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George Osborne's Plan B

Last of the Fraggles said:
The public sector obviously has more than enough to go around judging by this lot as just the first example I found.

http://www.scottish-enterprise.com/...ip/management-team/senior-staff-salaries.aspx

Or my 'hard-working' local council management team

http://www.northlanarkshire.gov.uk/index.aspx?articleid=17857

Now I see why they have to charge me to pick up my rubbish!
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How about introducing a punitive top tax rate? That would reduce such excess in one fell swoop.... Funny how Cameron et al aren't too keen on that one :)

The obvious solution to public sector pensions is to have a top limit of provision - let's say pegged to median income. That way we don't waste vast sums of money on people who are already rich enough. But that would impinge on MP's very generous provision, so that will likely be a non starter....
 
Rolfe said:
Financial markets have screwed up the pensions of people who worked just as hard as people in the public sector, and who sacrificed salary to accumulate a pension pot. They can't go on strike about it.

Financial markets have also screwed up the ability to provide for public sector workers. Nobody is saying they don't deserve a good pension. But why do they deserve it more than someone in the private sector who scrimped and saved to pay into Standard Life, and now sees a tiny annuity at the end of it? Why should the tax man take from that person, to prop up the pension of public sector workers?

The private sector isn't all gold-plated million-dollar pension pots. A lot of it is the person who thought they were going to get £10,000 a year pension and is now looking at half that. With no redress. That's the person you want to tax so the teacher can keep the £25,000 a year index-linked pension.

It's not all one-sided.

Rolfe.
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It seems you are a "two wrongs make a right" supporter.
 
I'm just considering the equity (or otherwise) of forcing the sector who have had their pensions slashed through no fault of their own, to then pay out of their pockets to maintain the full pensions of a different group of people.

Suppose you've been robbed. Then your neighbour is robbed, and wants you to make good his losses. Do you say, oh well two wrongs don't make a right, and give him what remains to you?

Rolfe.
 
Infinite growth on a finite planet, the bizarre theory upon which our pensions rest, is a delusion.

Funny how protecting biodiversity is seen by some as an irrelevant luxury.
 
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Last of the Fraggles said:
You've never been to Cumbernauld, have you?
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Not sure what point you're trying to make.

From what I understand, that particular New Town doesn't have a great reputation, a combination of the fact that its architecture is a hodge-podge of styles including some large Brutalist structures and includes some particular socially-deprived areas, allegedly part of the Buckfast Triangle*, which also includes Airdrie and Coatbridge.

OTOH, if I remember rightly it has a nature reserve and country wildlife centre**, sits amongst large swathes of farmland and in places has some stunning views over central Scotland.

* - So called because vast quantities of that tonic wine enter that vicinity, and are never seen again.

** - Presumably that's where the biodiversity factor comes in.
 
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Rolfe said:
Not really. The responsibility is with the pension providers. I'm talking about the huge number of people working for small businesses who simply contracted with pension companies to administer and provide personal pensions for their staff. They were in the business of making widgets, not providing pensions. The portable personal pension was the way this was done, and it's not the fault of the guy who set up the widget-making business that Axa and Standard Life paid their CEOs millions and now don't intend paying out the pensions.

Rolfe.
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Well, it's misfortune, but banking crashes are nothing new, they've happened in the past. The private sector did have the option of forming unions and forcing their bosses to ensure their pension scheme was safe, but the pervasive anti-union culture left all the decisions in the hands of bosses who pretty much knew that they were going to be fine either way.

I do sympathise with private sector workers in this regard, since it isn't really standard practice in our culture to put a large amount of effort into ensuring you get a fair deal in retirement, nor is it always practical and safe to paint yourself as a target in your business by promoting union activities, but the options were there. Public sector workers organised to improve their pensions, private sector workers failed to do so.

