustainable long term unless you accept that it isn't self funded (eg the tax payer keeps paying into it).
Toys19,
I think you'll find that selfish greed is pretty prevalent in the private sector as well. People are prepared, nay encouraged, to abandon their employer, their colleagues and their customers merely for a pay rise with all the associated costs and problems this may incur.
Also, I appreciate that many people are finding it difficult and 'share the pain' is the call of the day. I can, however, remember when the economy was doing well and mates of mine were getting well above inflation pay deals in the private sector, the govt saying that pay restraint in the public sector was needed to combat the effects of large private sector pay deals and ensure that inflation did not rise out of control. There didn't seem to be as much 'sharing the spoils' then as there is 'sharing the pain' now.
People are prepared, nay encouraged, to abandon their employer, their colleagues and their customers merely for a pay rise with all the associated costs and problems this may incur.
Are you saying public sector workers don't do this?
You will find the sharing of the spoils did occur, its called taxation.
Because in a private scheme the money has to be ringfenced and invested
Private scheme contributers (employer not employee)can take contribution holidays however when the the scheme is in surplus if they choose.
Clubber - the point is that alters fundamentally the contractual terms. In the private sector a part of the deal is that the money is invested safely - this bit is not there for the NHS - but we get a government guarantee instead / in exchange for the government using the money as revenue now
There will have been huge surpluses in the early years of the scheme - this along with more recent surpluses would if invested have ensured the sustainability of the scheme
Are you saying public sector workers don't do this?You will find the sharing of the spoils did occur, its called taxation
Of course they do but probably not as much due to limited number employers. However I think it will rise as more private sector employers get involved and people look for the best deal.
As far as I can see most people are selfish to some extent and want to look after their own, pure altruism is very rare. The ways to achieve that are varied, some people vote with their feet and move jobs, others strike, others scheme and cheat etc.
I meant 'sharing the spoils' more like the 8% and £3000 bonus my mate got year on year in the good times, rather than the govt getting more revenue.
Clubber - as posted before, the proper figures direct from the NHSBA:
From the year 2000, Employer (ie. taxpayer) contributions into the "fund" have (in stages) increased from 4% of payroll, to 14% of payroll. So, the Government (you and me) is now paying in over three times as much as we were a decade ago (proportionatly, actually over six times as much fiscally)
Prior to that increase the NHS pension scheme was in deficit to the tune of several hundered million pounds per year.
There will have been huge surpluses in the early years of the scheme - this along with more recent surpluses would if invested have ensured the sustainability of the scheme
Yes, they would have but they weren't. That's not really an excuse for just blindly going along with a potentially massive liability in the future.
Basically, as I read it now, the pensions should (or maybe could) have been self-sustaining but based on where we actually are now, they're not. The solution to that is interesting really but based on what I understand now I don't think that you can claim that they're self-sustaining.
Of course there's the moral/ethical question over whether because they were previously in surplus (still waiting for figures on this) the people who paid at that time are owed by the tax payer (who took the surplus) since potentially they were being promised a benefit worth considerably more than they were paying in (so while it was sustainable at the time, it was only long term on what sounds to me like a pyramid scheme).
Or maybe I'm just totally wrong 🙂
TJ - you are conflating two questions, the first is how much am I entitled to and the second is does the payer have the financial wherewithal to pay it.
The answer to the first is no different between public and private sector. The second is.
rather than the govt getting more revenue
yes but when the govt was getting the tax revenue it allowed Messers Brown and Blair to woo the voters by overpaying the public sector with all the cash they thought they had sloshing around. So the public sector got the results of the boom, now they ahve to take some of the pain. Ok so public sector only got a few percent increase, well they need to take a few percent decrease now. Private might have got bigger increases and are suffering from consequent decreases now. I just don't see why the puiblic sector should be protected from the recession.
Of course its morally and ethically wrong - I have paid for my pension, the money has been spent instead of being invested for my pension, the reason the future projection looks to be in deficit is because the predictions are based on less staff being paid less so lower contributions. So because the tories intend to privatise the NHS I get my pension cut?
And the government want me to pay more and get less benefit so a wages but the extra I pay will go towards the deficit not to paying for my pension?
Its theft on a scale that make maxwell look OK
No mefty - you are failing to understand the basic and fundamental difference between and investment funded private scheme and a revenue funded public scheme backed by the government.
I meant 'sharing the spoils' more like the 8% and £3000 bonus my mate got year on year in the good times, rather than the govt getting more revenue.
Where did Osborne get the claim that public sector pay increased by twice the rate of private sector pay over the last four years?
Maybe he's been selective with his sample as you have?
Of course its morally and ethically wrong - I have paid for my pension,
Thats a tricky one TJ. How much have you actually paid and is this what you will get back? I think what you mean is that you have made a contribution as do many people. How that contribution is turned into a larger or smaller guranteed future income is a different matter.
I hope to get more than I have put in thats why I didnt put it under the bed.
The argument appears to be that your contribution turns into a significantly larger pension later than many in the private sector who are not on final salary schemes.
TandemJeremy - Member
Of course its morally and ethically wrong
I tend to agree actually though only regarding what you've already paid towards, not ongoing accrual of pension benefits. I'd be inclined for what you get out to reflect the benefits you were offered at the time but that the benefits are reviewed now to reflect what's being discussed - eg a deficit in the future (or now). That sounds fair to me.
And the government want me to pay more and get less benefit so a wages but the extra I pay will go towards the deficit not to paying for my pension?
Well that's really about the part of your pension you're paying towards now even if there is no 'pot' there's still a defined future liability. If as is claimed, there's actually a deficit at present or more importantly there's a significant difference between what you're paying in and getting out and that's due to continue then I don't see it as unreasonable for any surplus you pay now to go back to the government to balance out what is being paid in.
Out of interest, the claimed 14% being paid in by the government - what value is that in relation to the extra costs being proposed to the pension members?
I have spelled out the differences throughout this thread and explained the rationale for them, but then I am capable of analysing financial risks and know how to manage them. You can continue to live in your own little world where the Tories are out to get you and where no doubt, another fundamental principle of economics and finance can be ignored, the existence of the economic cycle, so that boom and bust can be abolished.
Where did Osborne get the claim that public sector pay increased by twice the rate of private sector pay over the last four years?
Maybe he's been selective with his sample as you have?
Was talking more than 4 years ago, I mean the real boom times when NuLab was doing well and GB had ended boom/bust for all times.
The real issue is this:
I am a nurse and under the current scheme will get a pension of around £8K pa at 60. With the proposed one I might get a bit more but will have to put £200ish a month in.
Lets say I am going to get £10k which is about £200 per week but will have paid in the £200 per month for the next 21 years.
State pension is at the moment £132 per week so in comparison what I pay only gives the difference.
Reckon I might be better off just enjoying my cash and hoping that theres some welfare state left (or my kids get really rich and look after their old dad).
No mefty - you keep attempting to say it the same as a private sector one when it clearly isn't there being a number of fundamental differences.
a private sector pension is paid from an invested fund
The NHS scheme is paid from revenue
teh NHS scheme is guaranteed by government.
these are fundamental differences that you simply want to ignore.
TJ, to be fair, I think you're misunderstanding him. I don't think he disputes those points or is saying that the NHS pension is identical to a private one, what he's disputing is that there's somehow no consideration for liability just because there's no pot. For me, liability is the key issue and in that sense, no different from a private pension even if there isn't an actual pot of money to cover it - it's still something to consider.
Glad to see this threads still going well. I'll call by tomorrow and check if you've got it all sorted by then. No fighting, now!