Friday, 27 July 2012
John’s Blog 86 – Pensions – The State
If we look at the whole of our Pension provision policy and its basic pension mechanics, which unfortunately involves figures and sums, we find some surprising facts and figures.
The State Pension spend on the last figures released amounts to £102bn made up of :-
State Basic - £55bn State Second - £14bn Benefit spend - £33bn
This is made on an unfunded “pay as you go basis and spends the whole of the income from NI contributions, an unsustainable situation, projected to get worse.
If it was run as a funded scheme, then the costs would be dramatically reduced. Contributions of £20bn, put away as pension savings, growing or earning at a rate of 6%, would over 40 years meet these costs in real terms, and give potential expenditure savings of £80bn per year.
This is much greater than any of the economic review savings that is creating so much hardship in the present cuts in spending. Even at a more modest investment return of 4%, there is still a saving of some £67bn per year real and shows the strength of pension savings in a funded scheme, where the money is made to work.
There is of course the problem of the existing pensioner spend, but this is not as great as may be first imagined and can be covered by careful transition management over a period of 20 years as outlined in previous blogs.
At present life expectancy, the existing pension spend will have halved in 20 years and new pensioners entering retirement will be progressively met by the funded scheme; it can be shown that initial extra spend on NI rebate contributions of £17bn would meet the transition.
This money however is pension savings in an investment Fund, which can be used in present proposed Capital spend on infrastructure projects or the transfer of State assets in buildings etc., and therefore does not appear as a current expenditure. In addition the investment income generated would meet the pension payments without the need to repay the Capital, which steadily reduces in real terms due to inflation.
The overall effect would be to release some 50% of the income generated by National Insurance contributions to do the work that was intended in employment, training, health and welfare of those in work, over a transition period of 20 to 40 years and give a more sustainable and satisfactory pension system.
Such a scheme should be independent of the State and be run in conjunction with a modified Nest contributory scheme as funded defined benefit scheme, whose advantages are obvious without the need to increase contributions, delay retirement and also give a better retirement outcome.
The other major advantage is besides saving money, the substantial Funds would be available for widespread investment in the UK to create a growing economy and full employment.
It is time the problem of pensions and older people was taken seriously and intelligently, the answers are there, they just need separating from the rubbish and modern commercial opportunism, we are talking about people here our parents, grandparents and our own and children’s future.
Saturday, 21 July 2012
John’s Blog No.85 – Census 2011
The Census 2011 results for England and Wales are finally out and for persons, male and female, show increases from the last Census in 2001 of 11% in retired population over 65 from 8.312 to 9.223 million, just under a quarter of the total population rise of 7.1% some 3.7 million.
If these were rates projected over the next 20 and 40 years, they would give a rise of 23% to 2031 and 52% by 2051, resulting in an over 65 population of 11.34 and 14 million respectively, which is much lower than the current projections for over 65 population doubling or worse in this time.
Furthermore this was a period which saw a rapid rise in immigration and the large influx from Commonwealth Independence and post WW2 baby boom, which are just starting to enter retirement, resulting in a peak in elderly population over the next few years.
The over 85 population has risen at a higher rate of 24%, some 242,000 to 1.255 million, due to the accumulation effect resulting from reduced mortality at the early ages, but is only 13% of the total over 65 population and declining rapidly.
However if one compares the working age population age 16 to 64, this has increased by 9.2%, indicating an overall growth of those entering retirement, rather than longevity in retirement given by forward projections. If one also looks at the progression of the 55 to 65 into retirement at 65 to 75 from 2001 to 2011one finds an 88% survival compared with 73% within 2011, also indicating increased transfer rates.
Again looking at the decline of the over 65 population with age, one finds that at age 70 this has dropped to 71% and down to 47.4% by age 75, which has dramatic impact on the effect of retirement age, which if delayed until age 70 means there is a one in three chance of never drawing a pension at all.
Life expectancy is the point at which the population has halved; the Census figures suggest this could be just under ten years and not the twenty years given by Life Tables, which are based on mortality rates. These show trends and because they involve less than one per cent of the population, need time to take effect.
