The contributions don’t pay for all the accruing benefits, the government make a theoretical contribution, it is all theoretical because there is no fund, they like many employers want to reduce this contribution in the future. It is no more complicated than that.

Zedsdead – Member
Average public sector pensions are around £4000 pa
Is this correct?

Yes and no.

It is (reportedly*) the average pension paid by the public sector. However it is NOT the average pension paid by the public sector to a full time employee with 40 years of service.

So many people work for the public sector part time; not unexpectedly their pensions reflect this. Many people work for the public sector for only a small number of years; naturally they get lower pensions.

Currently depending on exactly which bit of the public sector you are in if you work for 40 years you might expect something like 1/2 – 2/3rds of your final salary (usually the highest of the last 3 years) as pension, for the rest of your life – plus a lump sum. So a minimum wage cleaner working 40 hours a week (£12.6k) who has been working all their adult life will retire on considerably more than the reported figure (£6300 p.a.) whilst an experienced band 6 nurse (£34k salary so outside London) retiring at 65 could have earned a pension of > £20k pa, plus a tax free lump sum**.

Don’t forget public sector workers also qualify for normal state pension benefits. Oh – and the public sector pensions are index linked wheras private sector ones often are not.

* as TJ reports its not even true for most sections of the public sector.

** NHS pensions have undergone various reforms – and so this assumes they are on the “latest” version…

this is just simply wrong. You cannot have it both ways.

Maybe I am, but then so would every pension fund manager in the world, so I think that it unlikely. If you want to get a basic understanding of pensions you could read FRS 17 which deals with how company’s account for their liabilities or some of the Institute of Actuaries material.

No mefty – you have a basic lack of understanding of how the NHS pension works.

This years contributions fund this years benefits. You claimed this

You have to look at the accruing liability and match the contributions to the liability, people contributing today are contributing to their future pensions not someone’s existing pension.

which is wrong.

So to summarise your statement as I understand it, TJ, it’s affordable now but may or may not be in the future, depending on whether the parameters change? Doesn’t that put the current contributors at risk of not getting what they were told they would get?

Your other point being that if the current surplus was invested (rather than spent by the government), then that could cover the potential shortfall.

Right?

I have, I used to have a certain amount of support for the public workers, that was until they all became selfish whingebags who want the whole world to feel sorry for them,

Politics of envy.

I used to wonder if I’d done the right thing going for lower wages, no company car, no gym membership, no perks, no work funded holidays conferences, accounting for every last minute of my work time (I certainly wouldn’t dream of the taxpayer paying for me to post on STW during work time: I am on a day off today ‘cos I did nights all weekend). But I used to remind myself that the retirement age, pension, yearly ‘cost of living’ small percentage pay rise every April, and relative job security was worth it in the long run, and that the extra few hundred quid a year in union membership would also help keep this up.

Don Simon, I am sorry you had such a shite time with your last employer but you could have considered making the short term sacrifice in terms of salary, benefits and working conditions for a long term security of a pension and an employer who gives you a pay rise when they said they would and pays a bit less but pays you on time.

and then go on strike the very moment anyone looks at them in the wrong way.

The strike last November was the first time the NHS have been out on strike since lord knows when. Easily 25 years (someone mentioned it in the last argu-thread about pensions iirc). If it makes you feel better, I happened to be on a rostered day off that day and still went out on the demo and rally.

Pretty much clubber – apart from the NHS scheme has been changed already to reflect people living longer and tomake it sustainable and if the surplus had been invested it would mean huge surpluses for ever. the NHS pension fund would be the biggest in the world

the NHS pension fund would be the biggest in the world

I hear that in the voice of Brian Blessed 🙂

You say it’s been changed to be sustainable, but surely that’s only based on assumptions on how much is going to be paid in each year since there’s no effective fund pot, just money in and out each year.

No TJ you are showing a basic lack of understanding of how accountable pensions work in the real world.

