Teachers’ pensions costing taxpayers £1bn a month

HAYSIE · February 11

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HAYSIE · February 11

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HAYSIE · February 13

Teachers’ pensions costing taxpayers £1bn a month

https://www.msn.com/en-gb/money/other/teachers-pensions-costing-taxpayers-1bn-a-month/ar-AA1yWXLs?ocid=msedgntp&pc=W230&cvid=dcceb838da374b1bd6bb051413717c9c&ei=11#fullscreen

Enut · February 13

That's just the Teachers' Pension, add in Civil Servants' pension, Police, Fire Service, NHS etc etc and it's no wonder the country is struggling. As @Essexphil mentioned elsewhere this should have been addressed 30 years ago but all that has been done is to move these schemes onto lower accrual rates, older retirement ages or career average earnings rather than final salary, they are still hugely expensive and will continue to be so.

I used to ask new clients how much they paid into pensions, if the answer was 'zero' I used to say, 'well you do, you pay about £100 per month into pensions, sadly none of it is into yours, that £100 per month pays for all the civil servants, MPs, teachers, NHS staff etc to retire quite comfortably, do you think it's time you paid something into a pension for your own benefit?' p.s. It's a lot more than £100 per month now for many tax payers.

HAYSIE · February 13

Enut said:
That's just the Teachers' Pension, add in Civil Servants' pension, Police, Fire Service, NHS etc etc and it's no wonder the country is struggling. As @Essexphil mentioned elsewhere this should have been addressed 30 years ago but all that has been done is to move these schemes onto lower accrual rates, older retirement ages or career average earnings rather than final salary, they are still hugely expensive and will continue to be so.

I used to ask new clients how much they paid into pensions, if the answer was 'zero' I used to say, 'well you do, you pay about £100 per month into pensions, sadly none of it is into yours, that £100 per month pays for all the civil servants, MPs, teachers, NHS staff etc to retire quite comfortably, do you think it's time you paid something into a pension for your own benefit?' p.s. It's a lot more than £100 per month now for many tax payers.

Government Pension Fund Global
Norway's Government Pension Fund Global, commonly known as the Oil Fund, is a fund where the surplus wealth produced by Norwegian petroleum income is deposited. It invests Norway's profits from oil and gas and owns around 1.5% of all shares for companies listed globally. The fund has used its assets to lobby for a speedier transition to sustainable energy and voting for more carbon reduction targets. Established in the 1990s, it has invested in more than 8,760 companies in 71 countries around the world.
As of November 2024, it had over US$1.74 trillion in assets,[1]

https://en.wikipedia.org/wiki/Government_Pension_Fund_of_Norway

Enut · February 13

Do we have anything in this country that produces 'surplus wealth'? We already have a windfall tax on energy companies.

Essexphil · February 13

The Headline is, of course, wrong. It costs far more. As the article says, that £1Billion a month is just for retired teachers. Another £9Billion in the year was paid in to cover future payments in relation to current teachers.

So-in 1 year, that is £21Billion. And Teachers represent about 20% of the total unfunded Final Salary Schemes. So-in simple terms, costing roughly £100Billion a year.

There are roughly 30 million taxpayers in this country. So-over £3,000 a year. Each. And Forces/Police schemes are more generous than Teachers

I was on a Final Salary Scheme in a Private Company. At 1 point, Actuaries estimated that while I was putting in 2% of my Salary in about 2000, my employer was putting in 26%. £13 for every £1. Which is, of course, why the Final Salary scheme at that Company was closed to new joiners in 1992, and closed entirely for future years for legacy employees in about 2012.

That was a FTSE 250 Company. That could not afford it. Like pretty much every Private Company. And the same holds true for taxpayers.

Essexphil · February 13

Might have mentioned this before. But it shows how people do not appreciate Pensions when it involves spending other people's money.

A close relative was a Teacher. And was Unfairly Dismissed by a School. The sort of blatant Unfairness that only a Headmaster with Zero experience in the real world could achieve. As an example, the main reason for Dismissal was an "unacceptable sickness record". 2 days off in 5 years. With Doctors appointments relating to menopause

The Local Authority and I exchanged views. They offered £30k. I said no. Then offered £30k + an extra 13 years Pension contributions, and to pay out immediately as though she was 65 (think she was 52).

My relative was going to say no. Until I pointed out the real cost of that Pension offer was just under £1 million...

Tikay10 · February 13

Eventually, a brave Politician is going to have to bite the pensions bullet as public finances will be completely overwhelmed. And you can imagine the hoohah when they do, as we see every day with the Winter Heating Allowance with the aftertimers & finger-pointers regularly saying "yo, pensioners are freezing to death".

Struggling to think of a potential PM strong enough to be the one to do it though. The last one strong enough was Lady Thatcher, & they don't make PM's like her these days. In a way you can understand it, just think of the opprobrium Mr Starmer would get if he tried to do it. He & Ms Reeves are getting roasted over Inheritance Tax & Heating Allowances, but pensions are a much much bigger & more sensitive issue.