Census population figures are more a snapshot of what is happening at that year in time, a head count of numbers, in the normal flow of life from birth to death. Although medical and social advances have reduced the losses, there is no reason to believe they have stopped altogether.
The present figures do not therefore justify the panic reaction to the problems of increased longevity and the drastic measures of delayed retirement, increased contributions and reduced benefits to meet a crisis which appears to be exaggerated and being dealt with in the wrong manner.
In any event even the worst projections were manageable, but only by a change in attitude and scheme basis, particularly as regards the largest provider of the State. Individuals need to be more independent and self sufficient in providing for their retirement.
It is no longer possible for those in work to support the increasing numbers entering retirement, the basis of the present State Unfunded pension system; each person in work needs to take their own pension pot with them, whose size must be large enough to support them when they relax after a life of work.
This size may need to change to meet any increased lifespan and special needs associated with elderly care, which may need increased contributions, but private pension provision is very inefficient with high costs and low annuity returns and State provision is outdated and unsustainable.
The population over 65 is increasing but the reasons and manner need greater study and understanding; we are living longer but is it catastrophic or just acceptable enough to be allowed for and enjoyed. In a well managed society pensioners are an inherent part of the economy and a benefit not a burden.
Thursday, 12 July 2012
John’s Blog No.84 – Elderly Care 2
The White Paper on elderly care was a non event, doing nothing to tackle the problem or advance and meet the needs of the elderly population; its main content being to specify the legal right to care but not who, how, what and why.
Any decisions or action are postponed for several years at least until after the next election, but increasing the burden on the individual and Local Authority without defining the Health care boundary. Of course owners will be given the opportunity to mortgage their home again at an undefined interest rate to meet care costs.
The main effect of these ill thought out and incomplete ideas will be to encourage anyone retiring to sell their property and rent, or take out equity release before the State does and spend or distribute the money to one’s children. It will not be worth owning a house after age 70!
The Government will go down as achieving all the ideals of Communism in the complete redistribution of wealth from the middle classes, whilst maintaining that of the rich and privileged, just as its predecessors destroyed mining, manufacturing, the railways etc and our way of life.
It is no longer worthwhile to work and save and build up an inheritance for your children, or even marry and have children at all, meanwhile you are forced to live beyond your natural lifespan in a state of increasing poverty and misery and often advanced senility.
We need to return to basics and define the purpose of living, its aims and objectives, family, moral and social responsibilities and adjust that with the material needs.
Work and providing for your personal needs, children and elderly is an inherent part of Society, completely opposed to the current greed, envy and self-interest.
The problem of longevity and increasing elderly care need, requires assessing carefully not with wild figures snatched out of thin air or quick fix cost cutting solutions. The numbers, levels and cost need defining, where does £100 per day come from, one can get a short break at a third of that cost.
A good example is the over 80 population projections, the figures available appeared based on a uniform linear projection of reduced mortality rates, yet life is not like that, ageing occurs at a much more rapid exponential rate. There is no immortality elixir and numbers fall off more rapidly with age.
The real problem is the lack of Government today, at least half the expenditure is wasted on military systems scrapped before use; expensive PFI rents; idealistic benefit and human rights costs; innumerable post mortem enquiries and gross overcharging for external services and goods, with no overall objective or purpose.
We need to get back to a working and saving society, living within our means, with pride in our family, community and citizenship, plus our ownership of home and possessions, lifestyle and knowledge. The spend today forget tomorrow has failed, with no better example than our pension and retirement provision.
The economic and banking crisis has shown the way, we just need the will, determination, vision and leadership to proceed, which unfortunately appears to be lacking in the present approach. Large amounts of money are still being poured into the Banks in so called “quantitive easing”, who are not passing it on; the economic approach is outdated and our overspend balance of spending abroad remains unchecked and increasing.
We are living hand to mouth from crisis to crisis with nothing fully planned or managed from immigration chaos, Olympic security, Benefit reform, military expenditure and all other State expenditure, whilst time and effort is wasted in Parliament on non-essentials.