Having said that, what we really need to do is make the richest members of society clean up as much of this mess as possible before cutting people's pensions, imo. And if being taxed makes the rich want to leave, fine, i've gotten bored of that threat - let them, and make it clear that if you move out of the country, if you ever want to return for more than a week or so you best be ready to cough up the extra taxes you would have paid if you hadn't left (the extra between the level of taxation of the country you moved to, and the level we set). We'll see how many people really want to leave.
 
stokes234 said:
Well, it's misfortune, but banking crashes are nothing new, they've happened in the past. The private sector did have the option of forming unions and forcing their bosses to ensure their pension scheme was safe, but the pervasive anti-union culture left all the decisions in the hands of bosses who pretty much knew that they were going to be fine either way.

I do sympathise with private sector workers in this regard, since it isn't really standard practice in our culture to put a large amount of effort into ensuring you get a fair deal in retirement, nor is it always practical and safe to paint yourself as a target in your business by promoting union activities, but the options were there. Public sector workers organised to improve their pensions, private sector workers failed to do so.

Having said that, what we really need to do is make the richest members of society clean up as much of this mess as possible before cutting people's pensions, imo. And if being taxed makes the rich want to leave, fine, i've gotten bored of that threat - let them, and make it clear that if you move out of the country, if you ever want to return for more than a week or so you best be ready to cough up the extra taxes you would have paid if you hadn't left (the extra between the level of taxation of the country you moved to, and the level we set). We'll see how many people really want to leave.
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Your argument for public sector pensions seems to be based on an irrational hatred of those you class as rich. It's not a good argument.

Incidentally, even if somehow the private sector had managed to 'guarantee their pensions' it wouldn't have stopped the stock market crashing and the value of pension funds being hammered. So companies would have been forced to make good the difference and a lot of them would no doubt have gone out of business.

That's not even considering the self-employed or those who work in small companies that don't have corporate pension plans.

Nobody is actually stopping anyone in the public sector having a good pension in the future anyway - just asking that they fund it themself if that's what they want.
 
Last of the Fraggles said:
Nobody is actually stopping anyone in the public sector having a good pension in the future anyway - just asking that they fund it themself if that's what they want.
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That's exactly the point. All my pension is in pension funds I contributed myself. The only "help" was tax relief on the contributions - all the money that went in was mine.

I was a partner in a small private company. I'm in the same position as all my former employees. We set up a scheme with a pension fund provider, and encouraged employees to contribute by putting some company money in directly to their pensions as well. But realistically, it was all "their" money.

How could any pension like that be "guaranteed"? It's not possible. We put aside what we could, for ourselves and our employees alike. Reasonable predictions at the time said this would provide decent pensions. To put aside any more, we'd all have been approaching living on bread and water.

Now the pension provider has revised its estimates of what it will pay out quite drastically. And the original partnership was dissolved years ago when the senior partner retired. I'd love to know where the money was going to come from to "guarantee" anybody's pension against a stock market collapse.

Public employees know where the money is going to come from to guarantee their pensions, though. They hope. The taxes paid by those people who have already lost out. Nice work if you can get it.

Rolfe.
 
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Rolfe said:
That's exactly the point. All my pension is in pension funds I contributed myself. The only "help" was tax relief on the contributions - all the money that went in was mine.

I was a partner in a small private company. I'm in the same position as all my former employees. We set up a scheme with a pension fund provider, and encouraged employees to contribute by putting some company money in directly to their pensions as well. But realistically, it was all "their" money.

How could any pension like that be "guaranteed"? It's not possible. We put aside what we could, for ourselves and our employees alike. Reasonable predictions at the time said this would provide decent pensions. To put aside any more, we'd all have been approaching living on bread and water.

Now the pension provider has revised its estimates of what it will pay out quite drastically. And the original partnership was dissolved years ago when the senior partner retired. I'd love to know where the money was going to come from to "guarantee" anybody's pension against a stock market collapse.

Public employees know where the money is going to come from to guarantee their pensions, though. They hope. The taxes paid by those people who have already lost out. Nice work if you can get it.

Rolfe.
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Thing 1:
Public sector workers are tax payers too.

Thing 2:
I'm sorry that you have been taken for a ride by the incompetence of the financial industry. At a price these companies could have offered guaranteed returns but there was no market for these products. We were so brainwashed by the investment returns of the '70s and '80s, we thought that returns of 7-15% were typical. From a very young age, I feared that keeping pace with inflation was as good as it would get and so to secure a pension of 50% of average salary I'd have to put around 1/4 of my salary into a pension (based on the assumption that I'd be working for 45 years, retired for 20 years). Turns out this would probably not have been enough.

