Public Sector pensions continue in the news with the Government ploughing ahead with employee contribution increases and other changes, whilst “consulting” on such changes.
PS pensions are in a mess and the Government are doing little to sort it out, no accounts are published on scheme performance, although members pay contributions, which with employers and SERPS rebate amount to some 19% overall. The money goes straight into State coffers without normal accounting controls.
Any private scheme running in this manner would be prosecuted and fined, barred from running a scheme and even imprisoned for misuse of funds. The scheme is run on a “pay as you Go” basis which means there are no funds to account for, moreover some members make good contributions and will pay much more, whilst others pay little or nothing, being subsidised by other members and the taxpayer.
Yet none of this is publicised and changes have not been logically justified. NHSs, Teachers, Police and Fire pay member contributions from 6% to 11% and the scant figures available suggest pensions paid are low for the average member around 30% of average wage. The higher earners and late promotions do well, taking an unfair proportion of payments. The figures also suggest that the State pension is included as part of benefit.
As there are no funds, the scheme fails from the lack of investment income which cam meet anything from half to all the pension payments paid, making a funded scheme 3 or4 times more cost effective as the contribution work hard in the members interest.
The 2008 figures available indicate that NHS contributions exceed pension payments by at least a third, as do police and fire, with Teachers somewhat less. However they could all transfer to a funded scheme without the major problems predicted, particularly if the State met its liabilities on existing pensioners.
There are a lot of misleading statements about the viability of PS pensions, most of which could be dispelled if the facts and accounts were published in the same manner as other schemes are forced to do.
Much is made of increased life expectancy and the need to work longer because one lives longer, but little study has been made of the over 65 population, the main area affected by these projections In fact the major impact is on unfunded schemes from demographic effects, if you are self sufficient the impact is small. PS schemes on current projections will see a one to one ratio of those in work contributing and those drawing pensions within 25 years, an obviously impossible situation when there are no pension funds to meet pension increases.
There is an urgent need for an open and frank disclosure and discussion of the problems, which affects an important and trusted part of our society, who many depend on and who are being forced towards strike action they do not want or know how to avoid.
Savings Annuities Public Sector NHS Teachers Police Local Government Hutton State
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