Pension savings are the hardest hit by the present policies and yet are the area which could create growth, stabilise the economy and give large potential State expenditure savings. If “QE”was used to reform all State pensions to funded schemes, the money would serve a dual purpose, ensure pension stability and provide large investment funds directly into infrastructure and UK Business expansion.
The real “Big Society could start here by giving freedom of retirement choice to all in work, not off loading unwanted costs onto charities and individuals, effectively indirect taxation.
House of Lords reform, well overdue, could be the next step. It should remain non-political, elected members should be truly independent and representative, from Community groups, Charities, Welfare groups and all voluntary groups.
We just need basic commonsense and vision for our future.
Friday, 6 July 2012
John’s Blog No.83 – Elderly Care
This is getting increasing media attention but official proposals and reports are continuously delayed probably because no one knows how to tackle the problem or even define it.
This could be the nub of the matter, because like many of the current problems today the approach is from the wrong end, starting as a cost cutting exercise and what can be afforded on what is left. One needs to start at what are the, needs, how they can be met, the best way of meeting them using all the resources available, then what are the costs and how and what can be met?
The current approach is fragmented, haphazard and illogical, with conflicting responsibilities between Central and Local Government, NHS and Social Services and the various charitable organisations, including Families, with major dependence on the latter.
There are also very basic Social and Moral issues involved, who is responsible is it the State, Community or Family, what is a reasonable lifestyle or a pointless one, who decides on a vegetative state and where does individual choice or wishes occur and be allowed.
Needs and numbers are easier to assess, one can start by defining the levels of care from simple homecare to more complex ones, social clubs, retirement homes, sheltered housing, residential care, nursing, hospital and Hospice needs. Numbers can start at existing ones with more detailed studies on future trends and projections.
Costs for care can be high as they involve large labour and building costs on the one hand and undervalued and underestimated family, charity and community costs, which could all be better integrated, with considerable savings. For example luncheon and social clubs play an important role but are the first to be axed.
Councils set residential care costs at some £23,000 per person per year; private suppliers put this much higher, but what is a realistic figure, how much is affected by rules, regulations, licenses etc, created by rogue incidents or accidents and are too severe. Can permanent staff be relieved by volunteers in afternoons etc.? Can Diferent homes meet diferring needs without upset.
Care assessment could be on a much wider basis, involving GP’s, family, communities and charities and is too closely connected to commercial considerations, mainly of cost. Retirement homes could be planned to include social needs, instead of just living compartments, and include Housing Associations to give simpler transition and progression as care needs increase. A lot could be done with a little thought.
Contributory funded pension schemes could play an important part in elderly care, in addition to investment in buildings. After retirement, from age 80 on, Fund disposition tends to be uncertain and currently is pessimistic resulting in surplus; good fund management could ensure this allowing money release to meet care costs.
This should not be used by the State for cost cutting, but as a means to ensure adequate and extra provision to members in place of any proposed Capital levy. One of the major problems in Economic policy is liability postponement, which is placing an ever increasing burden on the working population, nowhere is this more apparent than in the State unfunded Pension system.
National Insurance contributions need fundamental change; they should be forward savings for retirement and an Insurance for working people, a return to the basic concept, but modernised. Members contributions should mean something and not just thrown into the welfare pool.
The need for extra contributions for pensions is being implemented, but not recognised as individual personal savings, which together with NI contributions should be used for the sole benefit of members and embrace Public Sector and all other pension schemes. This could create aims, objectives and rewards for those in work.
Friday, 29 June 2012
John’s Blog No.82 – Pensions
I continue on the theme of NHS again this week.
It was reported that the South East London NHS Trust is to be declared insolvent with debts of £150 million, mainly associated with the excessive costs of a PFI contract running at over one million pounds a week. This resulted from the building of new hospitals, which apparently they could not afford.
It followed a recent publication on PFI projects which makes grim reading, in which total costs are some four to five times the original building costs over a 20 to 30 year contract. Successive Governments have been mortgaging the taxpayer’s future on ill negotiated and unaffordable HP contracts.
If you buy a new house on a mortgage over a 30 year term, at current interest rates around 6%, you would expect to pay around twice the original cost, which would be balanced out in real terms by inflation increases and might even show a profit on house price rises.
