IanP - the question of what is sustainable is a difficult one. One way or another, old people need enough money to live. That means a pension which supports them. The money for that has to come from somewhere. You totally reject increasing employer contributions in the private sector, yet the alternative is for the employee to shoulder the burden. Either way, it's money taken out of the economy, with all that implies. What is unsustainable is the fact that many private sector workers have NO pension provision and most have pensions which will be insufficient. Unless we want to simply cull old people, we're spending money now that we need to save until later. Thats unsustainable. As to the implied position you take that public sector workers should contribute to austerity, well they already are. Their wages will drop in real terms by a similar amount to the private sector (albeit slightly more slowly), they have seen and will see massive redundancies. According to the IFS they can expect this to continue for two years into the NEXT parliament, well after growth has returned to the private sector. All this is necessary. I suspect the unions will even accept a deal with two of the three government proposals included (they already have conceded moving from RPI to CPI). However, it is just wrong to hit them with a triple whammy of paying more, working longer and getting less at the end. I had a look on the pensions calculator. A "typical" 30 yr old schoolteacher loses 3% on their salary, works 3 years longer, and gets £6000/yr less for their sacrifice. No wonder they're on strike.
And, based on these facts people argue that they shouldn't strike? I find that pretty gobsmacking. OK, public sector pensions are the envy of many in the private sector, but surely the answer to this is to improve the private sector pensions?
- the lack of proper information can't help in any attempt to have a mature debate between the parties.
Quote from: Stu Littlefair on November 30, 2011, 08:39:55 pmAnd, based on these facts people argue that they shouldn't strike? I find that pretty gobsmacking. OK, public sector pensions are the envy of many in the private sector, but surely the answer to this is to improve the private sector pensions?I'm not saying they shouldn't strike, I'm saying I can't see what it will acheive.If FatKid went on strike and noone could see their GPs for a day, do you think Doctors would get public support? Or do you think the papers would be full of "Lazy bastard GPs go on strike whilst earning £120,000"?As an aside, as FatKid briefly alluded to, this may be true on paper but it's spin really. OK, so gross pay is £120k- take off employers and employees contributions for pension (Partners are self employed) then you lose over 20% (soon to be increased to over 22%). Add in >50% tax, with loss of the 10% allowance, and take off the 10K of compulsory fees etc then a net pay of £30k doesn't sound as impressive. I'm not going to argue it's shit money, but it's not 120K in any way. There's a lot of people bring home more than £2500 net a month.PS I am not working as a Partner so I'm not moaning about my own circumstances.
A nurse, a banker, a tory mp and a daily mail reader are all sat round a table on which there is a plate with 10 bicuits on it. The banker reachs across grabs and eats 9 of the biscuits, the tory mp leans across and whispers to the daily mail reader " watch it that nurse is after your biscuit".
I think IanP's question, which would also be mine, is whether the current pension pot and the current rate of paying in, can sustain pensions into the future once you factor in extended life expectancy? Is this a static pot, or like most pensions is its sustainability based on assumptions about the quality of what it's invested in (which are now no longer valid)? If it can be sustained, then this would seem like a backdoor method of pulling money out of the public sector without cutting more salaries or jobs. If it can't, then whatever deal was promised in the past would still require government subsidy that arguably cannot be justified when everyone else has much poorer pension provision. Comparing things to the private sector on the basis that growth is predicted to return in a few years, after all I've read, seems wishful thinking. The current deficit reduction plan and predictions of growth returning are based on two things: 1) no collapse of the euro (which is a 50/50 bet at best it would seem) 2) the interest rate we pay on debt staying more or less the same, aren't they? My fear is that if the euro goes under our economy will nosedive, debts spiral and our interest rate goes up. Alternatively, if the eurozone sorts its self out then suddenly our debt becomes the least attractive in europe and our interest rate still goes up. Net result is all predictions are wrong, this isn't the last round of austerity and the state will have to be dramatically reduced in size. In which case shaving a bit off pensions is going to seem irrelevant.
I know it's not the 50% band, it's 40% with loss of the 10% allowance. Although I wasn't aware Re pensions influencing band.Although I will bow to your superior knowledge! Although the point of lack of support still remains. And that I need to change jobs....
I'm not totally rejecting anything - it just seems very unlikely that UK employers could absorb a 4-8% increase in employee costs in the current environment. My position on pensions is that we need to live in the real world - it seems that there's a lucky generation who has gained from improving health and longer lifespans while still retiring on the basis of plans which were put in place many years before based on very different assumptions. Do people in there 30's and 40's now really expect to have the same pension arrangements as their parents?
Interested in where you got your £6000 less pension figure - I had a quick look on the Teachers pension calculator and couldn't find a proper comparison. Comparing average salary pension to final salary is pretty complicated and needs quite a lot of assumptions (guesses!) - the lack of proper information can't help in any attempt to have a mature debate between the parties. Even before the current financial problems in the developed world the expectation of retirement in your early 60's was being challenged - as per Ru's post if the western world really is starting a period of stagnation when compared to the up an coming economies of the developing world then striking over pensions really could start to look like fiddling while Rome burns.
The answer to the first part is a yes. Public sector pensions don't work like other schemes. In essence, the government takes money in, and commits to pay the benefits defined. Based on reforms already implemented to public sector pensions, the burden on the public purse is already falling, and is set to stabilise at a lower level. So it is clearly "affordable" in that sense, even in the light of rising life expectancy. This is because the public sector has already made commitments to lose some of their pension benefits, and to shoulder the burden of future cost increases themselves. The tory proposals to increase contributions are *on top* of this, and is basically a cash-grab.
Do you ever wish you hadn't bothered?
The £6k number came from newsnight last night. For a 35 year old female school teacher. Her current pension is around £18,000 / yr. On the telly, they said this would go down to £12K/yr. Based on the teachers pension calculator, and the government's excel spreadsheet this seems about right, although I had to make assumptions about salary growth etc. It will be in this ballpark figure.I don't know why you compare to this straw man of retiring at 60 on the same pensions our parents had. No-one our age currently gets that, or is lobbying for it. If we leave things as they are, public sector workers will retire at the state pension age, which for someone in their mid-30s is likely to rise to around 70 (it will already be 68). On average, they'll receive a pension of £7k/yr. If you are seriously proposing a system where people work longer than that, or live off smaller pensions than that I think you are being unreasonable.
Bit of a tangent this, but personally I think this thing about ever rising life expectancies is drivel. The idea that we’re all going to live to 100 is new-minted poo. I’d say it’s more likely that we’ll hit peak life expectancy soon and will then see it decline somewhat. Working longer, for less money followed by retirement on a pittance, coupled with a shrinking NHS doesn’t strike me as an ideal recipe for longevity. It may well be that we’ll look back and see that the pensioners of today get a better deal than any before or since and thus live longer. Plus I think most of the low hanging fruit on health gains have been had (reduced numbers smoking, antibiotic efficacy, surgical innovations etc). Or the euro will crash and we’ll all get eaten by Littlefairs next week, problem solved.
Its not that we're all going to live to 100, nor that they will continue to rise, but that like it or not life expectancy has increased from the time when pensions were designed/planned as this excerpt by Hans Rosling nicely demonstrates.....
