Final-salary Pension under threat!
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Final-salary Pension under threat!
Apologies if this has already been beaten to death but just been reading The Times today and an article by Jill Sherman the Whitehall Editor is suggesting that the public sector staff are expecting to contribute hundreds of extra pounds towards their pensions and the "gold-plated" final-salary pension is under threat!
Part of my decision to stay in the *RAF for the long-term to age 55 was *governed by the final-salary pension and gratuity.*
Can the Government do this to us?*
*
Part of my decision to stay in the *RAF for the long-term to age 55 was *governed by the final-salary pension and gratuity.*
Can the Government do this to us?*
*
I don't own this space under my name. I should have leased it while I still could
To you, most probably not. To your successors, almost certainly.
You are in one pension scheme or another; that is part of your ToS. The 05 scheme was the scheme to which new recruits would automatically be joined. The scheme had certain attractions and was offered to people in the 75 scheme. Some chose to change and some chose to remain in the old scheme. It was your choice.
Any new scheme must balance economic reality with sufficient recruitment potential to sustain recruitment and retention.
Flying Instructional Pay and Flying Pay was an example of how changes in new ToS might be introduced. At first FIP was reduced, then delayed, then abolished. Flying Pay was changed. In the former their belief was that people wanted to join to fly and you didn't need to pay them an incentive so to do. I guess it might have put some off but clearly had not real effect. The Flying Pay change to tiers also had an effect but perhaps not as well received as had been hoped.
So your new pension scheme might have incentives that make it more attractive to switch - say a personal contribution leading to a bigger pension. The downside of that is that you would lose an element of pay and have a potential of early death precluding you drawing your pension.
KF, thank you for that, 75 it was although the buying in for widows pension was 73. And your link helped not a lot.
You are in one pension scheme or another; that is part of your ToS. The 05 scheme was the scheme to which new recruits would automatically be joined. The scheme had certain attractions and was offered to people in the 75 scheme. Some chose to change and some chose to remain in the old scheme. It was your choice.
Any new scheme must balance economic reality with sufficient recruitment potential to sustain recruitment and retention.
Flying Instructional Pay and Flying Pay was an example of how changes in new ToS might be introduced. At first FIP was reduced, then delayed, then abolished. Flying Pay was changed. In the former their belief was that people wanted to join to fly and you didn't need to pay them an incentive so to do. I guess it might have put some off but clearly had not real effect. The Flying Pay change to tiers also had an effect but perhaps not as well received as had been hoped.
So your new pension scheme might have incentives that make it more attractive to switch - say a personal contribution leading to a bigger pension. The downside of that is that you would lose an element of pay and have a potential of early death precluding you drawing your pension.
KF, thank you for that, 75 it was although the buying in for widows pension was 73. And your link helped not a lot.
Last edited by Pontius Navigator; 18th Sep 2010 at 19:14.
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Pension 05
Thanks guys, the link is great. I opted to go for 05 as this for me was the best option. Decided to stay till age 55 luckily on PA Spine, and this would ensure financially, mortgage gone and generous pension to live off. Will not be happy if my choices to stay are to be undone by a broken Gov etc
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The main thrust of the article concerned the fact that the Armed Forces are the only public sector workers who do not contribute to their pensions. It suggested that as of April 2011, the AFPS will change to become a contributory one with suggestions between 5-8% muted. The article argued that the contributions would equate to a 5% pay cut for the Armed Forces
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Abated Pay
Deliverance, you are spot on the AFPRB conducts a quinquenial review of the various pension schemes and recommends an abatement of pay to take into account the value of our pension with that of other pension schemes. There are different abatements for Officers and other Ranks as pensionable service starts as different ages. If you follow this link you will find the last report which set the level at 4%. It is, therefore, arguable that we already make contribution.
http://www.ome.uk.com/Document/Defau...B-F35D76E6FF1B
http://www.ome.uk.com/Document/Defau...B-F35D76E6FF1B
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Deliverance, it was 9% but brought down over 2 successive years to 7%. Quite right, a contributory scheme of 5% should see a 7% increase gross or 2% net.
Whoopy, I can see the headlines now Forces get 7% pay rise wit scant mention of the 5% contribution. Same deal when they brought in the military salary, with one hand they giveth . . .
Whoopy, I can see the headlines now Forces get 7% pay rise wit scant mention of the 5% contribution. Same deal when they brought in the military salary, with one hand they giveth . . .
I don't own this space under my name. I should have leased it while I still could
KF, thank you, I didn't find that item but it is certainly one that the press choses to ignore, same as civil servant's bonus. Their bonus scheme, imposed as a result of Treasury policy, is actually a return of 2% of their salary redistributed based on relative performance.
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Could anyone actually point me to a link which has the actual statement that salary was abated to account for our pension?
