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[STEMO]

I think we need a change in the law regarding employers priorities. They should be made to keep their pension funds in order before any other expenses (bonuses, dividends etc) are paid out. There would be uproar if they didn't pay staff wages but that's exactly what this is: future wages in old age.

Dividends higher than pension deficits at FTSE firms
http://www.bbc.co.uk/news/business-36537846

[TheBoy]

Its the DB (final salary) schemes that are problematic, this doesn't happen with DC schemes. And it will only get worse.

There is no pot of cash with the DBs, and as we started to live longer, the maths on the DBs no longer worked. Hence most of them closed.  So you have a pension liability, but no contributions towards it...


Obviously, DCs will get proper borked when we leave the EU as well...  ...look at the hot they've taken just over the threat of leaving...

[LC0112G]

Its the DB (final salary) schemes that are problematic, this doesn't happen with DC schemes. And it will only get worse.

There is no pot of cash with the DBs, and as we started to live longer, the maths on the DBs no longer worked. Hence most of them closed.  So you have a pension liability, but no contributions towards it...


Obviously, DCs will get proper borked when we leave the EU as well...  ...look at the hot they've taken just over the threat of leaving...

That's not correct. All private sector DB pensions, and some public sector DB pensions (LGPS for instance) are backed by pots of money - not in cash but investments. The 'black holes' you hear about are because these pots of money aren't large enough to provide the income that is predicted to be required in the future. It's the pension regulator and the trustees of the pension schemes job to force these companies to make up any short fall. The problem is that the shortfall is very difficult to predict because you cannot know what future growth will be - all you can do is guess. Someone lucky enough to join a DB scheme today at 20 probably won't draw it till 65, so someone has to work out how much money needs to be put away today in order to provide a guaranteed income in 45 years time for the following 25+ years. Not easy.

Most public sector DB schemes (Police, Doctors, Nurses, Civil Service) are unfunded though. There is no pot of money/assets with these. The governments are just going to pay them with money from the magic money tree - aka Tax payers are going to pay them. 

[LC0112G]

I think we need a change in the law regarding employers priorities. They should be made to keep their pension funds in order before any other expenses (bonuses, dividends etc) are paid out. There would be uproar if they didn't pay staff wages but that's exactly what this is: future wages in old age.

Dividends higher than pension deficits at FTSE firms
http://www.bbc.co.uk/news/business-36537846

The laws are already in place. It's the job of the Pension regulator and the board of trustees of the pension schemes.

The article seems to be saying that these companies should make up the defecit today, when the liabilities may not occur for 40 years. Not very sensible.

[Mister Rog]

I've never understood the logic of final salary pensions. Getting paid the same amount for not being productive, as you were paid for being productive. It just does not make sense. These were invented by people in organisations, many of them in the public sector, who would never have to deal with the consequences and who were not playing with their own money.

Of course if I was going to be on one, I would shout and scream that that they are great and should always be honoured  But, I won't be, so I can have a bit of a jealous rant 

 

[jonathanh]

I've never understood the logic of final salary pensions. Getting paid the same amount for not being productive, as you were paid for being productive. It just does not make sense. These were invented by people in organisations, many of them in the public sector, who would never have to deal with the consequences and who were not playing with their own money.

Of course if I was going to be on one, I would shout and scream that that they are great and should always be honoured  But, I won't be, so I can have a bit of a jealous rant 

a point very well made and in recent years those non productive member have continued to receive inflationary increases, some linked to RPI far outstripping the increases of those in work. 

the Government hasn't got the bottle to sort this out because they are simply trying to survive the referendum ( and probably cannot whatever the outcome) and b) companies don't vote so why fix an expensive burden on them...

[STEMO]

I've never understood the logic of final salary pensions. Getting paid the same amount for not being productive, as you were paid for being productive. It just does not make sense. These were invented by people in organisations, many of them in the public sector, who would never have to deal with the consequences and who were not playing with their own money.

Of course if I was going to be on one, I would shout and scream that that they are great and should always be honoured  But, I won't be, so I can have a bit of a jealous rant 

a point very well made and in recent years those non productive member have continued to receive inflationary increases, some linked to RPI far outstripping the increases of those in work. 

the Government hasn't got the bottle to sort this out because they are simply trying to survive the referendum ( and probably cannot whatever the outcome) and b) companies don't vote so why fix an expensive burden on them...

As regards to the public sector, well teachers any way, the final salary scheme ended in April 2015. They are now on a career average scheme, far less generous. Teachers, up until 2012, paid 6.25% of their wages into their pension. Contributions have now risen sharply, and my wife currently pays 12%. When you consider that they've had a 1% increase in wages for the past four years, and another four to come, it's not the gravy train some people considered it to be.
But, then again, these are the same people who chirp " Nine o'clock till half three and six weeks summer holiday. I'd love a job like that" as they chew the cud in the pub/supermarket/dole office. My wife leaves home at 6:40 and usually gets home about 18:30, then sits working at her laptop for about two hours every night and about six hours every weekend.
I haven't seen her since yesterday morning as she is running a residential conference for aspiring leaders and will be home, knackered, some time tonight.
I am very proud of her, despite the flack she gets from people who haven't got a clue.

