||[Nov. 30th, 2011|10:51 am]
So I wanted to understand more about the pensions situation that is the result of today's strikes and I needed somewhere to put it all down.|
What I understand is...
The Chancellor has discovered that the civil pensions are going to cost £11bn more than originally forecast. This is due to people living longer and I believe more people people in the public sector.
To combat this he has capped employer contributions and is enforcing a 3% increase on employee contributions - figures I've seen are 6.4% employee contributions and employers contribution 14%. Figures quoted are an additional 2.8bn by 2014.
The eligible age to take the pension is being increased
The pensions are now going to be 'mapped' against CPI rather than RPI - now I'm not dead clear on this but I'm pretty sure this is the interest rate that they will get on their pensions. CPI is lower than RPI and current predictions are that what the employee will get from their pension is 15% less - this sounds to me like it is going to be 'back dated' too for all those affected.
Another change is that rather than being on the final salary pension - which is something like the max salary you've had in the years leading up to you taking the pension - it is going on average salary over the course of the career. So general principle is that your average salary that includes early career will be lower than the max salary at the end of your career - this will result in the employee being entitled to less pension (no idea on % or numbers)
Average civil service pensions range from 4k-15k per year depending on which sector you are in.
You can opt out of the whole scheme but you are not allowed to change your contributions from the set % I've given about
Right so I wish I knew my pension scheme better but obviously at the same time I don't really want to let you know all my intimate details but I think there should be some comparrisons. Below are my feelings on the above situation in same order as above.
If the forecast is wrong for the money required for pensions then obviously this is a problem and it needs sorting. However if I complete an incorrect forecast at work it is my problem and I need to make savings in other areas to compensate for the over spend - I do not get the choice of taking more money from somewhere else (and I'd probably get fired if it was as large as the above). We have deomgraphic figures showing that life expectancy is increasing, that over 25% of the population will be over 65 by 2025 and we've had these predictions for probably the last 40 or 50 years - I'm not too sure how the forecast can be so bad.
I understand that by capping the employer contributions you are protecting the tax payer but I don't really know how I feel about this - it is a mix of well if someone told me I needed to pay more and that my employer didn't I'd be pretty pissed off. Strange thing is in this situation is that civil servant are also tax payers so in some ways they are contributing twice to their own pensions so this may also benefit them. But I suspect in the grand scheme of things this last part is negligable and essentially it is the workers who are being asked to accept less by paying more to dig the Government out of a hole with the Goevernment providing no incentive for them to do so.
So the increased age to take a pension I think is fair enough - this is just a fact of our current life expectancy and is across the board on state pensions. However as someone with a private pension I can draw this down at 55 (at the moment) so maybe I can afford to be fairly relaxed about this as I expect my state pension will be nominal compared to my private scheme whereas anyone in the public sector will have to work until the retirement age or have additional savings or pension if they wish to retire early. Actually thinking about it, if we consider my private pension from work the same as the civil pensions this would mean I could not take this until I was 65 - so in addition to my work pesion I would have to have a seperate scehme over and above the one I get from work which would entirely piss me off - I do not want to HAVE to work until I am 65 or pay twice as much to be able to retire early.
The interest point is harder to compare to my pension as I really have no idea what this equates to but if someone told me I was going to get 15% less on something that I am effectively paying for I'd be hacked off
The change in salary comparrisons I think is fair enough - private sector pensions moved away from final salary a few years ago - there are something that need to be accepted to combat a money finance, and for me personally this is just one of those things. This might be because I've never pinned my financial security on a final salary pension and because I am a few years off - I can see how if you are closer to retiring this could cause issues but I find it hard to fully relate.
No idea what I'm expecting out of my pension (I probably should check) but I would expect my work pension to give me something within that bracket of average pensions for the civil service. The main difference for me is that the % I pay is half of what is being enforced on public sector workers. I can also change this if I choose to - either to create more money per month or to increase my pension pay out. My employee to employer contributions is equivalent to the one outlined above so I think I fall into the lucky/good employer category.
In summary I would be exceptionally unhappy if someone told me that I was going to lose an extra 3% of my monthly pay because the Government had decided I was one of the target areas to help them out of a hole. In addition to this I am going to lose around 15% on what I was predicted to receive as my pension. That I cannot retire until I am 66 unless I take more money out of my monthly pay packet to set up another scheme and that my only option to take control over my pension scheme is to opt out of a good pension scheme and forego all my employer contributions.
I don't know about you guys but with all my monthly outgoings I would be hard pushed to find the extra 3% without compromising an area of my lifestyle and I would be loathed to do this just becuase someone in the Government told me I had to because they cocked up.
I wonder how much moeny would be made by 2014 if they got the banks to pay over their bonus schemes rather than putting pressure on key workers who support our kids, health, and safety?