Apparently if the Government were to buy that house, it would agree to interest rates three times the normal 6%, expensive maintenance contracts and large professional fees to manage the contract. In a new house, you would expect few maintenance costs and also structural / build guarantees, with just redecorating, minor repairs etc., which you would do yourself or get done when needed, but that is not how the State does it.
These PFI costs unfortunately have to come out of annual budgets, thus limiting the amount that can be spent on patients, teaching, police and fire. A breakdown of other costs in NHS Trusts were also reported, besides the high labour costs expected in a 24/7 work operation of which almost half goes back to the Treasury, there were also large external service and professional charges.
These suggest that there are much greater savings to be made in these areas than those from the present conflict on pensions and the demand for larger contributions, which pales into insignificance. The main problem on State pension costs arises from the increases in projected over 65 population.
The same problem was reported in the increasing elderly care costs, which are projected to swamp Local Council budgets, resulting in major reductions in services, which have already started.
There has been little serious study carried out on the over 65 population, the present panic and projected numbers arise from the reducing mortality rates and the current high population influx over the 65 threshold. These result from a combination of the post WW2 baby boom and the immigration flood from Commonwealth Counties following independence, all now retiring.
The over 65 population is projected to almost double over the next 40 years at a rate some five times faster than over the past 30 years; the population is increasing due to medical advances, smoking reduction and health awareness but there is no logical explanation for this sudden change.
In fact there is a wide variation in population projection figure ranging from 40% to 100% by 2051 for the over 65, actual figures for the past 30 years show 22% rise, whereas projections to 2041 are 80%; the 2011 Census results are therefore crucial in deciding trends and validity of forecasts.
After 65, mortality rates rise rapidly, increasing with age so that at age 85 to 90 it is some ten times the rate at 65, one therefore has to be very careful when using factor mortality reductions to estimate population as this can exaggerate the over 85 numbers, which from some of the figures appears to be happening.
Care cost projections arise directly from these figures, which therefore need justifying, the lower population estimates, some 30% over 40 years make all these problems manageable, without the doom and gloom. Even the higher projected rates however are readily manageable in a funded scheme, allowing payment rates to be sustained and annuity rates to be improved.
One wonders whether some of these figures are politically motivated in order to justify cost cutting measures, looking at the worst scenario to give greatest savings; if one accepts them the only sensible conclusion would be to abandon unfunded systems, which in any event would give a better more affordable system. The resulting investment funds could buy out PFI contracts, if feasible or fund future ones at better rates.
It was reported that the South East London NHS Trust is to be declared insolvent with debts of £150 million, mainly associated with the excessive costs of a PFI contract running at over one million pounds a week. This resulted from the building of new hospitals, which apparently they could not afford.
It followed a recent publication on PFI projects which makes grim reading, in which total costs are some four to five times the original building costs over a 20 to 30 year contract. Successive Governments have been mortgaging the taxpayer’s future on ill negotiated and unaffordable HP contracts.
If you buy a new house on a mortgage over a 30 year term, at current interest rates around 6%, you would expect to pay around twice the original cost, which would be balanced out in real terms by inflation increases and might even show a profit on house price rises.
Apparently if the Government were to buy that house, it would agree to interest rates three times the normal 6%, expensive maintenance contracts and large professional fees to manage the contract. In a new house, you would expect few maintenance costs and also structural / build guarantees, with just redecorating, minor repairs etc., which you would do yourself or get done when needed, but that is not how the State does it.
These PFI costs unfortunately have to come out of annual budgets, thus limiting the amount that can be spent on patients, teaching, police and fire. A breakdown of other costs in NHS Trusts were also reported, besides the high labour costs expected in a 24/7 work operation of which almost half goes back to the Treasury, there were also large external service and professional charges.
These suggest that there are much greater savings to be made in these areas than those from the present conflict on pensions and the demand for larger contributions, which pales into insignificance. The main problem on State pension costs arises from the increases in projected over 65 population.
The same problem was reported in the increasing elderly care costs, which are projected to swamp Local Council budgets, resulting in major reductions in services, which have already started.