I’d agree that public sector pensions are being messed around with on a whim by the politicians under the current arrangements and it’s not clear (to me) whether there is any basis for what they are doing.

If it was up to me all benefits accrued under the current arrangements would be ring fenced and would continue to be paid by the tax payer. I would however shut the existing schemes to new employees at the very least and preferably all employees (as has happened in the private sector) and start the new scheme on a sustainable funded basis separate from political interference. It should also take a lot of the arguments away, the employee and the employer put money into the fund, it’s invested, the employee gets and annuity based on the pot at the end of service.

At the moment the public sector wants it’s cake and eat it. They don’t want to increase contributions and they want decent guaranteed pensions. The main loser in that scenario is the tax payer who gets to foot the bill if it all goes pear shaped.

The current unfunded schemes aren’t sustainable without continued underwriting from the government. If the government was happy to underwrite all pensions on the same basis I’d go for that (i.e. the usual comment about bringing private sector pensions up to the same standard as the public sector rather than the other way around).

Politics of envy.

This is a joke, right?

No I am not, there is no magic about the NHS scheme, the principle underlying it is the same as every scheme in the world, you make contributions today for an income in the future known as a pension – these are called pension contributions – the clue is in the name – not that you are paying contributions for some pensioners benefits today in the hope that there will be someone around to pay yours. Every contribution give rise to a future liability, actuarially the quantum of this liability is greater than the contribution, hence the concept of the government also contributing. Rather than investing the money in a separate fund, the government chooses to use the money and thus reduces its need to borrow. Governments like this because the pension liabilities are off balance sheet whereas the reduction in debt is on balance sheet so their numbers are flattered.

If you want to invest in something where your contributions pay someone else an income, I believe there are a couple of chaps called Madoff and Stanford who used to offer such a product, so they might be able to help.

Mefty – sorry – you simply are wrong – I suggest you read up on how the NHS scheme works. revenue funding IIRC

TJ – You are a financial ignoramus, I know how it works my wife is a member of it, I also have the benefit of having advised trustees of pension funds, I don’t need to rely on propaganda from either side to evaluate these issues.

If you had the ability to understand what I wrote you would understand that nothing in it contradicts the fact the present income may meet present outgoing, that is completely different from the actuarial liability.

Have to admit, TJ, mefty’s take on future liability seems in line with the point I raised as I read it…

Mefty – try listening.

in the NHS this years benefits are paid by this years contributions. there is no investment fund.

it is nothing like any private sector pension scheme.

Seriously – go and read up on it.

This is indesputable fact.

clubber – thats because mefty simply does not understand the difference between the NHS pension scheme and more normal ones.

So there is a potential future liability (for the government I guess) since the people currently in the scheme rely on future contributors to pay their pensions, which only works if the assumptions made (eg there are enough of them for example) are correct or within tolerance?

Yes – basically – remembering that the scheme has been radially altered to reduce this potential deficit hugely and also to put it in context teh money the government has taken out in surpluses would easily cover this liability

Its also a tiny amount of subsidy compared to the tax relief on real fat cats pensions

Ah, that’s a different point, TJ, don’t try to obfuscate…

DS, right back atcha 😉

I have, I used to have a certain amount of support for the public workers, that was until they all became selfish whingebags who want the whole world to feel sorry for them

Selfish wingebags, I mean… There is another timewarp dailymailist thread about scousers on the dole somewhere on the internet that badly needs your input.

Precisely, clubber, but the fundamental of all pension valuation is that you do not take into account future contributions because they are not a given. Companies have separate funds because it is felt rightly that the employee’s pensions should not be at risk if the company goes bust in the future. Unfortunately it does not always work in practice. In the case of a government, as they have the ability to print money, this risk does not exist so there is no need for a fund. That said, some countries or states have public sector pension funds, Calpers in California and ABP in the Netherlands for instance, and these are both huge investors.

