Telegraph pensions

ended 13. June 2022

A journalist at the Daily Telegraph is writing a quick story this morning following on from Guy Opperman's comments that public sector pensions are not sustainable for the state. She's keen for quick thoughts from pension experts and IFAs as to what extent public sector pensions need to be reformed. Please jot down your thoughts ASAP as deadline is tight. She may wish to call some of you so make sure your mobile numbers are on your Newspage.



 

6 responses from the Newspage community

Like state pensions, this is a political hot potato. You could cap the pensions for higher earners in the NHS, for example, as the lifetime allowance still does not hugely affect them. The maximum final salary pension could be capped at £50k. It's hard to punish lower earners as the pension benefits are an attractive benefit for later life in the NHS. As for MPs, you can question whether it's acceptable and right for them to have such generous schemes and what value they have added to our society over the past 5-6 years. If we are talking about levelling up society, perhaps we should start with those in power? Adrian Kidd 07951060219
The affordability of public sector pensions has been debatable for some time, and many of those in the private sector could only dream of a similar pension. That said, successive governments have made several changes to public sector pensions, each time in an attempt to reduce cost. What is perhaps surprising is why is this issue being raised now, when the government is in trouble in the polls. Is there a genuine problem, or is it an attempt to win votes by pitting the private sector against the public sector, or an acknowledgement that they are expecting extremely tough times ahead for the economy that will make those pensions unaffordable.
"Guy Opperman is spot on. Public sector pensions are not sustainable in the long run. Guaranteeing an income for someone for a 30 year retirement, when there is such uncertainty in the world, is madness. It made sense when people retired at 60/65 and only lived for about five years. But it does not fit with todays world. Change needs to happen and it has to start now."
The Pensions Minister has dared to mention the massive white elephant in the room - public sector pensions. It's become taboo to discuss the huge disparity in public vs private sector funding, and I'm sure he will be criticized for stating what many in government must have known for years - this is not sustainable. It's not just the cost of providing these "gold-plated" schemes, but the generous tax rules that apply to them. The calculation used for the pension Lifetime Allowance, for example, is wildly out of date and results in lower tax bills for those with large final salary pensions.
Apologies please disregard- misread public sector pensions for state pension so my comment is not relevant to the question The UK State pension is an important safety net for those who have insufficient company or personal retirement provisions and a vital part of the financial plan even for those that do. It is a predictable inflation-protected income stream until death. Long term, however, the triple lock will not be sustainable for UK public finances, especially as the population ages. If it is to be kept, the state pension should be viewed as a benefit not a reward just as national insurance contributions should be viewed as a tax and not part of a personal pension pot. The state pension should therefore be means tested for those with assets and income above a certain level.
Public sector pensions may not sustainable, but only because of government policy. It's a political choice whether or not these schemes continue. They provide a bedrock of financial stability for our society as whole and a rapid shift towards defined contribution schemes would have huge ramifications. In fairness though, some kind of reform will likely be needed as longevity continues to improve. Defined benefit pensions in the pubic sector often provide generous benefits and can raise questions of fairness, especially as the burden ultimately falls on taxpayers. Some of the more generous schemes are those enjoyed by politicians, so perhaps they could lead by example and re-align their own pension benefits to match those of the people they serve?