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'Career Average' to Replace Final Salary?
The BBC reports, Public pension schemes 'should be career average':
Lord Hutton's review of public sector pension schemes has been urged to recommend they be changed to career average schemes.
The
National Association of Pension Funds (NAPF) says such a switch would
be the best way to keep the schemes going in the face of rising costs.It would also protect the interests of lower-paid workers, the NAPF said.
Most public servants are in better final-salary schemes, whose costs are rising due to increasing longevity.
Review
Lord
Hutton indicated he would recommend this policy when, in October, he
published his initial findings on the future of the pension schemes.
His
independent commission, set up by the coalition government, covers
staff in the civil service, NHS, local government, education, police,
armed forces and fire service.
Lord Hutton's first recommendation was that members of most of these schemes should pay higher contributions.
The government has said it will adopt this policy, with contribution rates likely to go up by an average of 3% of salary.
"Career
average pensions are the most promising option for providing a
sustainable, affordable and fairer public sector pensions system," said
Joanne Segars, chief executive of the NAPF.
"While
it will reduce the costs of public sector pensions, it will also
protect lower-paid workers who don't usually have significant salary
spikes late in their careers," she added.
The
idea was supported by the London Pension Funds Authority (LPFA), which
runs the local government pension scheme for councils in London.
"The
conclusion we have drawn is that there is a need to share risk more
effectively between members and employers," said the association's
chief executive Mike Taylor.
"We believe the CARE [career average] system is the most appropriate solution to achieve this."
Cheaper
A
final-salary scheme pays a pension based on both the number of years
for which a worker makes contributions, and their final salary at
retirement.
A career average scheme is fundamentally different.
A worker's pension builds up as a proportion of each year's salary during their employment.
In most cases, this means the pension paid out will be significantly lower than in a final-salary scheme.
As
such, career average schemes are much cheaper for employers to
finance, which is why Lord Hutton, and now the NAPF, have come out in
favour of them.
At the moment, the only significant
career average scheme in the public sector is the one that has been
open since 2007 for new recruits in the civil service.The universities' scheme - not part of the Hutton review - is currently considering making a similar change for new staff.
Lord Hutton will publish his final report in time for the 2011 Budget and has received 137 submissions.
In
October, he acknowledged that the future cost of paying for the public
sector schemes - all of which are paid out of taxation, apart from the
local government scheme - had already been cut by as much as 25%.
Among the typical changes already in place have been the introduction of a higher pension ages for new recruits.
The
government is also about to enforce a lower level of
inflation-proofing for all public schemes by moving from the use of the
retail prices index (RPI) to the slower rising consumer prices index
(CPI).
I'm not going to debate the pros &
cons of final salary versus career average pension schemes, but it's
obvious that policymakers in Britain are looking to make cuts to
pensions and this, along with the switch to CPI, are all part of the
measures they're introducing now.
The US is also taking note as
many states are struggling to cope with their own ballooning pension
costs. CBS's 60 Minutes had a segment on the municipal bond market this
past Sunday which took a close look at the financial mess plaguing many
states (see videos below or click here).
Will a collapse in the municipal bond market be the next major hurdle?
Who knows? But I can guarantee you the Fed and the US government will do
whatever it takes to avoid any collapse of the municipal bond market.
In the meantime, pension reforms will continue around the world, and
many policymakers will be looking at Britain to see how their reforms
are working out and whether they can bolster their pension system now
that the day of reckoning has arrived.
Part 1:
Part 2:
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In the meantime, pension reforms will continue around the world, and many policymakers will be looking at Britain to see how their reforms are working out and whether they can bolster their pension system now that the day of reckoning has arrived.
Not in a million years.
U.S. muni/fed governments will confiscate all your property and sell your children into slavery before they retract one promised dime to public sector salaries and pensions.
Wanna bet on that?
Yes, gentleman's bet since the details are likely to be messy and it will take a while to play out. My guess is that some reform will be floated and sold as a "shared sacrifice" but ultimately all the sacrificing will be done by owners of private wealth who don't have public pensions.
If you're in the U.S. get a government job while you still can. It's your best bet to be among the last still standing since there is no more powerful interest group. Even the bankers and corporate titans don't compare.
I guess you missed how Ireland and France liquidated their pension funds to make the banks whole. When it happens here, there'll be the same mealy-mouthed rhetoric about shared sacrifice, but the only people who will do any sacrificing at all will be public workers (violated contracts) and taxpayers (reduced services for increased taxes).
I always say, "If you leave large piles of monies laying around, politicians and lobbyists will find ways to legislate out of your hands and into theirs. It is for this reason people need to put public sector employees salary/benefits issue aside and watch what is really going on. The constant attacks on what used to be know as a contractual agreement in this county is amazing.
A different example, note to all that think Roth IRA's are such a wonderful thing. Good luck if you think the rules of the game will be the same when you go to withdraw. Again, "If you leave large piles of monies laying around, politicians and lobbyists will find ways to legislate out of your hands and into theirs.
Just because many on this board do not have a pension, don't think for a minute that your Roth wont be under attack someday. Will you be for austerity measures then? People need to take a stand and draw a line in the sand.
That said, it is quite the conundrum, if you give bond holders a hair cut the pension funds still get hit.
And yet when you see what a US ceo makes, pretty friggin disgusting. Since they make 300 times ur average worker. I have nothing against people whom actually create the company, but others with these type of expectations, earn your place beyond labor arbitrage or government cronyism.
