In the UK, public sector pension schemes are oft quoted as one of the "best you can get". For example, with my current annual earnings of ~£27,000, less some small deductions for the Cycle2Work scheme, I contribute 7.1% of my net earnings, and my employer contributes a further 14.1% (before tax and after other deductions such as C2Ww). That's a fairly substantial contribution made all the better as it's before tax deductions from net income.
My dilemma is that I share the same view as jacob:
I did some digging and it appears that there's no personal pension account with my name on it that will grow with compound interest until I reach retirement age... rather the funds required to meet the demands of those who already reached retirement age are being paid by today's contributors. Surplus funds from contributions go to the UK treasury which may well be invested to help meet the needs of the future but there's no transparency about this... At it's core the scheme is a Ponzi scheme through and through....if you're running a pension fund, you obviously need someone to pay for all those promises in the optimistic Ponzi scheme you built a few decades ago...
This means long term success of the scheme is utterly dependent on continued population growth, economic growth and the willingness of future generations of public sector workers to continue paying ever increasing contributions of their income into the pension fund to secure the ageing UK population. There a number of reasons why I don't think this is likely:
1. Without population growth the NHS will shrink to meet demands of a smaller population (assuming social healthcare in this country can survive a few more conservative governments!). What happens to the public sector pension fund when social healthcare is made private? The government certainly hasn't thought that far ahead.
2. Without economic growth governments can't raise enough taxes to continue to afford public healthcare, to pay the staff and organisations and by extension the pension payments for retired staff will also become unaffordable.
3. As the scheme unravels, the number of people paying into the scheme falls and which is a negative feedback loop. I can see future generations less concerned about saving for retirement as their cost of living is squeezed. I just had a conversation with a colleague who is not saving, ins't in the scheme and is complaining that they can't afford food (whilst she just signed up for a 24 month plan to get an iphone 6 plus, go figure).
I can find no recent news stories as it's not on the radar of the press at the moment, however to cut a long story short, the scheme started to unravel a few years after the recession of 2008 and there were calls everywhere that public pensions where unaffordable. As a result the over generous schemes have been changed. Normal retirement age changed from 55 to 65, contributions were increased across the board (with highest earners paying greater proportions, only fair right?) and auto enrolment of new staff into the scheme was introduced to avert impending implosion of the Ponzi scheme. I doubt auto enrolment was a act of goodwill from a government concerned about future financial security for its citizens. Rather it is highly likely a means to ensure that as the baby boomers soon reaching retirement could be paid the pension. Probably a sign that the fund is nearing its limits.
There are rumours of forced enrolment on the horizon, and further extensions to working age are inevitable as the scheme is changed time after time as the economic climate demands it. I may never see my hard earned contributions again. Should I take the hit on income tax and lose the employer contribution to a pension fund and take the money home?
I'm personally paying in £1917 of net annual income, which will soon increase to £2511 as I hit the next threshold for in the tiered employee contributions based on earnings. If I leave the scheme, I'll lose my employer's 14.3% annual contribution (£3861), but remember this isn't really going to my pension pot, rather the Ponzi fund! I'll take a hit on income tax on my contributions before it arrives in my account but I can at least manage these funds myself. It's a gamble, but I have more faith in my own financial management skills and my scepticism about the long term success of government endorsed Ponzi schemes.
There's a lot of ifs and buts about the future of the fund, the NHS, population numbers and economic growth so I know there is no right or wrong answer. Stay or go? Opinions?