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There are police forces in the UK where 50% of their annual budgets is going to people who no longer work there. This is _insane_. Pensions should be funded from savings / investments made during working life, not taken from future tax recipes.

Furthermore these pensions are gold plate: linked to inflation and guaranteed for life. We have 100s of thousands of middle tier public sector workers like teachers and council workers retiring every yesr with a guaranteed income stream that would cost millions if you were to buy the equivalent annuity.

How anyone thought this was sustainable or sensible blows my mind. It needs to stop.

> This is _insane_. Pensions should be funded from savings / investments made during working life

you might think that the people responsible for providing the pensions would have taken the contributions that the workers made during their working life and invested that money for the future!

Unfortunately, that didn't happen. The UK government (who was the responsible party) made the decision to pay pensions out of future income rather than saving anything. It looked great on the balance sheet, since they could reduce taxes today and let somebody else look bad in the future.

It appears the majority of people don't understand that the national debt, and other unfunded liabilities, are future taxes. The socialist workers party is very popular in my country too despite eating the future in order to play Santa Claus in the present.

Invested the money in what exactly? This essentially requires the government to decide what investments they think will be winners and losers, whilst influencing the rules that help decide who wins and loses. That would be politically controversial to say the least.

so like... a sovereign wealth fund?

Alaska does it relatively successfully with their PFD fund.

Investment in it's own share market perhaps? If a country can't back it's own economy it has bigger problems than not being able to fund pensions.

Same thing a smaller-volume investor would do to spread their risk? A mixture of bonds (gov't giving itself money, to earn a return, ha!) and stocks (probably a wide index fund, both US and international).

Deciding on the breakdown of what percentage to allocate to each bucket and how many stocks from each category to use in your index would be an interesting debate to have though.

    > Invested the money in what exactly?

Buying government debt seems a pretty safe bet.

There are a number of miscalculations which mean contributions would never have funded these schemes.

One is the number of years people live after retirement. Another is that pensions (due to their terms) have outpaced wage growth significantly so current contributors can't fund them. Finally, a pension relative to final salary is difficult to fund from a percentage of mostly from early-mid career wages.

In the UK, many public sector organizations have been privatized. Early privatizations often took the pension liabilities with them. As the employees who were members of such schemes leave the scene and current organizations must choose between meeting obligations and making a profit, I expect to see the companies look to duck out of obligations perhaps by packaging obligations into a spinoff company and then watching it go bankrupt.

A lot of retirees I know are pulling money out of these schemes using the new option to take the money as cash. They then put the money into buy to let as a kind of annuity on the basis that even if they'd get more money from the scheme in the long run, they aren't a position to take that kind of a risk. Hope they have insurance.

Elected City Council members need to be held accountable for what they voted for, that's all.

But I agree, "defined benefit" pensions are a thing of the past. There is a good BBC Radio Money Box show about it: http://www.bbc.co.uk/programmes/b0713p7s

    > There are police forces in the UK where 50%
    > of their annual budgets is going to people
    > who no longer work there

Source? In 2009 20% of policing costs in the UK went to pensions[0], which doesn't seem that particularly insane; has it really risen so much, or are there certain police forces that aren't representative due to shifting demographics?

    > Pensions should be funded from savings
    > / investments made during working life

Perhaps, but I don't see the relationship between this and your previous point.

    > these pensions are gold plate: linked
    > to inflation and guaranteed for life

So ... an inflation-linked annuity? How does that differ from most private pensions? Is there anything stopping you purchasing one?

    > teachers and council workers retiring
    > every yesr with a guaranteed income
    > stream that would cost millions if you
    > were to buy the equivalent annuity

This also needs sourcing, as it also fails the sniff test and some simple Googling. Taking the example here[1], a relatively senior teacher, looks like she'll get an annual pension of ~£20,000 if she retires at 60, which is probably equivalent to a private annuity of £500,000.

I for one welcome our post-truth overlords...

[0] https://www.moneymarketing.co.uk/lib-dems-reveal-police-pens...

[1] https://www.moneymarketing.co.uk/issues/29-october-2015/case...

> a relatively senior teacher, looks like she'll get an annual pension of ~£20,000 if she retires at 60, which is probably equivalent to a private annuity of £500,000.

There is the problem. I've had a 8% pension in the programming sector since I was 20, my projections are for £300,000 by age 67 and £10,000 retirement income.

Teachers get 12 weeks off a year and to retire 7 years earlier on double the pension.