There has been little serious study carried out on the over 65 population, the present panic and projected numbers arise from the reducing mortality rates and the current high population influx over the 65 threshold. These result from a combination of the post WW2 baby boom and the immigration flood from Commonwealth Counties following independence, all now retiring.
The over 65 population is projected to almost double over the next 40 years at a rate some five times faster than over the past 30 years; the population is increasing due to medical advances, smoking reduction and health awareness but there is no logical explanation for this sudden change.
In fact there is a wide variation in population projection figure ranging from 40% to 100% by 2051 for the over 65, actual figures for the past 30 years show 22% rise, whereas projections to 2041 are 80%; the 2011 Census results are therefore crucial in deciding trends and validity of forecasts.
After 65, mortality rates rise rapidly, increasing with age so that at age 85 to 90 it is some ten times the rate at 65, one therefore has to be very careful when using factor mortality reductions to estimate population as this can exaggerate the over 85 numbers, which from some of the figures appears to be happening.
Care cost projections arise directly from these figures, which therefore need justifying, the lower population estimates, some 30% over 40 years make all these problems manageable, without the doom and gloom. Even the higher projected rates however are readily manageable in a funded scheme, allowing payment rates to be sustained and annuity rates to be improved.
One wonders whether some of these figures are politically motivated in order to justify cost cutting measures, looking at the worst scenario to give greatest savings; if one accepts them the only sensible conclusion would be to abandon unfunded systems, which in any event would give a better more affordable system. The resulting investment funds could buy out PFI contracts, if feasible or fund future ones at better rates.
Sunday, 24 June 2012
John’s Blog No. 81 – Pensions - NHS
There is an alternative open to doctors and nurses in their dispute with the Government over their pensions and that is a breakaway pension scheme or to propose the privatisation of the existing scheme. On the State proposed changes, they would be better off and these exist within BUPA and other private schemes.
The Government is entrenched in its present proposals and its reaction to the strike action shows a degree of panic, with wild statements from the Health Secretary and the Prime Minister designed to promote envy and obtain Public antagonism against the alleged “gold plated schemes”.
Since my last blog, I have also been attempting to check the Health Secretary’s claims which do not make sense or add up and have sent an email requesting support figures. At best they appear misleading, at worst wrong and the nearest I can get is to assume the £84bn given is the total pension liability for doctors.
This is almost a third of the total NHS liability and 7% of the total Public Sector pension liability, which seems high and must be split between working and retired, at most £42bn to retired; to the £17bn doctors contribution must be added Employers and SERP’s rebate, bringing this up to the same £42bn.
Increasing doctor’s contribution from 8.5% to 14.5% will give the Treasury a £12bn profit, added to the annual existing £2bn plus the additional contributions from other staff. If all contributions were put away as personal savings and invested, then existing contributions could be halved for the same replacement pension values, with considerable savings to DoH, no population increase worries and considerable investment funds.
This suggests an abysmal failure to understand even the basics of contributory pension schemes or even basic mathematics within DoH or the Government, with a taxation based approach where contributions are discarded and facts distorted.
It would appear that the Government is not fit or capable of running a contributory pension scheme and the only real solution would be an Independent Pension Trust. Contributions from members SERPs and the State Employers would be paid directly to the Trust and at the present contribution level between 19 to 21% is more than adequate to meet existing pension agreements even with the worst over 65 population levels.
This could be set up as in the USA, or even under the BMA and SRN auspices, as a Super Trust and could possibly extend to include all NHS staff. The NHS is the strongest of all the Public Sector pension schemes, with the last OBR report giving a surplus of £2bn before any of the proposed changes and therefore in the best position for such a change, with major benefits to members and large savings to the State.
The withdrawal of labour is abhorrent to doctors and nurses and strikes are not popular, however the threat of withdrawal of contributions could have a much greater impact. The Government is completely dependent on contributions to meet the pension payments
It has been stated that existing terms will be honoured for the next ten years, those outside that period have nothing to lose by requesting a statement of their position either as a frozen pension or a lump sum transfer.
