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Taxes plug police pensions gap
Friday 1st January 2010, 11:30AM GMT.
Millions of pounds of taxpayers’ money is being used to plug a hole in West Mercia Police’s pension fund, official Government figures reveal.
They show the Home Office paid a special grant of £11.2 million to the force, which covers Shropshire, to help it meet its pension costs in 2008/09 – up from £3.1 million in 2006/07.
Nationally, the data shows that the police pension funding gap has more than doubled over two years.
Last year, a total of £481.9 million was paid out to fill the void in pension scheme funding which the police forces cannot meet themselves, compared to £201 million.
The size of the government bailout is now worth 11 per cent of the total annual payments made into the scheme – raising questions about its long-term viability.
The yawning gap has sparked concerns, given that the government introduced new measures to overhaul the police pension fund three years ago.
Despite the changes, the fund now requires massive financial support from the taxpayer.
Liberal Democrat Treasury spokesman, Lord Oakeshott, who obtained the data said: “We have paid twice for police pensions in the last three years – first through council tax and then through income tax too.
“Getting a grip on ballooning public sector pension costs will be the acid test of any government’s credibility and the Government’s shaky credit rating over the next five years.”
Lord Oakeshott urged the Government to set up an independent review into public sector pension costs “to make them fair and affordable for public and private sector workers”.
Police constables who joined the service before the April 2006 reforms can retire on a full pension after working for 30 years, regardless of age, or after 25 years’ service when they are over 55.
Officers who joined after 2006 can retire on a full index-linked pension plus a lump sum equal to four years’ pension after 35 years’ service once they have reached 55 years of age.
Policing minister David Hanson said an entitlement to a police pension was “a key element of the remuneration of police officers”.
“The Government recognises the need to ensure that the costs of public sector pensions are controlled and has put measures in place to tackle factors such as the costs of increasing longevity,” he said.
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What most people do not understand is that whilst compared to some the police pension seems lucrative, that is until you realise that some 13% of the officers salary goes to pay towards it, as opposed to many areas of people employed by the state they are provided with a non-contributory pension scheme.
That however does not explain the shortfall, ever since the police pension scheme was introduced the contributions paid by the officers did not go into some super-dooper pension fund raising fantastic returns it went into the main policing pot and was spent on meeting the day to day running costs of the police, the governments of the day made the decision and nothing has changed since.
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This is no surprise based on the fact that a large number of Officers were recruited in the late 70′s and early 80′s after desperate Labour Party policies and wages. Those people are now due to retire after 30 years, there is no incentive to stay after that.
We should be reminded that the Tax Payer/Government contribute NOTHING to the Police Pension funds, each officer pays 11% gross into their fund for minimum 30 years.
The funds should be self supporting, problem is now that the Forces are taking less officers on replacing them with ineffective CSO’s who do not pay into this fund.
2010 and beyond will see less recruiting than ever to save money. The service is getting poorer by the day .
Do the maths !!
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Surely the Police need modernising and close the final salary scheme and replace it with a money purchase one as most are having to do now. Too many police with fat pensions at 50..!
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What is there to say! .. this kind of thing is happening all over the world!..
Banks, Large Financial companies and Unionised Auto workers in North America have all recieved enormous amounts of taxpayers monies to prop up Bonuses and lucrative Pension and Benefit Plans and the sad fact is, it is the most vulnerable in society that will have to foot the bill for these Huge Bailouts like the elderly and seniors on a fixed income, many who have no company funded pension.
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I’m self employed and my pension aint going to be worth anywhere near what it was forcast to be when I started paying into it. Is the taxpayer going to plug my holes???……I THOUGHT NOT!!
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Those commentators who believe that a constable who paid 11% of his salary to pay for his pension for thirty years then retired at age 48 on two thirds of his final salary, index linked, needs a maths lesson.
A constable retiring at 48 will probably live for another thirty years. So to properly fund his pension he would have to save enough to have a pension fund equal to 30 times his final salary. When a constable started 30 years ago his salary was about £5K to £6K so he paid £600 to £750 a year contributions. His salary rose to £35K in those 30 years.
Nobody in a normal job can afford to pay, nor can any employer, for a pension scheme as provided by the state for it’s employees.