Personally, I'm retraining to be a teacher.

Pension calculators from the likes of legal and general show that you need vast pension contributions to match public sector employees. To match a teacher it recommended I made a 15% contribution, is any private sector company offering that?

http://www.legalandgeneral.com/calculators/contributionCalc-...

I was writing a long reply, but it boils down to: if you think you'll earn more as a teacher than as a reasonably skilled developer, even including pension and holiday, let's hope you're not teaching arithmetic.

You should take a look at annuity tables. 20k rpi-linked at age 60 will cost you nearly a million.

There are very, very few people retiring from the private sector with pension pots worth this. And those that are probably fall into the "fat cat 1% elite" so derided by the left.

> It's pretty obvious that cities and states should start eliminating pensions, but the beneficiaries of those same pensions are the people that need to do that.

There's an easy way around that. "All existing pension-holders will continue receiving benefits as defined. All new public employees will receive investment-based retirement plans funded during their employment." Then existing pension-holders have no reason to vote against it. This also seems far more ethical, as it retains the guarantees given to existing recipients.

The company I worked for phased out its guaranteed-minimum-benefit retirement program, in favor of its standard investment-based retirement program, by doing exactly this: limiting eligibility based on initial hire date.

The article says that El Monte did this - they abolished the supplemental top-up pension in 2008; but paying just those few who qualified for it from 2000-2008 is devastatingly expensive.

I agree though - cancelling plum benefits while grandfathering existing recipients is the only politically tractable approach.

> I agree though - cancelling plum benefits while grandfathering existing recipients is the only politically tractable approach.

How about the approach that was used in the 80s ? 20% year-on-year inflation for a while with the government lying about it saying it's 5% ? That "reduces" liabilities by 15% per year.

As an on-again-off-again libertarian, my preference would be for the government to do as little as absolutely possible so that we might never have to deal with public sector unions again. Then there are no incentives to lie.

I believe several states in the USA have taken this approach already. Some states made the switch soon after the 2008 real-estate crash and market meltdown. They have the old plans for older employees and new hybrid/stock market based defined-contribution plans for newer employees.

Also, many state pensions aren't that great compared to California, etc. Employees only get 40 to 50 percent of their former salaries under a lot of pensions. I've never understood how California can do 80% pensions. The Federal pensions have some very high percentage too (not sure what it is).

The issues with pensions in most of these states is that they don't fund the pensions. Lavish benefits are given, especially in public safety settings, and are not funded.

States that don't steal from the future (New York, Wisconsin, Oregon, the dakotas, Idaho, Tennessee) fund their pensions. States like Illinois, California and Massachusetts do not.

Pensions aren't a problem, bad governance is. It's easy to say that it is "obvious". But the obvious solutions come with non-obvious blowback.

What do you do when a 50 year old fireman throws out his back dragging a hose and ends up on disability for 15 years?

What do you do when a burned out policeman shoots someone accidentally or has a heart attack and gets a fellow Officer killed.

Retirement at 50 is not the way to solve the risk of ageing bodies on physically demanding jobs. 30 years of fire/policing experience is perfect for training, fire prevention, home / business security advice, more administrative roles and generally being the mentor for the newbies.

Alternatively if there are too many physically demanding posts make it more like the armed forces and get rid of most people between the 10-20 year mark with a smaller pension and assistance with finding new work. 50 is a terrible time to push people into a new career.

I checked for my city and there are a couple fire fighters with salaries of $45k-$75k a year but made $140k-$180k in just overtime and overall total comp of $220+. How does that even happen?

In general I am trying to avoid snark, but your comment brings to mind this video:

https://www.youtube.com/watch?v=XTlMLeEHjw8

Guess it happens for the same reasons that company hires consultants (easy to get rid of) but does fire fighter consultants exist? Ergo understaff and pay overtime rather than adequately staff the station. easy to cut down on overtime.

My understanding is that overtime scams are common in parts of the public sector.

The usual scheme is that you are not punished for not showing up to work, but are paid overtime for taking someone else's shift. As a result, swapping shifts with someone results in a 50% pay increase for both of you. Together with other scams, the result may be even greater.

Or instead of eliminating Pensions, start actually collecting the money properly. I work at for a government pension plan (in Canada). We make more money every year than is paid out, and are more than covered for future years at this point.

No reason pensions don't work. But it requires a responsible government. And if you could give the rest of the world some of that responsible government, we'd all appreciate it.