Out here in PA, we just had a bloodsucking leech politican retire to a $300K pension and healthcare for life. I'd bet my bottom dollar this is the example they use to attack numerous contractually obligated and constitutionally protected $20K pensions. Afterall, every file clerk and programmer is an eleventy-bazillionaire dontchaknow.
Oh, also, your 300X multiple is about 30 years old...it's well into the four-digit range these days. And the economy is just doing super awesome right now, isn't it?
This is just tinkering. The real problem is (of course) that there are wildly too many people who live off the government purse. In the UK there are perhaps literally 10, even FIFTEEN TIMES too many govmint employees. Yes the idiotic pensions should be completely axed, but it's only tinkering.
I've got a better idea, scrap this pension baloney all together. Pay people their salary & let them decide if they want to put it into a retirement fund. After all it's supposed to be their money. If they wind up not having any savings to retire, tough.
That way nobody would have to be paying Lord 'I don't do shit & never have done' Hutton, to blow hot air.
The whole thing is a scam anyway, just a way to use other people's money to prop up the securities markets, since most people would probably hoard gold if they had a choice.
could this create yet another incentive not to enter the job market till later in life (after college). I can a see a feed back loop where a young person once again see a situation where the only way to make it is to become a debt slave through education and because more people value college education even more, the price of education goes up. many careers take 10 or 12 years until the pay makes up for the 12 hour/no life shifts.
I could also see the exact opposite occure. the economy is cyclical and any job that pays well is gonna let you go once the new generation is willing to take your place for cheaper. so some people may opt out of college debt and settle for a more constant life style.
now if this was only for the public sector. then i could see situation where high ranking public employees once again feel the pressure to take incentives that are against the public interest as these people have nothing but a significant pay drop on there way out.
It continues to amaze me how a supposedly intelligent bunch of readers keeps believing what they read without thinking about it. Would this "career average" salary be based on paid salary or inflation adjusted wages? If it's the latter then virtually every retiring public sector employee gets a raise thanks to inflation. If not then you are using inflation as a trick to cheat them out of what was promised them. Either way they are not going to go for it without a fight. But since you have all been trained out of your critical thinking skills nobody noticed.
More bailouts coming right up. Love how average joe pensions are "unsustainable" but CEO salaries are justified because "There are only so many people around with the talent to do the job" Excuse me while I hurl.
ass hats alla round. it is a currency, fed, ponzi problem.
called the demon inflation incarnate. all bullshit and
"debts that cannot be repaid will not be.." and the debts
are artificial and derived from the criminality associated
with the fed and its policy and system. default.
put the f back into the fed.
end the fed and all that hangs off it. all bullshit.
read ellen brown, michael hudson and end this meemee of
eternal debt of the masses to the politically connected asses
for no other reason other than they are quoted in the main stream
media. sheesh
Maybe the problem with pensions is that the job an employee receives at the end of their career does not have a high enough mortality rate. Maybe the last assignment for a pensioned employee should be a duel to the death with a higher salaried, more senior government bureaucrat or company board member.
I like it--pension death match 2020. The survivor gets full benefits, the loser gets a cheap coffin!
+1
Good reality show potential. Also a whole new market exchange too. Going long 30 Year 300 Pounder over pussified senior diplomat .
bail out the banks again...
duh ....!!!!!
bitches, whores
and ass hats /......
and fucking pimps, almost forgot them
Calif. had union picketers blockin streets for laying off union janitor bitches. If anyone tried that , they would shut the state down.
Would the drug-addled populace even notice if California was "shut down"?
Deal is a deal. But the public union leaders demanding unsustainable levels of compensation had to know 10 years ago what was coming and they did not reign themselves in, to the detriment of everyone else.
Laughable: When union bosses took control of GM, the first thing they did was go to the unions of the parts suppliers and demand they take 40% pay cuts. Did they ever think of saving GM by doing that themselves? Course not.
It's the union's job to demand "unsustainable levels of compensation," management's job is to say no." Blame overcompensation--whether salary or pension--on the boss.
When party B agrees to work for party A at for a certain salary now plus some ridiculously unaffordable pension plan at a later date, then you can't really expect me to feel sorry for party B when it turns out they will not, in fact, be able to enjoy 20, 30, or 40 years of rainbow and unicorn filled retirement.
Especially when they're screaming for the government to take money from ME to pay for it.
We have a lot of civil servants who expect to do safe, boring, nearly menial jobs for 20 or 25 years and then retire in their 40's.... that simply isn't going to work.
So what you're saying is that it's OK to agree to promises that you know you can't or won't fulfill? And we wonder why this country is so fucked up...
++
These pension plans are simply not affordable. They are unrealistic. If people want to work only 25 years of their life, then their life style should reflect it, very modest..
Whatever the corporations or governments do to their pensioners, no matter how draconian, is only right and proper, and must be meekly accepted with no dissent or protest. Only through complete subservience and submission to our psychopathic masters can any true profits (the only criterion of any value today) be found. Resistance is futile, and happiness, morality and liberty are irrelevant.
Remember, as Leo has often stated, "they" own you, and there is nothing that you or I can do about it. Get with the program!
(Note: the expressed sentiments are NOT mine, and in fact are diametrically opposed to my own --- I was merely channeling the spirit of Leo Bankerasskiss, based on his many comments in this forum.)
Your obsession with me is pathological...give it up already!
Leo, you slimeball, I am going to keep calling you out as long as you continue to post your execrable, contemptible admonitions of surrender to the corporate kleptocracy. Count on it.
Forget me, you need to seek professonal help!
Please die already, you amoral bastard.