All this morning on the programme we're taking a look at public sector pensions. 5 live Money's Andy Verity and an expert in the studio will seek to answer your queries.
Andy says: "The claim is that the true cost of public sector pensions is double what the government says, because of the way liabilities are calculated. That's according to a report by the Public Sector Pensions Commission.
"They argue that in order to plug the gap in funding, public sector employees need to pay higher contributions, work longer and if possible move on to defined benefit schemes -- more like those in the private sector."
If you're in the public sector we'd like know what pension you're expecting. Do you accept the argument that you should pay more? If you're in the private sector is it really that their public sector pensions are too high, or it it more that private ones are too low?
If you have questions about your pension scheme and what it will pay you, and whether they're too expensive, we'll do our best to answer them this morning.
Post your questions to Andy and his expert below, or contact the programme: text 85058 or email breakfast@bbc.co.uk.
== UPDATE, 06:49 ==
The public sector need to get real, they have better pensions than the private sector and the redundancy is in a different league where in the private sector or the packages are the legal minimum - James in Milton Keynes
ANDY says: Public sector pensions do generally have better benefits than in the private sector. Most large private sector employers used to have final salary schemes, where the employer promises a proportion of your pay when you leave service. Your contributions are invested in shares, bonds, property and cash.
As the stock market surged in the 1980s, these schemes were cheap to run and generated a surplus - more than enough to so employers could take a "holiday" from paying contributions.
But in the "noughties" that stopped, and actuaries insisted that the schemes adopt a tougher basis for working out how much money they'd need to pay out on their pension promises - how, in other words, they work out their liabilities. That made them look far more expensive, requiring big contributions out of employers' profits, and they began to cut back by closing the schemes to new entrants.
Many private sector staff are still members of final salary schemes, but they tend to be older employees. Younger staff are shut out of them, and instead have defined contributions schemes likely to generate smaller pensions.
== UPDATE, 07:10 ==
Are public pensions index linked when in payment? My scheme has reduced rises in payment - Pam, London
ANDY says: All final salary pensions (those which promise to pay a proportion of your pay at retirement, based on how many years you've worked for the company) are index-linked.
In the public sector when your pension gets paid it goes up in line with the retail price index - currently 5.1 per cent.
However, private sector final salary schemes have the statutory minimum, "limited" price indexation. This means they will go up in line with RPI - but only so long as RPI is less than 2.5%. In other words, the rises are capped.
== UPDATE, 07:15 ==
Please can you tell me if my pension age can be changed retrospectively? I am a police officer with 15 years service who is Due to retire at 54 - Simon from Nottingham
MALCOLM McLEAN, a pensions consultant, says: Pension ages generally cannot be changed retrospectively. Once you have accrued rights based on service up to that date, no-one can take them away.
Police do enjoy a lower retirement age than most in view of the nature of the work they do. The normal retirement age for police is 55, but it sounds like you may have a preserved right to retire even earlier.
== UPDATE, 07:21 ==
Government renege! I have been paying into SERPS for decades. I should have received £8k a year at 60. I have now been informed I will not get it until just before my 65th birthday, if then. That is £40k nicked from me which I have fully funded and planned with my accountant. Why should I fund the public sector? - anon
ANDY says: I'm guessing that you're a woman, because Serps has always been paid alongside the basic state pension which has only ever been paid at 60 to women. That age is going up to 65.
There's a strong contrast between state pensions - basic and Serps - and public sector pensions. While you can't retrospectively change public sector pension retirement ages, you can do it to the basic state pension and Serps - and they have.
You're right about the value of those pension benefits too. £8,000 a year over five years - £40,000 - is more than many people are able to save.
== UPDATE, 07:32 ==
Hi Andy. I am a teacher in a sixth form college and I will be 60 in October. Should I retire as soon as possible? - David
ANDY says: That depends on how much money you're expecting from your pension, and whether by working on you might boost the terms. Most teachers still can't pay into their pension after the age of 60 so there's little prospect of improving the terms.
If your pension is enough income for you to live on, you could retire at 60. However, you could also work on and use the extra years of full wages to set aside more money into additional voluntary contributions or a personal pension.
== UPDATE, 07:41 ==
I'm hard earning, aged 55, looking to retire early. How do the proposed changes affect me? - James
MALCOLM says: This is not an official report making recommendations - it's a report commissioned by the freemarket think tank the Institute of Economic Affairs and the Institute of Directors. The government has set up its own review under the Labour former work and pensions secretary Lord Hutton.
If you are able to retire early there will almost certainly be a reduction made to your pension to take account of it being paid early. However that applies regardless of the changes being recommended by today's report - which calls for public sector retirement ages to go up. However, if and when the scheme retirement age does rise it can't affect benefits accrued to date.