These could be collated by the BMA to establish the overall position, either for negotiation or the basis of an independent scheme, which could be established over the available ten year transition period. Studies show that this would be perfectly feasible, particularly if the existing pension burden is lost.
The State would find it difficult to find the substantial sums involved in the current liability if contributions ceased and there were major withdrawals from the scheme and some form of independent scheme would generally be regarded as fair and sensible. There is also the major question of the legality of the present “pay as you go” scheme, which clearly is a misuse of member’s contributions.
There is little evidence that the BMA has used these approaches or taken scheme legality action, also Private schemes must show adequate funds to meet liabilities, why shouldn’t the State?
There is another problem facing the Government in the NHS and that is the increasing dependency on agency doctors and nurses, their current approach will make it more attractive to leave the service, becoming self-employed or emigrating, the latter is already occurring with new doctors.
Faced with 14.5% contributions and working until age 68 and probably 70 and understaffed, working in the NHS directly would not be attractive, The use of agency staff is extremely expensive, unattractive , unreliable, and difficult to manage. It is therefore essential that working in the NHS is made worthwhile
Satisfactory pension provision is an important part of employment today; contributions must be treated as member’s personal savings, give good returns and be flexible with freedom of choice on amounts saved, retirement age, with member’s involvement in decisions on wealth redistribution, investment etc.
(Note I must apologise for an error in the last blog; PS pension liability should be £1200bn not £1800bn giving 4% return at £48bn (now corrected)).
The Government is entrenched in its present proposals and its reaction to the strike action shows a degree of panic, with wild statements from the Health Secretary and the Prime Minister designed to promote envy and obtain Public antagonism against the alleged “gold plated schemes”.
Since my last blog, I have also been attempting to check the Health Secretary’s claims which do not make sense or add up and have sent an email requesting support figures. At best they appear misleading, at worst wrong and the nearest I can get is to assume the £84bn given is the total pension liability for doctors.
This is almost a third of the total NHS liability and 7% of the total Public Sector pension liability, which seems high and must be split between working and retired, at most £42bn to retired; to the £17bn doctors contribution must be added Employers and SERP’s rebate, bringing this up to the same £42bn.
Increasing doctor’s contribution from 8.5% to 14.5% will give the Treasury a £12bn profit, added to the annual existing £2bn plus the additional contributions from other staff. If all contributions were put away as personal savings and invested, then existing contributions could be halved for the same replacement pension values, with considerable savings to DoH, no population increase worries and considerable investment funds.
This suggests an abysmal failure to understand even the basics of contributory pension schemes or even basic mathematics within DoH or the Government, with a taxation based approach where contributions are discarded and facts distorted.
It would appear that the Government is not fit or capable of running a contributory pension scheme and the only real solution would be an Independent Pension Trust. Contributions from members SERPs and the State Employers would be paid directly to the Trust and at the present contribution level between 19 to 21% is more than adequate to meet existing pension agreements even with the worst over 65 population levels.
This could be set up as in the USA, or even under the BMA and SRN auspices, as a Super Trust and could possibly extend to include all NHS staff. The NHS is the strongest of all the Public Sector pension schemes, with the last OBR report giving a surplus of £2bn before any of the proposed changes and therefore in the best position for such a change, with major benefits to members and large savings to the State.
The withdrawal of labour is abhorrent to doctors and nurses and strikes are not popular, however the threat of withdrawal of contributions could have a much greater impact. The Government is completely dependent on contributions to meet the pension payments
It has been stated that existing terms will be honoured for the next ten years, those outside that period have nothing to lose by requesting a statement of their position either as a frozen pension or a lump sum transfer.
These could be collated by the BMA to establish the overall position, either for negotiation or the basis of an independent scheme, which could be established over the available ten year transition period. Studies show that this would be perfectly feasible, particularly if the existing pension burden is lost.
The State would find it difficult to find the substantial sums involved in the current liability if contributions ceased and there were major withdrawals from the scheme and some form of independent scheme would generally be regarded as fair and sensible. There is also the major question of the legality of the present “pay as you go” scheme, which clearly is a misuse of member’s contributions.