You’ve completely lost me jw. 😕

don simon – Member

You’ve completely lost me jw.

I mean I can’t believe such a well-considered poster like your good self would have been altogether serious with the bit I quoted up there either.

I have, I used to have a certain amount of support for the public workers, that was until they all became selfish whingebags who want the whole world to feel sorry for them, and then go on strike the very moment anyone looks at them in the wrong way.

In case you forgot where it was you seemed to go all ‘daily wail’.

In case you forgot where it was you seemed to go all ‘daily wail’.

Got you. So I have to listen to the teachers on here complaining about their pensions and their working hours and how the rest of the world must understand them and help them with complete disregard to the bigger picture and that’s a daily wail reaction? I state a fact and I’m a whinger. There really isn’t any hope, is there?

I don’t think you are a whinger DS, but that bit was pretty OTT.

I state a fact and I’m a whinger

You stated opinions like most people on here have, not facts. Even the numerical ‘facts’ linked to on here by both the lefties and righties are massively up for debate: the teachers’ opinion is that their is a sustainable pension and your opinion is that it isn’t and they are disregarding the economic needs of those around them.

Why did you end up teaching (that is what you do/did isn’t it?) in the private sector then DS? I am wondering if you might be envious of the pension and job security you would have had in a different life working for a state school or CFE.

Back when I was a community nurse, I was once offered a tasty looking package in the private sector by an owner of a group of care homes who liked the cut of my jib, basically a few grand more than I was on for the NHS and a tasty company car on top of that. When you are a 28 year old father of 2, treated like dirt by middle managment, and paid waaaay (I think back then I would have been 8k) under the national average wage for a world of stress and genuine life-or-death responsibility, with a university education behind you and a professional registration to keep up, an offer like that is really tempting! I’m glad I played it safe and didn’t though: the owner turned out to be a right wrong-un, screwed over a load of his emplyees on their pay and had several of his homes closed down including the large one that I would have managed. I chose to stay one the lower-risk lower-paid path and today I still have a job. (even if our newly-outsourced payroll department ‘forgot’ to pay me £500 of my wages the other day 👿 )

Why did you end up teaching (that is what you do/did isn’t it?) in the private sector then DS? I am wondering if you might be envious of the pension and job security you would have had in a different life working for a state school or CFE.

I went teaching as it allowed me to work in other countries and paid for other ventures. Why would I be envious when I have something which is potentially worth more than any pension? And the fact I was referring to was my losses. People make choices and should accept the rough with the smooth, anyone who is accepting a contract is accepting security at the cost of rewards. Some of us forego the comfort of a contract and prefer the risk and greater rewards that self employment offers.
Years ago I would have supported the public work force, but having listened to the me, me, me attitude of certain public workers, they have lost my support. Having listened to the story of a well paid public worker who is a lazy fat knacker who does nothing, falsifies documents and reports while collecting his salary waiting for his pension, no sympathy.
I have another friend who is high up in the civil service works hard and earns his salary.
There is good and bad, unfortunately the bad has caught my attention and when I hear comments like “why should the police work overtime for free?”, I lose all sympathy and all worthy civil servants should be putting distance between themselves and this attitude. Everyone has to do a bit extra in this global crisis. 😀

If it was up to me all benefits accrued under the current arrangements would be ring fenced and would continue to be paid by the tax payer. I would however shut the existing schemes to new employees at the very least and preferably all employees (as has happened in the private sector) and start the new scheme on a sustainable funded basis separate from political interference. It should also take a lot of the arguments away, the employee and the employer put money into the fund, it’s invested, the employee gets and annuity based on the pot at the end of service.

Totally agree, but it must apply to all employees – not just new ones.

DS: Shame the lazy few made you generalise that they are all lazy and selfish in public service then.