The Canadian federal government just bailed out a bunch of underwater pensions by increasing CPP (which itself is under fund if you look at it the way non-CPP pensions report https://en.wikipedia.org/wiki/Canada_Pension_Plan#Unfunded_l...)

Sounds ripe for funding with a tax on property purchases by foreign nationals.

They might get lucky once. I wouldn't count on another windfall when the pension plans get in trouble in the future.

CPP isn't for government employees, it's for everyone. The government doesn't run the pension plan for it's employees, they have corporations that do that, so they're independent of the government, and won't allow them to play shenanigans with being underfunded.

These local government employees are normally not covered by social security insurance. This allows the local governments to pay very little. So while, yes, their pensions are now out of the norm, those employees would need to be paid more in the near term to make up for the deduction of social security insurance out of their paycheck.

Furthermore, this would only address current employees and not the prior employees who never paid into social security and have nothing but their local pension to fund their elder years.

I had been wondering what exactly California was doing with 10% of my income...

Paying for roads, teachers, police, freeways etc. ... Stuff you actually use ... The real question is what do the feds do with 30% of your money? Apart from dragging you into endless wars of course

Washington has no state income tax, and still has all of those things.

As a non-US-citizen: how do they do it?

WA has high sales tax, for one.

WA basic sales tax is 6.5%.

CA basic rate is 7.5%, with many local add-ons (making San Jose 9% and San Leandro 10%, for two Bay Area examples)

Are you arguing that WA doesn't have high sales taxes? Many municipalities in WA also have additional taxes as well. Seattle and Tacoma, for example, has 9.6% sales tax. Bellevue, 9.5%. Spokane, 8.7%. Vancouver, 8.4%.

'folly asked how Washington state raises revenue without income tax. 'redx00 and I answered. Do you disagree that sales (and real estate, and other taxes and fees other than income taxes) are how Washington state raises revenue?

This subthread stems from the WA/CA contrast. I was just pointing out that WA's sales tax is lower than CA's, implying that WA provides comparable infrastructure with just a sales tax as CA does with high levels of both sales tax and income tax.

If you're going to complete the comparison, how do California services compare with Washington's?

Ever been to a California DMV. I thought NY (NYC) was bad. California DMV takes terrible another notch.

I believe there are a myriad of other taxation that goes on and someone just had to compare where the dollars are coming from - example cigarette taxes, alcohol taxes, property taxes, lottery etc etc

One of the most regressive sales taxes in the country. Also property taxes.

Looking at https://en.wikipedia.org/wiki/Sales_taxes_in_the_United_Stat... I see 12 states with the same base rate as Washington or higher, and another 14 or so just 0.5% behind. I see 13 states with the same "max with local surtax" or higher.

Washington does levy sales tax on clothing, but apparently so do most states.

So the sales tax is a bit above median, but doesn't seem any more regressive than other states per se. And is lower than California's.

Property taxes have more to do with it, I suspect, especially given the mess in California with those.

The funny thing is, the effective new property tax rate in Oakland or SF is something like %1.2-%1.5, which is bigger than Seattle King County's tax rate of %1. And Seattle has better roads than the bay area, no state income tax, a lower sales tax and has rainy weather. I don't get it.

> the effective new property tax rate in Oakland or SF is something like %1.2-%1.5

Do you mean the tax rate on new properties? Or the effective rate actually collected, given the restrictions on how much property taxes can rise, etc? I thought one problem in California was that the latter figure, which is the more relevant one, was very low as a result of Prop 13.

The other problem in California is that it just seems to not spend money very well, as far as I can tell...

Yeah. The tax rate that is collected whenever you buy a property and 'reset' the prop 13 timer. %1 for the base rate, plus a bunch of other one off fixed charges that add up to the %0.2-%0.5 rate. People who have had prop 13 properties for decades have something like a %0.3 equivalent property tax rate.

Seattle most assuredly does not have better roads than the bay area - I noticed a stark difference when I moved up a few years ago.

  Paying for roads, teachers, police, freeways...

... $7 billion bridges...

> The real question is what do the feds do with 30% of your money?

Mostly spend it on Social Security, Medicare, and Medicaid.

It used to be that private companies paid a heck of a lot more than they do now. The public sector won't let social welfare programs pick up the slack so that company heads can make billions.

Yes I for one am maddened that Crystal Hubble is making almost 12000 dollars.

How do we use that data to understand pensions?