Pick any report listed here (such as the 2001/2 one) and search for either 'pension' or 'Abatment'
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To answer the original question - can the government do this to us? Emphatically yes, and often with little or no primary legislation. I have an old Which Guide to Pensions on the bookshelf, which points out in the opening chapter that all governments, irrespective of political persuasion, are forever tinkering with pensions...why? Because they can.
However, where public sector final salary pensions are concerned (including the AFPS), it will be a case of fiddling and evolution, not drastic revolution.
The key public sector roles, specifically those that are vital to the function of an evolved democratic state such as ours (police, NHS, teachers, armed forces, fire brigade, much of the civil service and even politicians) require a good percentage of their public servants to be of the full career variety. This is because of the huge costs associated with training these people. We all know how much military pilots costs to train, but they are only the tip of the iceberg. Compared to the commercial world, where "within the work place" training is virtually non-existent nowadays, the resources and public money required to train a doctor, or a policeman, or a teacher etc etc are immense.
Pensions may not be the biggest attraction to university leaver (although I suggest they are fast becoming a young persons consideration when seeking a career) but once a public servant has got a few years and started a family, they become a massive inducement to stay.
If you removed the inducement by making public sector workers responsible for their own "defined contributions" pensions, most of which are both optional and highly portable, you would see public sector workers job hopping like everybody else, every time something more attractive passes by. And this is something that the state (any state) simply cannot afford, either in terms of cost, or in the disruption which would arise from the continual turnover of public sector staff (especially as it would be the good ones that go and the chisellers that stay).
Small changes yes (and so there should be). Big changes - no chance.
However, where public sector final salary pensions are concerned (including the AFPS), it will be a case of fiddling and evolution, not drastic revolution.
The key public sector roles, specifically those that are vital to the function of an evolved democratic state such as ours (police, NHS, teachers, armed forces, fire brigade, much of the civil service and even politicians) require a good percentage of their public servants to be of the full career variety. This is because of the huge costs associated with training these people. We all know how much military pilots costs to train, but they are only the tip of the iceberg. Compared to the commercial world, where "within the work place" training is virtually non-existent nowadays, the resources and public money required to train a doctor, or a policeman, or a teacher etc etc are immense.
Pensions may not be the biggest attraction to university leaver (although I suggest they are fast becoming a young persons consideration when seeking a career) but once a public servant has got a few years and started a family, they become a massive inducement to stay.
If you removed the inducement by making public sector workers responsible for their own "defined contributions" pensions, most of which are both optional and highly portable, you would see public sector workers job hopping like everybody else, every time something more attractive passes by. And this is something that the state (any state) simply cannot afford, either in terms of cost, or in the disruption which would arise from the continual turnover of public sector staff (especially as it would be the good ones that go and the chisellers that stay).
Small changes yes (and so there should be). Big changes - no chance.
Last edited by The Old Fat One; 19th Sep 2010 at 11:37.
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Sapper,
I think the last in-depth review of the value of military pensions was conducted in 2006. See the external report here.
That review prompted the AFPRB to state the following in their 2007 Report.
The AFPRB noted in their 2008 report that:
but they didn't mention the value. However, they did set 2011 as the date for a review of that value.
Hope that helps.
I think the last in-depth review of the value of military pensions was conducted in 2006. See the external report here.
That review prompted the AFPRB to state the following in their 2007 Report.
Our valuation of Armed Forces’ pensions suggested that the adjustment we apply to comparator pay to reflect the relative value of pensions should be 4 per cent.
Civilian comparators were established which use base salary (annualised basic salary including contractual bonuses and permanent payments) and total cash (basic salary plus variable bonuses and incentives), adjusted to reflect the relative value of the military pension.
Hope that helps.
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If you removed the inducement by making public sector workers responsible for their own "defined contributions" pensions, most of which are both optional and highly portable, you would see public sector workers job hopping like everybody else, every time something more attractive passes by. And this is something that the state (any state) simply cannot afford, either in terms of cost, or in the disruption which would arise from the continual turnover of public sector staff (especially as it would be the good ones that go and the chisellers that stay).
So, by comparison, the MoD can afford to dilute things, because civvy street will be less attractive. Many civvy pension plans are better than NEST already anyway, but opinions are divided as to whether or not many will wind up their existing schemes in order to dumb things down even further, to NEST level. By comparison, AFPS could still look more attractive. And don't forget - many civvy employers don't offer the other perks that the MoD does (learning credits, free gym, subsidised food, housing etc).
Latest news - DWP
Last edited by Al R; 19th Sep 2010 at 13:27.
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Hutton Pension Report
Hutton's Interim Report has been issued this morning.
Regarding short term options for change:
It is a matter for the Government to decide the manner and level of any increases in contributions necessary. However, the Commission feels that any increases should be managed so as to protect the low paid and, if possible, increases in contributions should be staged and need to be considered with a view to preventing a significant increase in opt out rates. The Commission does not recommend introducing contribution rates for the armed forces at this time.