[LC0112G]

As regards to the public sector, well teachers any way, the final salary scheme ended in April 2015. They are now on a career average scheme, far less generous. Teachers, up until 2012, paid 6.25% of their wages into their pension. Contributions have now risen sharply, and my wife currently pays 12%. When you consider that they've had a 1% increase in wages for the past four years, and another four to come, it's not the gravy train some people considered it to be.
But, then again, these are the same people who chirp " Nine o'clock till half three and six weeks summer holiday. I'd love a job like that" as they chew the cud in the pub/supermarket/dole office. My wife leaves home at 6:40 and usually gets home about 18:30, then sits working at her laptop for about two hours every night and about six hours every weekend.
I haven't seen her since yesterday morning as she is running a residential conference for aspiring leaders and will be home, knackered, some time tonight.
I am very proud of her, despite the flack she gets from people who haven't got a clue.

No they didn't ,and no they aren't. I wish they had, but they didn't. They paid/pay 6.25%/12% in order to build up an entitlement to a pension. The money didn't go into their pension - there is no pension pot for teachers - it's unfunded. The government has already spent all the 6.25%/12% (and more on top). Your wife's pension will be paid by future tax payers.

Untill 2007 the TPS was a 1/80th scheme with retirement age of 60. Between 2007 and 2015 it was a 1/60th scheme with retirement age of 65. What that means is up until 2007, a teacher with 40 years service was entitled to a pension of half their final salary, in exchange for 'paying in' 6.25% of their pre tax salary.

You've previously said you're wife is on a high salary in excess of £50K. So till 2007 someone like her would have got a teachers pension of £25K p/a at age 60, in exchange for an yearly payment of £3125 p/a pre tax, so a deduction from take home of less than £1900 p/a.  How much would Joe public have to save over a 40 year working life to build up a guaranteed £25K p/a pension at age 60?

Go on have a guess. 

https://www.hl.co.uk/pensions/interactive-calculators/pension-calculator

The answer is over £600K, which would require monthly contribution of over £1000 for 40 years - so £12K p/a which is about 26% of their salary. Someone like your wife was paying just over £3K - 6.25%.

It's actually even worse (for the tax payers) because presumably she didn't start 40 years ago on anything like £50K (adjusted for inflation). So some of those early years she wouldn't have been paying in £3K - probably less than half that.

Things had to change. I have no doubt that teachers work hard, and most are worth every penny they earn, but even the new scheme is very generous, and would cost a private sector employee something like 25% of their wages. In effect a £50K teachers' remuneration package is actually worth more like £65K.

[jonathanh]

....to be paying 12% ( actually 11.7%) salary must be in excess of £75,000

at least the lifetime allowance charge will reduce the burden on the taxpayer a bit.... 

[STEMO]

As regards to the public sector, well teachers any way, the final salary scheme ended in April 2015. They are now on a career average scheme, far less generous. Teachers, up until 2012, paid 6.25% of their wages into their pension. Contributions have now risen sharply, and my wife currently pays 12%. When you consider that they've had a 1% increase in wages for the past four years, and another four to come, it's not the gravy train some people considered it to be.
But, then again, these are the same people who chirp " Nine o'clock till half three and six weeks summer holiday. I'd love a job like that" as they chew the cud in the pub/supermarket/dole office. My wife leaves home at 6:40 and usually gets home about 18:30, then sits working at her laptop for about two hours every night and about six hours every weekend.
I haven't seen her since yesterday morning as she is running a residential conference for aspiring leaders and will be home, knackered, some time tonight.
I am very proud of her, despite the flack she gets from people who haven't got a clue.

No they didn't ,and no they aren't. I wish they had, but they didn't. They paid/pay 6.25%/12% in order to build up an entitlement to a pension. The money didn't go into their pension - there is no pension pot for teachers - it's unfunded. The government has already spent all the 6.25%/12% (and more on top). Your wife's pension will be paid by future tax payers.

Untill 2007 the TPS was a 1/80th scheme with retirement age of 60. Between 2007 and 2015 it was a 1/60th scheme with retirement age of 65. What that means is up until 2007, a teacher with 40 years service was entitled to a pension of half their final salary, in exchange for 'paying in' 6.25% of their pre tax salary.

You've previously said you're wife is on a high salary in excess of £50K. So till 2007 someone like her would have got a teachers pension of £25K p/a at age 60, in exchange for an yearly payment of £3125 p/a pre tax, so a deduction from take home of less than £1900 p/a.  How much would Joe public have to save over a 40 year working life to build up a guaranteed £25K p/a pension at age 60?

Go on have a guess. 

https://www.hl.co.uk/pensions/interactive-calculators/pension-calculator

The answer is over £600K, which would require monthly contribution of over £1000 for 40 years - so £12K p/a which is about 26% of their salary. Someone like your wife was paying just over £3K - 6.25%.