There is little evidence that the BMA has used these approaches or taken scheme legality action, also Private schemes must show adequate funds to meet liabilities, why shouldn’t the State?
There is another problem facing the Government in the NHS and that is the increasing dependency on agency doctors and nurses, their current approach will make it more attractive to leave the service, becoming self-employed or emigrating, the latter is already occurring with new doctors.
Faced with 14.5% contributions and working until age 68 and probably 70 and understaffed, working in the NHS directly would not be attractive, The use of agency staff is extremely expensive, unattractive , unreliable, and difficult to manage. It is therefore essential that working in the NHS is made worthwhile
Satisfactory pension provision is an important part of employment today; contributions must be treated as member’s personal savings, give good returns and be flexible with freedom of choice on amounts saved, retirement age, with member’s involvement in decisions on wealth redistribution, investment etc.
(Note I must apologise for an error in the last blog; PS pension liability should be £1200bn not £1800bn giving 4% return at £48bn (now corrected)).
Friday, 22 June 2012
John’s Blog No. 80b – Pensions – Comment 2
I was so upset and incensed by the reports and distorted statements made in the media on the doctor’s strike that I felt the need to make an extra comment blog, I have no personal involvement with the NHS except as a patient but do have a high regard and from my knowledge of pensions, know they are not treated fairly.
The one day strike by doctors is over with various claims being made on its success or lack of it, particularly by the Government which are irrelevant. Doctors and nurses are a dedicated service and it is not surprising that few took drastic action, what is important is that they felt the need to, resulting from Government failure.
What was more disturbing were the various comments and claims being made by the Government, particularly the Health Secretary, it was almost like the juvenile question time with point scoring and wild divisive accusations, whereas doctors comments were restrained . To quote the main ones stated on television and in the media (Daily Mail):-
“Andrew Lansley today attacked striking doctors, saying the pension deal they want would come at the expense of lower-paid NHS staff. The comments followed his revelation last night that pension contributions for doctors have cost the taxpayer £67billion.Doctors themselves have only paid £17billion towards their retirement. Mr Lansley revealed that the public were funding 80 per cent of doctors’ pensions, and the total cost of the pension pot of all working and retired doctors is a massive £83billion.”
There is no information available to justify these claims, all the figures available from Government sources and the OBR suggest the opposite with NHS in surplus. They could only have been designed to promote anger and envy. They show a complete lack of understanding of pensions which appears to be prevalent in the Government and such claims need to be justified by facts.
They need to make up their minds whether Public Sector Pensions are a pension scheme, a benefit, a tax or a charity (and for that matter also State Pensions). All contributions are linked to pay and as a result they would expect to draw pensions also linked to pay; it is now generally accepted that final salary schemes are subject to abuse, mainly due to rapid pay increases just before retirement.
This led to unfairness, but the biggest area is between the majority contributors and the Civil Service/ others who originally paid nothing, then increased in 2008 changes to 2% and in current proposals will still be subsidised. Higher paid doctors will pay 14.5% whilst those in the Civil service only 9%.
It is claimed to be the same percentage rise, but this does not make it fair. Doctor’s pay is given at £148,000 with a pension of £68,000 (not supported), at 14.5% this would give contributions of £21,460, which in a modest pension scheme should alone yield their pension over 40 years. In addition there are SERP’s rebate of some 5.1% and Employer contributions currently 7.3% , plus the additional years saving to age 68.
There is no published evidence to support the claim that doctors or NHS pensions cost the taxpayer, the scheme is in surplus by some £2bn annually; forward population projection suggest this could occur in the future but this is only due to the unfunded nature of the scheme.
There is no clear separation in State accounts for Employer’s contributions and NI or SERP’s in the Public Sector, they could in a distorted manner be treated as a cost to the Taxpayer but are in fact Employer’s costs. There is also a tendency to include the State pension as part of the scheme benefit.
The urgent need is for the unsubsidised pensions of NHS, Teachers, Police, Fire and Local Government to be taken outside State control and put into independent Super Trusts on a firm Pension footing and treated in the same manner as Private schemes as regards Funds, assets and liabilities, i.e. as fully funded schemes.