Regarding short term options for change:
It is a matter for the Government to decide the manner and level of any increases in contributions necessary. However, the Commission feels that any increases should be managed so as to protect the low paid and, if possible, increases in contributions should be staged and need to be considered with a view to preventing a significant increase in opt out rates. The Commission does not recommend introducing contribution rates for the armed forces at this time.
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I've glanced at the key features of his report and find it very encouraging. Given the inevitability that public sector pensions have to be, and will be, reigned in a little, some of the worst scaremongering is - as usual - way off the mark.
He has rejected wholesale slaughter ("I won't get involved in a race to the bottom") thus siding in spirit with the unions who want private sector pensions dragged towards public sector values, rather than vice versa.
He has endorsed the principle of what you've earned you keep.
He has noted that the affordability/cost balance is already improving (and will continue to do so as the percentage of the working population in public sector employment will dramatically decrease over the next five years.)
And he is keeping the focus on basic structures such as contribution (however contribution is calculated or defined), age ranges and types of payout.
On balance, public sector pensions (and especially the AFPS) will continue to to be very good in real terms and vastly better than 99 per cent of the schemes in the private sector.
He has rejected wholesale slaughter ("I won't get involved in a race to the bottom") thus siding in spirit with the unions who want private sector pensions dragged towards public sector values, rather than vice versa.
He has endorsed the principle of what you've earned you keep.
He has noted that the affordability/cost balance is already improving (and will continue to do so as the percentage of the working population in public sector employment will dramatically decrease over the next five years.)
And he is keeping the focus on basic structures such as contribution (however contribution is calculated or defined), age ranges and types of payout.
On balance, public sector pensions (and especially the AFPS) will continue to to be very good in real terms and vastly better than 99 per cent of the schemes in the private sector.
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....although Armed Forces Pension Schemes are usually considered to be non-contributory, the salaries of all Service people are abated by an amount agreed by the Armed Forces Review Body to take into account the value of the pension? This is currently 4%, a not insignificant amount and is a contribution about which you, the contributor, have no say."
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It was interesting to read that in the past 10 years the amount of Armed Forces pensioners has risen by 19%. In 2000 there were 335,306 pensioners picking up an AF pension and this year there are 398,840. The average AF pension is £7,722 PA but there are 70 Ex servicemen picking up Circa £67,000 PA pension..... ....Its no wonder we can't afford it.
Anyway, we need our pensions expert Al R to have a look at this and see how it will affect us... Where are you Al R ? What does it all mean?
Anyway, we need our pensions expert Al R to have a look at this and see how it will affect us... Where are you Al R ? What does it all mean?
So what is the pension for a 4*, who by definition will retire having probably served for 40 odd years....... £67,000 perhaps?
Considering that it was recently announced that a number of military officers earn more than the Prime Minister, i.e. over £150,000ish, I suppose it is not surprising that some are getting over £67,000 as a pension. No doubt there are still some ex-5*s in that figure of 70 as well.....
I'm not surprised that the number of people drawing military pensions has gone up by 63,000 odd in the last ten years. The RAF shrunk by about 10,000 in that time, the RN by about 5,000 (I think), I'm not sure about the Army. It was also a period (at least before the credit crunch) where retention was a major issue and a large number of people left.
As for an average pension of £7,722, that means that by definition a very large proportion, probably more than half given the skewing effect of some pensions at £67,000 (e.g. what is the average of 1,2, 3, 4 and 100?), are lower than £7,700. I don't consider a pension of sub £7,000 to be a particularly excessive reward for a military career.
Considering that it was recently announced that a number of military officers earn more than the Prime Minister, i.e. over £150,000ish, I suppose it is not surprising that some are getting over £67,000 as a pension. No doubt there are still some ex-5*s in that figure of 70 as well.....
I'm not surprised that the number of people drawing military pensions has gone up by 63,000 odd in the last ten years. The RAF shrunk by about 10,000 in that time, the RN by about 5,000 (I think), I'm not sure about the Army. It was also a period (at least before the credit crunch) where retention was a major issue and a large number of people left.
As for an average pension of £7,722, that means that by definition a very large proportion, probably more than half given the skewing effect of some pensions at £67,000 (e.g. what is the average of 1,2, 3, 4 and 100?), are lower than £7,700. I don't consider a pension of sub £7,000 to be a particularly excessive reward for a military career.
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As for an average pension of £7,722, that means that by definition a very large proportion, probably more than half given the skewing effect of some pensions at £67,000 (e.g. what is the average of 1,2, 3, 4 and 100?), are lower than £7,700. I don't consider a pension of sub £7,000 to be a particularly excessive reward for a military career
More than likely all those who did less than a full career and get a bit of a pension at age 60. I would imagine that they would make up the bulk of military pensions.