I work with a couple of nurses a bit like your lazy civil servant acquaintance sounds, though without the ‘falsifying reports and documents’ bit (I would have delighted in reporting them for that, because like all career shirkers it is hard to pin anything on them) -basically crap but not quite crap anough to sack, which of course would be much easier in a world of self employment or fixed term contracts. Funnily enough, these two shirkmeisters are also two out of our team’s three ‘token Conservatives’ 😆 . I am sure that is a total coincidence however, and not at all representative of turkeys who vote for christmas health workers who vote conservative. I also do not consider them to be representative of the other 18 nurses and 14 health care assistants I work with though.

br, dunno about the other public sector pension schemes, but with regards to closing pensions to new starters, the new changes to NHS pensions for new starters would actually seem to be discouraging them from entering the scheme as for new staters it will not be competitive with private pension funds or indeed paying into some other investment which you cash in on your retirement.

DS: Shame the lazy few made you generalise that they are all lazy and selfish in public service then.

I haven’t done that, have I? But I would be concerned about you more vocal colleagues though.
The lazy fat knacker makes it more difficult to have himself fired as he’s the union rep, it just gets worse for him, doesn’t it?
I also have the luxury of having family members who are public workers, this gives me an interesting insight into their thought processes as I’ve been surrounded by them my whole life.
Just for info, I am no Conservative. 😉

the new changes to NHS pensions for new starters would actually seem to be discouraging them from entering the scheme as for new staters it will not be competitive with private pension funds or indeed paying into some other investment which you cash in on your retirement.

this is the intent. No new entrants makes the schemes become unviable then the government can close them and transfer us all to private pensions to make profit for their fat cat friends.

Its not about the possible future cost of public pensions – its about making profits for private pension funds

Just for info, I am no Conservative.

Well that’s no surprise – apparently hardly anyone is.

It’s a constant mystery to me how they manged to get 10 million votes last election.

With 10% of the population being well off, it might not be that surprising.

I haven’t done that, have I?

DS, my apologies for surmising ‘lazy’ from your posts, but:

they all became selfish whingebags who want the whole world to feel sorry for them, and then go on strike the very moment anyone looks at them in the wrong way.

…sounds like you said they are all indeed selfish and prone to strike too quickly.

Is ‘your’ lazy fat knacker a union rep? The rep in my team (not for my union) is not the hardest worker in our team but much nearer the top than the bottom. The unison and RCN reps I know personally are very dilligent workers: I knew them for their reputation as good nurses before I found out they were also staff side reps.

To add balance and insight into my understanding the thought processes of the righties on here, although my dad is a retired teacher and my mum a HCA, we are the financially poor bleeding heart pinko end of the family: most of my English relatives are public school/oxbridge uber middle class conservative-voting barristers, naval officers and bankers, (who can’t understand why I am a nurse and don’t have a proper job like a doctor or something.) More of a mix of social class/education/job/politix on my French side.

And I used to TEFL a little bit a couple of years before I found the health service. Great fun, my classes seemed to be like Borat every day, but I hope the pay has improved since I did it!

Is ‘your’ lazy fat knacker a union rep?

I believe so and often uses union duties as an excuse to get out of doing work. 🙄
I loved the TEFL stuff but didn’t love it enough to go into academy ownership. Conditions in Spain are going backwards, I suffered a 70% pay cut and decided to bin it in favour of opening a business here, in construction, in a recession. Mad? Me? 😆

I believe so and often uses union duties as an excuse to get out of doing work.

Shame 🙁

Two of my favourite ‘if I ruled the health service’ changes would be

1) That you get chosen at random from your work area or directorate (by your own union) to be a union rep: like jury service, but for a couple of years at a time, to make it more representative and rule out the shirkers and ‘chip-on-shoulder-axe-grinders’.

