The UK Pension Crisis ( a two tier socieity)

[Duke of Gloucester]

Is this not a little ironic as its my taxes that go to pay for the public sector pension.

No, they don't. Public sector pensions, like the private sector, are funded by contributions from employers and employees. In short, they are earned by the people working in the public sector.

In some ways public sector pensions are a good deal. They are indexed-linked, so their value is protected after retirement, and the chances of the employer raiding the pension fund and then going broke are very small. However, many private sector final salary schemes are funded at 2/3 of the final salary, rather than the public sector standard of 1/2, and, of course, that 1/2 is 1/2 of a public sector salary. Basically speaking, given a particular level of qualification, you can earn much more over your working life in the private sector.

What you seem to be calling for is a unilateral change to peoples' conditions of service, so you think it would be fair to tell a 50 year old that she has 15 more years of work, whereas, up until now, she thinks she has been building up an entitlement to retire in 10 years. How fair is that? It is true that the benefits of private sector pensions has been falling as fewer and fewer employers offer final sector salary schemes, but this can't justify unfairness to public sector workers.

What your taxes are paying for, Shades, is hospitals, roads, an army, navy, police force and public education to support the ecconomy that generates your income. Part of that will cover the retirement of those who have worked to provide those things for you throughout their lives.

Incidently, public sector workers pay tax too.

[Cataphract_Of_The_City]

The whole thing stems from the inability to recognise a simple fact. There are not enough people working to sustain the number of people on pension. Either face the problem or stop whining. People are becoming too indulged on their personal choices (dare I say lifestyle?) to realise that their choices can and will have an after-effect.

[solypsist]

in japan, 25% of the total population will be retired and older in the next 7-10 years. besides a labor crisis (they have very strict immigration laws and their birthrate is incredibly low), they're facing a similar fiscal retirement problem.

[Papewaio]

Pension is a fallback option not a great lifestyle choice.

If you cannot look after your own retirement then you will have to rely on others. So look at how your government treats you now and decide. In all likely hood you will be thinking on how to be self sufficient in your old age.

[ShadesWolf]

No, they don't. Public sector pensions, like the private sector, are funded by contributions from employers and employees. In short, they are earned by the people working in the public sector.

So the times was lying in saying

20% : The amount of council tax that already goes towards local government pensions

I quickly glosses over how the private sector are paid more, almost 40% in some cases

Sorry I disagree, a few ie the people at the very top might be paid that much, but at the end of the day its their company.

Secondly, If a company pays to much to its directors they it will go out of business. So in effect it can only pay what it can affored in the longterm.

The private sector is attempting to sort the pension problem out, a problem that this government has made worse. Many companies dont offer 'Final sal pensions' to new employees ans other like the one I work for has changed our pension to a money purchase scheme.

But of course the governemnt wont do this will they, at the end of the day the are still run by the unions, as they always have been.

[English assassin]

No, they don't. Public sector pensions, like the private sector, are funded by contributions from employers and employees. In short, they are earned by the people working in the public sector

I'm afraid that is not really accurate. Where do public sector employers get their money from? And where does the money used to pay the public sector wages which the employees then pay into their pensions come from?

The taxpayer. In my local authority a large proportion of council tax increases since 1997 has been to fund increasing pension liabilities.

In a sense this is all arranging deckchairs on the Titanic. The bottom line is that in order to pay for a moderate pension through, say, 20 years of retirement, you need to save a LOT of money in your, say, 40 working years. Savings of £500 pcm, every month, from 30 to 60 will give you a pension of £286 in todays prices BEFORE TAX, ie, a bit over £13,000.

Have a play here: http://www.pensioncalculator.org.uk/pages/interim.php

So if you have a spare £500 a month, after your tax, mortgage or rent, after all your expenses, (and somehow I don't think many people do) if you manage to save that for every month for 30 years (don't get ill, have kids, or a career break) you still wind up with an income that is, OK, not poverty, but its not exactly riches is it?

What this tells me is that the current system just doesn't work, at all. I almost wonder whether we shouldn't abolish the state pension, which is really just a lie anyway. The only sensible solution I can see is a combination is people working a bit longer and going back to the situation where your family looked after you (which would also concentrate people's minds on the need to have kids and maybe reverse the demographics behind all this anyway). if that last bit sounds tough, well, the way I look at it is why should MY children have to pay taxes to support my childless friends from university when they are pensioners, who decided to spend their money and 30s on holidays rather than on children?