This would require the State to find those assets, whether they be in Property, Pension Bonds or the like; the PS liability is given at £1,200bn some of which is Civil Service etc.; at 4% return this would give £48bn cost per year, much greater than the latest pension cost figures of some £24bn.
Some compromise transition period would obviously be needed and existing pension liability and subsidised areas could be separated off. However this is in fact the taxpayer repaying money borrowed over a long period of time, part of the National debt.
There is a growing trend to consider the redistribution of wealth within Pension schemes and also to limit personal choice, mainly due to the failure to recognise them as personal savings. Pensions are not the vehicle for such charity, although it could be done in a limited way with member’s agreement.
The one day strike by doctors is over with various claims being made on its success or lack of it, particularly by the Government which are irrelevant. Doctors and nurses are a dedicated service and it is not surprising that few took drastic action, what is important is that they felt the need to, resulting from Government failure.
What was more disturbing were the various comments and claims being made by the Government, particularly the Health Secretary, it was almost like the juvenile question time with point scoring and wild divisive accusations, whereas doctors comments were restrained . To quote the main ones stated on television and in the media (Daily Mail):-
“Andrew Lansley today attacked striking doctors, saying the pension deal they want would come at the expense of lower-paid NHS staff. The comments followed his revelation last night that pension contributions for doctors have cost the taxpayer £67billion.Doctors themselves have only paid £17billion towards their retirement. Mr Lansley revealed that the public were funding 80 per cent of doctors’ pensions, and the total cost of the pension pot of all working and retired doctors is a massive £83billion.”
There is no information available to justify these claims, all the figures available from Government sources and the OBR suggest the opposite with NHS in surplus. They could only have been designed to promote anger and envy. They show a complete lack of understanding of pensions which appears to be prevalent in the Government and such claims need to be justified by facts.
They need to make up their minds whether Public Sector Pensions are a pension scheme, a benefit, a tax or a charity (and for that matter also State Pensions). All contributions are linked to pay and as a result they would expect to draw pensions also linked to pay; it is now generally accepted that final salary schemes are subject to abuse, mainly due to rapid pay increases just before retirement.
This led to unfairness, but the biggest area is between the majority contributors and the Civil Service/ others who originally paid nothing, then increased in 2008 changes to 2% and in current proposals will still be subsidised. Higher paid doctors will pay 14.5% whilst those in the Civil service only 9%.
It is claimed to be the same percentage rise, but this does not make it fair. Doctor’s pay is given at £148,000 with a pension of £68,000 (not supported), at 14.5% this would give contributions of £21,460, which in a modest pension scheme should alone yield their pension over 40 years. In addition there are SERP’s rebate of some 5.1% and Employer contributions currently 7.3% , plus the additional years saving to age 68.
There is no published evidence to support the claim that doctors or NHS pensions cost the taxpayer, the scheme is in surplus by some £2bn annually; forward population projection suggest this could occur in the future but this is only due to the unfunded nature of the scheme.
There is no clear separation in State accounts for Employer’s contributions and NI or SERP’s in the Public Sector, they could in a distorted manner be treated as a cost to the Taxpayer but are in fact Employer’s costs. There is also a tendency to include the State pension as part of the scheme benefit.
The urgent need is for the unsubsidised pensions of NHS, Teachers, Police, Fire and Local Government to be taken outside State control and put into independent Super Trusts on a firm Pension footing and treated in the same manner as Private schemes as regards Funds, assets and liabilities, i.e. as fully funded schemes.
This would require the State to find those assets, whether they be in Property, Pension Bonds or the like; the PS liability is given at £1,200bn some of which is Civil Service etc.; at 4% return this would give £48bn cost per year, much greater than the latest pension cost figures of some £24bn.
Some compromise transition period would obviously be needed and existing pension liability and subsidised areas could be separated off. However this is in fact the taxpayer repaying money borrowed over a long period of time, part of the National debt.
There is a growing trend to consider the redistribution of wealth within Pension schemes and also to limit personal choice, mainly due to the failure to recognise them as personal savings. Pensions are not the vehicle for such charity, although it could be done in a limited way with member’s agreement.
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