2) Instead of pratting around with useless guff like the Knowledge and Skills Framework, the appraisal process had proper ‘teeth’ and that instead of the ludicrously long-winded long term sickness managment or ‘performance managment’ process (this is not the same thing as in teaching by the way, in the NHS this means you are in trouble, as opposed to in teaching where it is just being well supervised in a more helpful way by your boss) you could make all employees start on fixed term contracts for a few years, which could be not renewed if you turn out to be workshy or just too rubbish, as well as much more assertively managed if you decide to become lazy and rubbish after
several years on the job.

DS, you’re probably not as mad as you would be if you tried to start an EFL company over here. My dad got bored being retired and does a bit now for the local CFE, and from what he tells me, it seems as though for the private schools (of which there are very many in Plymouth), there is a huge deal more faff at the expense of teaching or turning a profit than there used to be when I did it. 😕

the new changes to NHS pensions for new starters would actually seem to be discouraging them from entering the scheme as for new staters it will not be competitive with private pension funds or indeed paying into some other investment which you cash in on your retirement.

If they are coming to that conclusion they are being badly advised, a career average final salary pension would cost an absolute fortune to recreate in the private sector, considerably more than the contributions.

Blimey mefty, you have the patience of a saint especially when being told categorically and repeatedly that you are wrong. 😉 And to think you are so completely and utterly wrong despite your wife being a member and your knowledge of how pensions work. How very strange!! 😉

Odd how most of the NHS has moved beyond these arguments because they/Hutton/BMA etc actually do understand the issues and how pensions work!! Indeed as has been alluded to earlier, the NHS has already implemented many of Hutton’s recommendations. Again, how very strange!! 😉

So what’s left – a slightly different argument and yet basically a simple one:

1. What should the pensionable age be?
2. Are final salary schemes affordable in the Long Run?
3. Should contributions be increased and if so using what measure?

Amazing how smokescreens on all sides obscure these three basic questions!!!

What about labourers, steel fixers, scaffolders, ground workers etc who do heavy work like that all day, in all weathers everyday? No doubt they get paid less than you do and have no pension.

What is happening to you is s**t especially when those at the top make sure they aren’t effected but a lot of people are far worse off than you.

Really do they? Look just because it happens to other doesn’t mean we should allow it. Like the factory workers and labourers of passed who fought for their rights we all benefitted from. Now it’s our turn to fight.

Teamhurtmore – he simply is wrong tho

Basic lack of understanding. Its a common error but what I pay now in contributions pays the pensions of those drawing pensions now. My pension will be paid from the contributions of those paying in when I retire. Not as mefty said that my contributions now will pay my pension when I retire. My contributions have been used to pay pensions and as revenue by the governement

If the governments over the years had invested the money not spent it there would be a huge surplus – at the moment the surplus is almost two billion

This is the whole crux of the argument that the government is using to change then -= tht future revenue will not meet future liabilities

And or your information the NHS has not adopted any of the Hutton recommendations – the recent changes to the pensions were done before Hutton reported after years of negotiations.

Answer me this

If when the fund is in surplus as it is now – in that contributions are far greater than outgoings and the government has taken that surplus and used it as revenue – ie reduced taxes on the back of it why if there is a deficit in the future should the government / taxpayer not make up the shortfall?

They have happily taken the surpluses

My pension contributions have funded the tax relief on private pensions

If it was up to me all benefits accrued under the current arrangements would be ring fenced and would continue to be paid by the tax payer. I would however shut the existing schemes to new employees at the very least and preferably all employees (as has happened in the private sector) and start the new scheme on a sustainable funded basis separate from political interference. It should also take a lot of the arguments away, the employee and the employer put money into the fund, it’s invested, the employee gets and annuity based on the pot at the end of service.

That is what I originally assumed the would do. But actually their proposal is, for most people at least, far more generous than this.

Current scheme (for most public sector staff): 1/80th of final salary for each year worked up to maximum of 40 years service.

Proposed scheme: 1/60th of average career earnings up to a maximum of 45 years service.

To my mind that will benefit the lower earners in the public sector rather than those on a ‘career path’…