[monkian]

Heh, love how The Times pretends its not a tabloid....

[Duke of Gloucester]

I'm afraid that is not really accurate. Where do public sector employers get their money from? And where does the money used to pay the public sector wages which the employees then pay into their pensions come from?

Public sector employees get there money from exactly the same place that private sector employers get their money from - they do a job and get paid for it. They have a set of pay and benefits from their work which includes a relatively generous pension and fairly stingy salary. If you wish to change the package, there will have to be negotiation and public sector employees are entitled to ask: "What extra benefits am I getting to offset the loss of some of my pension?" You can argue the government should have bitten the bullet 10 years ago and changed the retiring age then, but you can't treat public sector pay and benefits as some sort of charity bestowed by those working in the private sector. It is part of a package and it is earned.

So the times was lying in saying
Quote:
20% : The amount of council tax that already goes towards local government pensions

Well lying is a bit strong. Wilfully misleading might be more accurate. The main outgoing for a local government is the pay of its staff (probably about 80% if my field is anything to go by). Council tax is only a tiny proportion of their income, most coming from grants from central government, (almost all their income is from taxation, but very little from the Council Tax) so it is quite possible that employers' contributions to pension schemes do come in at 20% of the council tax.

There are some other misleading statistics quoted as well. The group of public sector workers contains a proportionately higher number of university graduates (all those doctors, nurses and teachers, you see) and this explains the statistic about average pay. If you are a graduate, working in the public sector for 40 years will cost you hundreds of thousands of pounds.

There is an out-and-out lie, about boosting public sector pay. Where the government can get away with it, public sector pay rises by the rate of inflation and so falls behind pay overall. When recruitment becomes a problem, pay levels are boosted a little, but never enough to catch up with average increases in earnings.

The only valid point that Shades makes is that public sector workers can hold out to maintain their pension benefits without risking their employer going broke. However the truth is that this will be revisited, and public sector workers, even those working now, will have to work longer. I do not expect to retire at 60.

the way I look at it is why should MY children have to pay taxes to support my childless friends from university when they are pensioners, who decided to spend their money and 30s on holidays rather than on children?

In this discussion we need to distinguish between state benefits and earned benefits. Earned benefits are part of a contract that needs to be honoured. Thats why EA's children will need to pay tax to support the midwife that brought them into the world now she has retired. Seems fair to me. State benefits are a different matter.

[English assassin]

Public sector employees get there money from exactly the same place that private sector employers get their money from - they do a job and get paid for it.

Yes but, no but. This is true as far as it goes. But the difference is this. As a private sector employer, if I want to pay more money into my employees pensions, and if i don't want to cut my spending on other bits of the business, I have to go and get more customers. If I can't do that its tough luck employees, there's not enough money to go round.

Whereas if I am a local council I just whack up the council tax which the local taxypayers have to pay. And we do. I've been a local councillor since 1998 and a fair proportion of our council tax rises have been to make sure we keep the local government scheme funded. Tax rises that are being paid by people whose own pensions may be non-existant.

In this discussion we need to distinguish between state benefits and earned benefits. Earned benefits are part of a contract that needs to be honoured. Thats why EA's children will need to pay tax to support the midwife that brought them into the world now she has retired. Seems fair to me. State benefits are a different matter

My point was more fundamental. ALL pensions, of whatever sort, are paid out of the labour of those still working. Think about it. You save a big pension fund. (lucky you). To invest it, what do you do? You buy shares, bonds, put some on deposit. In other words, you lend it to people who want money in their businesses, why, because they are still working. If no one wanted to borrow, your cash fund would be worth nothing (as an investment. You could still spend it on goods and services)

Even if we all save like mad, fewer people working and more people needing to pay pensions off those investments creates a problem, because over supply of money and undersupply of labour to invest in suggests pensions will be worth less.

Earned benefits are part of a contract that needs to be honoured.

But again, you have to note that if I said that in my business, promised very good pension rights, and couldn't pay them, I would go bust. In the public sector though they just rack up the taxes. I really don't see why there is something inherent in public sector work that means these promises must be honoured whatever the cost, and not so in the private sector. Shades' figures suggest the "underpayment" argument is no longer true. Job security is generally better. I'm not dissing the public sector but its not the sole bastion of all that is virtuous in the working world.

[yesdachi]

Pensions, social security and retirement in general seem to be a big issue in most developed countries and no one has a clue what to do.


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