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Nick, perhaps you did not read the previous comments to yourself. Would you like to contribute 11% of your income towards your pension – and just in case you continue to gripe after weighing that up, a copper can join at 18 yrs, 6 months, if he retires at 50 “on a big fat pension”, that means he will have contributed for 31 years, 6 months at 11%, tell me of another employee in the public or private services who contributes this much of his salary – YOU CAN’T because nobody else does.
Coppers can possibly get a better pension by contributing to a private scheme.
brian2, your comments support exactly what I was saying to Peter the other day in another stream, you are one of many thousands and thousands who have been badly hit and treated by Labour and Gordon Brown’s tax raid on pension fund investment interest. Many other people have totally lost the pensions that they had paid into let alone being given a reduced pension.
The whole pension system throughout the country is in dire straights because of Brown, now the Labour Party are foolishly raiding their own employees pension fund to pay for the ongoing costs of the party, I wonder what they will feel when they get a reduced pension which is highly likely if the funds are reduced without being invested.
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When you hear of how much police pensions are worth I for one had no idea that the officers paid 11-13%( according to the above letters) of their salary for 30yrs,that is one hell of a lot of wonga. As for the final salary scheme v money purchase, I would suspect that over the period of 30yrs there would be little difference.
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Brian2, I too am self employed, however I decided not to pay into a pension fund, for starters the value of the fund is never realised, all you ever get is a tax-free lump sum and then an equivalent to meagre interest on the remainder.When you die it dies with you. I’ve put all my money in tax efficient savings and investments,that way I get to spend the money as I choose or give it to those in my will if I don’t get to use it all, it will not be there to bolster the funds of a bank. Oh, and your final question, not formerly a Carry On script writer were you? Matron…..
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How Niaeve Nick is if he really believes that, I wonder how much he pays into his pension provision, probably no were near the 11% officers do.The pension was brought in and maintained to give some encouragement to officers to make a career of policing. If you want short-term contracted staff, who will leave when the going gets tough – then attack the pension scheme which already has been reformed to 35 years for 50% defined benefit.I wonder how many “private” sector martyrs work the hours and unsocial conditions most of uniformed police do.
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fair enough they risk their life for us, we must honour their pensions regardless of whether the stock market has been kind this year or not
making sure our elderly are well off is a great investment for the economy in the long run, why would anyone condemn people to a poor pension just for short term savings? its a false economy as impoverised pensioners cost the taxpayer a fortune in benefits, far better to give working people a fair pension
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no doubt there is a contractual obligation, if you employ some one to do a job for you, you must pay them what you said you would be it in salry bonuses or pensions or what ever, if you dont like the terms and conditions dont employ them in the first place, i think the police do a cracking job personally and are worth every penny they would earn more in the private sector as mercenaries / security consultants, so we should be glad they take a pay cut to honour the public by protecting them and serving them
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I am confused!
Title of story: “Taxes plug police pensions gap”.
Comment by Shropshire Lad @ 2 ” We should be reminded that the Tax Payer/Government contribute NOTHING to the Police Pension funds”.
Some mistake surely, Shropshire Lad; did you read the article or, at least, the title?
Just to remind you: in 2008/2009, the treasury, (i.e. THE TAXPAYER), paid an £11.2 million grant to the WMP to help it meet its pension costs.
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Just to clear up WHY, the Treasury have to fund the Police pension Scheme with this amount.
(a) in a normal, private pension scheme, the income from both the members and the employer is paid into the Pension Fund which is then invested to produce interest income which is then paid out as pensions or re-invested.
(b) in the Pension scheme which is peculiar to the Police, 11% of their salary and other pensionable income is deducted at source by The Treasurer to The Police Authority. It is not invested, there is no investment interest it can call on and there is no huge “pot” of retained pension income albeit there is a “budget” from which the pensions are paid.
(c) if we assume that the establishment of officers in West Mercia is 2,300 and if we assume that officers pay £300 per month into their pension scheme, we have some £700,000 per month going into the scheme scheme which the Police hold within the budget. It produces no investment income and in effect lies dormant. (I stress the establishment figure and the monthly sum are guestimates, they could be wildly out and I suspect that much more than £700,000 is paid in monthly.)
If Police Pension income was invested to produce interest the same as many other schemes, the need for the Government to subsidise it would be much reduced. At the end of the day, the winners are the Police Authority and the Government, not the poor officers who have – without negotiation, had the most savage, retrograde policies imposed on their pension scheme. In any other occupation they would have gone on strike but the Police are not allowed by law to do so.
They earn their pensions ten times over.
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