In part the collapse of "with profits" schemes based on the Equitable Life ruling has contributed to this mess.
 
Last of the Fraggles said:
Nobody is actually stopping anyone in the public sector having a good pension in the future anyway - just asking that they fund it themself if that's what they want.
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The thing is that they have made large contributions over the years (or more specifically my parents certainly made large superannuation payments their whole working lives) but of course the money has already been spent (not just paying current pensioners but also going into the general taxation pot). There's no way of saying what a fund would have looked like if they had paid into a fund.
 
Darat said:
pensions are usually considered part of a remuneration package so for the public sector workers they have taken the job on the basis of that package. Their employer is now trying to alter their remuneration package and Giz (and yours?) argument seems to be that because some other employees have been screwed over their pensions it is only right that they also be screwed!
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A stronger argument IMO is that future generations (actually one can start with the present one) will be screwed because they never had a seat at the table when the decision was made to promise retirement benefits to their ancestors that lumped all the longevity/insurance/investment risk onto themselves.

These pension promises were IMO unethical, even if that has only been revealed now that the assumptions have turned out to be incorrect on most fronts. They should therefore be corrected (and it is a racing certainty that they will have to be sooner or later) Breaking them now is the least bad option, and as such the most ethical thing to do now is to essentially tear the (pension) contracts up. Politically it is of course phenomenally hard to do, in the same way as making such promises is politically easy to do.

The pledges that "nobody who is <10 years from retirement will see anything change" should be the other way around. That cohort would be the one to draw maximum benefit from the system (before the prospect of insolvency starts to force political hands more) with minimum contribution (most of it made on their behalf when investment assumptions were rosier).
 
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Probably all of fertility rate, longevity/mortality, equity risk premium, and the tendency for promised benefits to ratchet higher due to game theory. And all the forecast errors had adverse effects.
 
For all the arguments about private sectors pensions being used to fund public sector pensions, at what point in modern history have people in the UK been able to decide what they want their taxes to pay for? It's not like you're going to get this money back or even cut from your contributions. The tax that has previously been paying for these pensions will be used to subsidise business (when a Tory govt) or employ more public sector workers (when a Labour govt). It's never coming back to you as an individual and is a drop in the ocean compared to the amount of the deficit.
 
Skepticemea said:
The majority of public sector pensions are currently fully funded.
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Incorrect. The pensions of UK teachers, the Civil Service and the NHS are not funded at all in the sense of assets being set aside today to cover future liabilities. Pensions of local authorities are funded but not "fully" funded. This OECD paper from this year goes into considerable detail and provides a comparison across the OECD. The reported funding ratio of all UKLA pension schemes (which they say they sampled from W Yorks, Merseyside, Greater Manchester and W Midlands, which are the largest) was 58% in 2008/9 using the LGPS's own assumptions. The OECD in the paper also uses a much stricter fair-value-pricing method and comes up with a ratio of 39.9% (Table 4.2 Panel C)

The problem is the govt want to use that money elsewhere
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This implies that there is a pot of assets already in trust to provide pensions and that the government will raid it, Maxwell-style, to finance other things. Rather, estimates of the additional public funds that will be required to pay for the future liabilities that will accrue on current promises (because of non-funding or funding shortfall) are what the government wants to reduce.
 
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The Don said:
The thing is that they have made large contributions over the years (or more specifically my parents certainly made large superannuation payments their whole working lives) but of course the money has already been spent (not just paying current pensioners but also going into the general taxation pot).
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This is precisely what happens with unfunded pension schemes and it is why there is no inter-generational equity in such schemes when all the assumptions made bend the wrong way.

There's no way of saying what a fund would have looked like if they had paid into a fund.
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Except that, as above, for local authorities there are funds that were paid into and the end result is still not pretty if the future benefit is fixed and the contributions are made assuming outcomes that go adrift.
 
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