It's actually even worse (for the tax payers) because presumably she didn't start 40 years ago on anything like £50K (adjusted for inflation). So some of those early years she wouldn't have been paying in £3K - probably less than half that.

Things had to change. I have no doubt that teachers work hard, and most are worth every penny they earn, but even the new scheme is very generous, and would cost a private sector employee something like 25% of their wages. In effect a £50K teachers' remuneration package is actually worth more like £65K.

I know your figures are correct and I know that, logically, things couldn't continue like that. But, in the same vein that Rog wrote earlier, it's a shitter when you are promised the final salary pension that your predecessors have been getting for years when you start out, only to have it taken away later. It's only human nature human nature to feel aggrieved. Her retirement age is now 67 and, to be honest, it's quite difficult to work out exactly what she will get. TPS website is still showing her benefits from the 1/80th contributions, so far about £13500 pa and a lump sum of, I think, around £35K. That's at 60, no mention of how it builds after that.

[STEMO]

There was an awful lot if " It's not fair" in the aftermath of the financial crisis. People in low paid jobs shouting the odds at the obscene wages some public servants were getting. Well.....now they in academies, the wages really are becoming obscene for those at the top of the chain. People have got to realise that nothing really changes, it just drops from the public eye as something more 'interesting' comes along.

[LC0112G]

I know your figures are correct

They weren't correct. I forgot to change the assumptions in the calculator - I believe the TPS has a 50% spouse pension and is index linked to RPI. If you add in those benefits, the pot required grows to around £1.3 Million, and someone on £50K would have to save 43% of their salary for 40 years

and I know that, logically, things couldn't continue like that. But, in the same vein that Rog wrote earlier, it's a shitter when you are promised the final salary pension that your predecessors have been getting for years when you start out, only to have it taken away later. It's only human nature human nature to feel aggrieved. Her retirement age is now 67 and, to be honest, it's quite difficult to work out exactly what she will get. TPS website is still showing her benefits from the 1/80th contributions, so far about £13500 pa and a lump sum of, I think, around £35K. That's at 60, no mention of how it builds after that.

I understand people may think like that, but it's wrong thinking. If she was a member of the TPS prior to 2007, then she has a preserved pension age of 60. And assuming your wife was within 10 years of retirement in 2012, then she's still in the 1/60th scheme, with a scheme retirement age of 65.

https://www.teacherspensions.co.uk/reform/members/at-a-glance.aspx

What usually happens when they change rules is that benefits built up to the date of the change are preserved, and then updated by statutory amounts - often CPI or RPI. They don't "have it taken away later". They just stop adding to it for future years. So your wife should have something like...

(Years prior to 2007)/80 * Salary in 2007 * (CPI from 2007-now) payable at 60
plus
(Years 2007-2015)/60 * Salary in 2015 * (CPI from 2015-now) payable at 60
plus
(years 2015-now) in whatever scheme she is in now - possibly still the 1/60ths one payable at 60.

Sometimes they can transfer your rights under the old scheme into equivalent rights in the new scheme - I don't know if the TPS did this. But the rights in the new scheme must be equivalent to those already built up in the old scheme - by Law.

Think of it this way - she was (till 2007) paying for roughly 25% of the true value of her pension. She is now paying roughly 50% of the true value of her pension. Most private sector employees would bite your arm off for that kind of deal.

[STEMO]

Yes...I know...and she gets 40% tax relief on contributions......lucky lady....

[Shackeng]

I've never understood the logic of final salary pensions. Getting paid the same amount for not being productive, as you were paid for being productive. It just does not make sense. These were invented by people in organisations, many of them in the public sector, who would never have to deal with the consequences and who were not playing with their own money.

Of course if I was going to be on one, I would shout and scream that that they are great and should always be honoured  But, I won't be, so I can have a bit of a jealous rant 

I may have misunderstood you, but a "final salary pension" does not mean that you draw a pension equal to your final salary. It means that your pension will be based on a percentage of your final salary, depending on how many years you have contributed to the scheme. 

[Mister Rog]

I've never understood the logic of final salary pensions. Getting paid the same amount for not being productive, as you were paid for being productive. It just does not make sense. These were invented by people in organisations, many of them in the public sector, who would never have to deal with the consequences and who were not playing with their own money.

Of course if I was going to be on one, I would shout and scream that that they are great and should always be honoured  But, I won't be, so I can have a bit of a jealous rant 

I may have misunderstood you, but a "final salary pension" does not mean that you draw a pension equal to your final salary. It means that your pension will be based on a percentage of your final salary, depending on how many years you have contributed to the scheme. 

I have to say, that is exactly what I thought it meant. Thanks for correcting ! After your reply I looked some things up. Not exactly simple is it ? I've never had a company pension scheme, it's all personal, so things are different.

http://www.mycompanypension.co.uk/What-is-a-Final-Salary-Scheme-Preserved-Members-DB