== UPDATE, 08:14 ==
As a police officer with 23 years I contribute 11% in my pension. With seven years to go I suspect I am at risk of taking a hefty hit, with final comuted lump sum at risk of taxing. New starters under pay less - we simply pay into a pool that retired officers are paid from, with younger officers paying less and also expected to work 35 years instead of 30. I fear less will serve full service, so I will rely on less money in the pension pot. The big save for those with 2-3 yrs service is the upcoming Olympics; a lot will change post 2012 and the service WILL suffer a change to regulations for longer served officer. Where will we be protected? After all, we cannot strike unlike all other public servants. - flashfalcon
ANDY says: The new starters in the scheme may pay less - but their benefits will also be worth less. Currently police officers who joined before 2006 pay 11 per cent. Younger members pay 9.5 per cent. But the employer pays 26 per cent - substantial by any standards. That reflects the benefits of the police pension, which, in terms of retirement age, is better than all other public sector workers except fire workers. Existing members can still retire at 55.
MALCOLM says: Currently employer and employees between them are paying more into the police scheme than is necessary to meet the pensions in payment. The Exchequer therefore actually makes a profit at the moment.
For you, existing benefits accrued to date will be protected - but it may be that benefits accrued after any reforms would carry a higher retirement age.
ANDY: The key thing to remember about public sector schemes - except the local government scheme - is that they are pay as you go. Pensions in payment now are funded by the contributions going in, plus a top-up, if necessary, from the taxpayer.
With the local government scheme or most private sector schemes the benefits instead are funded - meaning your contributions go into a fund which is invested in shares, property, cash etc. That fund then pays out the benefits when you retire. If it's got more than enough to pay the pensions, it's in surplus: if not, it's in deficit. But because the fund is invested for so long, there is plenty of time to make up even a large deficit.
== UPDATE, 08:37 ==
Look at a nation like Wales where about 70% of the work force work in some kind of Public Sector job or another - Councils, Government Departments, BBC, S4C, Welsh Assembly, etc.
My own city of Swansea has 40,000 people working in the Public Sector which is 75% of the workforce. Apart from a handful of shop workers and a few IT contractors who work outside of Wales everyone I know in Wales works for the Public Sector.
Wales is basically not creating any net financial benefit to the UK economy but between the perceived safety of Public Sector jobs, combined with the early retirement and fat pensions in the Public Sector, the house prices now rival the South East of England!
Yet this mentality is effectively bankrupting the UK - and it is hardly any different in Scotland and the North of England which both have over 50% of the workforce working in Public Sector jobs.
If the proposed pension changes for the Public Sector comes in it will have untold of implications for Wales and probably for Scotland and the North of England as well - but it needs to be done and done soon!
Will it be enough though? - tawse57
ANDY SAYS: I'm not sure if it's valid to say that Wales isn't creating any net financial benefit to the UK economy. Aren't you forgetting about great hi-tech manufacturing sites like Broughton where they make the wings for the Airbus? Or the oil refining business?
And don't forget the money public sector workers spend.
But focusing on pensions and what is "enough": this morning's report puts the cost of public sector pensions at 40 per cent of salary, where current contributions average 20 per cent.
That calculation is based on actuarial assumptions - in other words, the assumptions actuaries make about things like how long a worker is likely to live (the longer you live, the longer your pension has to be paid out, so the more it costs) and how quickly or slowly the money available to pay pensions can be expected to grow.
To get to that 40 per cent figure, the Institute of Economic Affairs and Institute of Directors have used conservative assumptions. They're working out how much it would cost now to BUY OUT all the pension benefits due to public sector workers, taking into account the fact that they enjoy a government guarantee, allow retirement at 60 (or if you're a police officer even younger) etc. Crucially their assumption is that the money available to pay pensions only goes up by 1 per cent a year. If it goes up faster than that - as it mostly has in the past - then the 40 per cent number comes down - to 27 per cent.
You could argue that given public sector pensions let you retire at 60 or younger and go up with inflation, 27 per cent of salary is cheap! And you could make up that 27 per cent by pushing up the retirement age by a couple of years - just as they have done for the basic state pension and Serps.
== UPDATE, 08:50 ==
Thank you for all your texts and emails. The big point coming out of them is how worried those of you who work for the public sector are about pensions, on top of worries about jobs. Rest assured that the benefits you have accrued until now are safe; that principle is well established, so talk of reform is focused on the benefits you will build up into the future.
Ironically though the people who seem most worried are those who are coming up to retirement. But the people who perhaps SHOULD be most worried are not those approaching retirement, who for the most part can still retire at 60, but young people - who are shut out of final salary schemes not only in the private sector but also in many areas of the public sector and have little chance of retiring before 65 or even 70.
And maybe the point isn't so much that public sector pensions are too "generous", paying out an average of £8,000 a year. Even on top of the state pension that's barely enough, as Malcolm McLean from the actuaries Barnett Waddingham pointed out, to lift you off state benefits. Maybe the real point is that ALL pensions could do with being higher - however they are paid for - so we're relying in retirement on the pensions we've earned, instead of falling back on the state.
Otherwise we may well end up landing our children with a big tax bill to pay to lift us out of poverty. Not for public sector pensions, but for means-tested benefits.
- Andy Verity