It's going to end badly unless something is done, for sure, but I've no idea how they get this one sorted.

HAYSIE · February 13

Enut said:
Do we have anything in this country that produces 'surplus wealth'? We already have a windfall tax on energy companies.

Isnt that the point?
At some point you have to get in front.
There is no future in playing catch up forever.

Enut · February 13

Tikay10 said:

Eventually, a brave Politician is going to have to bite the pensions bullet as public finances will be completely overwhelmed. And you can imagine the hoohah when they do, as we see every day with the Winter Heating Allowance with the aftertimers & finger-pointers regularly saying "yo, pensioners are freezing to death".

Struggling to think of a potential PM strong enough to be the one to do it though. The last one strong enough was Lady Thatcher, & they don't make PM's like her these days. In a way you can understand it, just think of the opprobrium Mr Starmer would get if he tried to do it. He & Ms Reeves are getting roasted over Inheritance Tax & Heating Allowances, but pensions are a much much bigger & more sensitive issue.

It's going to end badly unless something is done, for sure, but I've no idea how they get this one sorted.

Well Starmer and Reeves have been 'brave' and already attacked pensions, but not theirs obviously. From 2027 any unspent personal pensions will be brought into your estate on death and subject to IHT. Obviously this has little effect on those in final salary pensions (like Starmer and Reeves) but the families of those that have to build up our own personal pensions will, in many cases, see pension values reduced by 40% on death. In addition to that if the pensioner dies after age 75, then income tax will be due as well. So that pension pot you wanted to pass to your 'common law spouse' or down to children will be subject to double taxation and your nearest and dearest could lose up to 70% of the pot. Oh and that's a pension that you, in many cases, have built up on your own, no massive employers' contributions or link to salary to help you.

We've all seen the farmers protesting, anyone seen any personal pension holders protesting yet? Nope, very little public reaction to this one so far, despite the fact that it will impact many, many more families.

No politician will take on defined benefit (salary linked) pensions, they haven't got the guts to make one of the hardest yet most important changes that this country needs to make to try and avoid bankruptcy (or the national equivalent).

The answer? A referendum. Get the public to vote on which Final Salary/Career Average Earnings schemes should be stopped, with a declaration as to how much each discontinued scheme will save the taxpayer. Everyone will vote to stop every scheme they (or a very close member of their family) is not a member of, thus giving the Government an overwhelming majority in favour of closing every scheme. It'll never happen obviously.

p.s. opprobrium? I had to look it up, congrats @Tikay10 I have learnt a new word today.

Enut · February 13

Essexphil said:
Might have mentioned this before. But it shows how people do not appreciate Pensions when it involves spending other people's money.

A close relative was a Teacher. And was Unfairly Dismissed by a School. The sort of blatant Unfairness that only a Headmaster with Zero experience in the real world could achieve. As an example, the main reason for Dismissal was an "unacceptable sickness record". 2 days off in 5 years. With Doctors appointments relating to menopause

The Local Authority and I exchanged views. They offered £30k. I said no. Then offered £30k + an extra 13 years Pension contributions, and to pay out immediately as though she was 65 (think she was 52).

My relative was going to say no. Until I pointed out the real cost of that Pension offer was just under £1 million...

A brilliant deal for your relative, effectively they got £30K and a fully funded early retirement at age 52, no surprise that it was worth nearly £1 million and probably more depending on how long they lived into retirement, from age 52 onwards. An awful, awful decision by the local authority, but the people making the offer didn't need to worry, after all it's not their money. .

Essexphil · February 13

Enut said:

Essexphil said:
Might have mentioned this before. But it shows how people do not appreciate Pensions when it involves spending other people's money.

A close relative was a Teacher. And was Unfairly Dismissed by a School. The sort of blatant Unfairness that only a Headmaster with Zero experience in the real world could achieve. As an example, the main reason for Dismissal was an "unacceptable sickness record". 2 days off in 5 years. With Doctors appointments relating to menopause

The Local Authority and I exchanged views. They offered £30k. I said no. Then offered £30k + an extra 13 years Pension contributions, and to pay out immediately as though she was 65 (think she was 52).

My relative was going to say no. Until I pointed out the real cost of that Pension offer was just under £1 million...
A brilliant deal for your relative, effectively they got £30K and a fully funded early retirement at age 52, no surprise that it was worth nearly £1 million and probably more depending on how long they lived into retirement, from age 52 onwards. An awful, awful decision by the local authority, but the people making the offer didn't need to worry, after all it's not their money. .

I'm sure you understand this. But for people who do not, this is how the money racks up:-

1. Extra 13 years' contributions;
2. Paid out 13 years early;
3. Same applied to the 25 years' contributions that had already been made;
4. Extra 13 years of index-linked pension increases

She received it for 23 years. And her Husband still gets a massive chunk of money to this day.

