Particle Physicists on the Picket Line · 12:22am Mar 5th, 2018
The revolution has begun! Well, at least British university staff are now on strike. Together we shall overcome those fat cat vice chancellors seeking to deny us the fair pension we were promised. Workers and students unite and fight!
I spent much of last week doing my bit for the cause by going out in the cold each morning on the picket line. We’ve not been on strike before—at least not on this scale—so we are figuring out what to do as we go along. Accordingly to old accounts of strikes, anyone crossing a picket line would have their face smashed in. But that didn’t sound very nice, so we took a more Fluttershy approach - something like: erm… excuse me… we were wondering if you might like to support the strike… if that’s okay with you… The nice bit is the satisfying feeling of standing together, and the expressions of solidarity we’ve received from students.
You can read further details about it on my Particle Gadgeteering blog: Particle Physicists on the Picket Line
So you're going from a defined benefit plan to a defined contribution plan. Our government employees went through that back in 1986 or so with CERS to FERS transition, then just recently in 2016 or so with a FERS 'bump' because the nitwits in the planning section were chanting "FERS is stable, FERS is stable, FERS is stable... Oops, we need to bump new employee FERS contributions or the whole thing will break down." About 75% of my post-retirement income is going to come from my defined contribution plan 401K, which is a mixed blessing.
Defined Benefit Plans are sucker bets for government entities. It is *extremely* easy for existing employees to screw with the numbers in good years and plump up retirement benefits, then when the bad years inevitably come (and the 2008-2016 years were very bad despite superficial stock market returns), the End Of All Times comes screaming up to the forefront. As an example, CalPers in California is only funded at 68%. Ilinois is running at junk bond status. Even my home state of Kansas has KPERS running 9b in debt (mostly because of the supreme court here, but I digress).
Defined contribution plans are far better for the responsible adult. Plug your money into a tax-deferred (in the US) no-load mutual fund that tracks the SP500 (Morningstar for example) and just leave it there, and for most middle to upper income people, you can have upwards of a million dollars by retirement. Die just before retirement? Pass it on to the kids.
The problem with DCP's? That word 'responsible' in front of 'adult' People (henceforth called idiots here) who leave a job and travel to another, are allowed to draw that cash out of their DCP at about a 50% penalty and %40 tax (so 200k turns in to 50k or so) Change jobs again? Draw your accumulated 401k out again to cover expenses. Come retirement age and that fund is empty except for loose change.
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The UK equivalent of 401K is much more restricted as to what and when you can draw things out. Generally, you can't take anything until you're 55 and until a few years ago all you had to use 75% of what you took out to provide an annuity although that has now changed so lump sums can be taken but the age limits still there.
I'd agree that defined benefit scheme's are very difficult for the employer / government to fund, but the issue is that is what they chose to offer to the staff when they joined up. If they didn't think they could handle it then they shouldn't have offered it. The staff are working in good faith that the benefits they have been promised will be provided. As pensions are long term investments a change part way through their career can leave them without enough to live on and it's not necessarily practical to put sums aside on the off chance that your employer decides to change their pension scheme in the future.
Goverments act as though Money is the Higgs particles, and Housing is Dark Energy?
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Ours is not a government scheme. It is a private pension. The defined benefit system is what we signed up for, and it’s a much better deal that we want to keep. If the scheme really was facing a funding crisis then there might be a case for the sort of proposed reform, but it has become clear that the supposed deficit is a projection based on a crazy model considering the case if all universities went bankrupt simultaneously. Unfortunately those at the top have been determined to push this through despite the absence of any real case for it, and considerable opposition from staff. This is why it has got to this point.
Thank you for your support.
I hope that you should get your promised pension.