Essexphil · February 13

Another interesting thing arises from that article.

You have no doubt heard that Private Schools are going bust, claiming that it is due to VAT.

The reality is that private schools are no longer getting massive help with their teachers' Final Salary Pensions. Which has led to a whole lot of Schools seeking to change Pensions to DC (Defined Contribution), rather than DB (Defined Benefit, aka Final Salary). Whereupon Teachers are either rejoining the State sector or transferring to Private schools who are willing to absorb that cost...

Tikay10 · February 13

Enut said:

Tikay10 said:

Eventually, a brave Politician is going to have to bite the pensions bullet as public finances will be completely overwhelmed. And you can imagine the hoohah when they do, as we see every day with the Winter Heating Allowance with the aftertimers & finger-pointers regularly saying "yo, pensioners are freezing to death".

Struggling to think of a potential PM strong enough to be the one to do it though. The last one strong enough was Lady Thatcher, & they don't make PM's like her these days. In a way you can understand it, just think of the opprobrium Mr Starmer would get if he tried to do it. He & Ms Reeves are getting roasted over Inheritance Tax & Heating Allowances, but pensions are a much much bigger & more sensitive issue.

It's going to end badly unless something is done, for sure, but I've no idea how they get this one sorted.
Well Starmer and Reeves have been 'brave' and already attacked pensions, but not theirs obviously. From 2027 any unspent personal pensions will be brought into your estate on death and subject to IHT. Obviously this has little effect on those in final salary pensions (like Starmer and Reeves) but the families of those that have to build up our own personal pensions will, in many cases, see pension values reduced by 40% on death. In addition to that if the pensioner dies after age 75, then income tax will be due as well. So that pension pot you wanted to pass to your 'common law spouse' or down to children will be subject to double taxation and your nearest and dearest could lose up to 70% of the pot. Oh and that's a pension that you, in many cases, have built up on your own, no massive employers' contributions or link to salary to help you.

We've all seen the farmers protesting, anyone seen any personal pension holders protesting yet? Nope, very little public reaction to this one so far, despite the fact that it will impact many, many more families.

No politician will take on defined benefit (salary linked) pensions, they haven't got the guts to make one of the hardest yet most important changes that this country needs to make to try and avoid bankruptcy (or the national equivalent).

The answer? A referendum. Get the public to vote on which Final Salary/Career Average Earnings schemes should be stopped, with a declaration as to how much each discontinued scheme will save the taxpayer. Everyone will vote to stop every scheme they (or a very close member of their family) is not a member of, thus giving the Government an overwhelming majority in favour of closing every scheme. It'll never happen obviously.

p.s. opprobrium? I had to look it up, congrats @Tikay10 I have learnt a new word today.

@Enut

ZING at the part I've emboldened & italicised. That was precisely my point.

Enut · February 13

Essexphil said:
Another interesting thing arises from that article.

You have no doubt heard that Private Schools are going bust, claiming that it is due to VAT.

The reality is that private schools are no longer getting massive help with their teachers' Final Salary Pensions. Which has led to a whole lot of Schools seeking to change Pensions to DC (Defined Contribution), rather than DB (Defined Benefit, aka Final Salary). Whereupon Teachers are either rejoining the State sector or transferring to Private schools who are willing to absorb that cost...

... or that for years the heads of schools/academies have been replacing older, more experienced, higher paid teachers who have better pension entitlement with newer qualified, less experienced teachers who are paid less and have less pension entitlement or entitlement under less generous pension schemes.

Quite a few years ago I heard of a new academy head who boasted of cutting their staffing bill by £1/2 million per year. He was the best thing since sliced bread until the results started going downhill. I wonder if anyone spotted the link between the two?

Essexphil · February 13

There are important differences between traditional state schools and newer "academies".

A traditional school is ultimately run by the Local Authority. It is very much designed to be an integral part of a national network.

An academy has far more control over its own affairs. It is run on commercial lines, with a profit motive as part of its remit. With all the advantages-and disadvantages-that brings.

Bean81 · February 14

It's amazing to me that even average salary schemes are still being offered to new staff. I'd assumed they had stopped. I guess the problem is why ask people to pay 5% and the state pays 10% into a private pension pot today (like my own work scheme), when you can take 8%+ from employees today (in other words, get an 8% discount on their cost today) and defer the payments to another day. Somebody shout if I got that wrong.

One day, we'll need to have an adult conversation about all of this as a country and take long-term decisions, even if it costs more today. I won't hold my breath.

Bean81 · February 14

FWIW, I don't have a major problem with pension pots now being part of IHT. I'm deliberately avoiding a ton of tax and the cliffedge of losing childcare support by piling into my pension toda6. I can't really moan if some tax is paid when I'm gone. What is annoying is that final and average schemes won't be part of it, along with not recognising that your life partner is effectively your spouse,

Teachers’ pensions costing taxpayers £1bn a month

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