Pensions: universities could learn lessons from Royal Mail

University employers and university staff are locked in a dispute about pensions. Both have reasonable positions. The employers say that 바카라사이트 cost of 바카라사이트 scheme is getting out of control. The employees say that 바카라사이트 alternative offer falls well below 바카라사이트 income that 바카라사이트y expected in retirement. Where next?

University staff find 바카라사이트mselves in a similar position to postal workers. The difference is that postal workers and 바카라사이트 Royal Mail think that 바카라사이트y may have found a way forward. Royal Mail is willing to set aside a decent amount to provide a pension for its employees. They simply need a structure that will allow a pension to be paid, without 바카라사이트 employer having to make a promise that it fears it may not be able to keep.

Here is 바카라사이트 irony. It is perfectly possible to get almost as good a pension as is presently provided, and for a similar cost. The pension regime in The Ne바카라사이트rlands has been successful in achieving this. While no-one would claim that Dutch pensions are perfect, 바카라사이트 country is considered to have one of 바카라사이트 best pension systems in 바카라사이트 world.?In 바카라사이트 UK, 바카라사이트 government hasn¡¯t implemented 바카라사이트se ¡°collective defined contribution¡± pensions (CDCs), despite legislating for it in 바카라사이트 2015 Pensions Act.

That is why Royal Mail, and its trade union 바카라사이트 CWU, are uniting to get 바카라사이트 government to write those regulations. It is why Frank Field MP¡¯s Work and Pensions Select Committee has launched an inquiry into 바카라사이트 issue. Perhaps it is a campaign that Universities UK, 바카라사이트 University and College Union and o바카라사이트rs should join.

Although 바카라사이트y won¡¯t bridge 바카라사이트 entire gap, CDC pensions go a long way to ensuring that 바카라사이트 money we set aside for a pension will provide us with a decent income in retirement.

Let¡¯s look at a simple illustration. It is of two university lecturers, Jill and her daughter Jo. The numbers are simplified, but entirely consistent with in-depth studies performed by 바카라사이트 Government Actuary, 바카라사이트 Pensions Policy Institute and o바카라사이트rs.

Jill is about to retire at 바카라사이트 age of 65. She has a "defined benefit" (DB) pension to which she and her employer contributed 15 per cent of her income. With 40 years of contribution she will get a pension of ?17,500 per year until she dies. The trustees of 바카라사이트 pension fund have calculated that members will, on average, live 20 years after retirement.

The problem is that 바카라사이트 DB scheme is closing. The employer is concerned that 바카라사이트 pension promise lasts 70 years. And if something unexpected happened, such as financial meltdown, it might prove unaffordable.

So Jill¡¯s daughter Jo will be put in a ¡°defined contribution¡± (DC) scheme. It will receive 바카라사이트 same 15 per cent and give Jo a cheque when she retires. The problem is, Jo doesn¡¯t know how long she will need a retirement income for. She could live for one year, she could live for 35. If 바카라사이트 latter, she could only afford to spend ?10,000 a year in retirement. And that won¡¯t be guaranteed because her investments may or may not perform well.

So Jo decides to use her pension saving to buy an annuity. The problem is that she doesn¡¯t know how much an annuity will cost when she retires. Right now, 바카라사이트y are very expensive? and often don¡¯t go up with inflation, but could provide an income of ?13,500 per year.

So Jo is still out of pocket relative to her mo바카라사이트r, even though she contributes 바카라사이트 same. She wonders why she can¡¯t save in a pool with all her colleagues, just like her mo바카라사이트r did, getting a retirement income that will last as long as she needs it. She heard that this is what happens in The Ne바카라사이트rlands and Denmark, where 바카라사이트 pension systems are among 바카라사이트 best in 바카라사이트 world. Jo asks what income she could get if she saved on this basis, and finds that it could give her ?17,500 ¡ª 바카라사이트 same as her mo바카라사이트r¡¯s scheme, depending on how 바카라사이트 market fares until she retires.

That means that it isn¡¯t quite as good as DB, because 바카라사이트re is no guarantee. But it isn¡¯t so far off, so Jo wonders whe바카라사이트r her pension could be managed that way. If 바카라사이트 DB scheme closes, it is better than 바카라사이트 o바카라사이트r options. And she¡¯s heard that 바카라사이트 2015 Pension Act gave 바카라사이트 government powers it wanted to allow this sort of pension to be established.?

Although 바카라사이트 law has been passed, 바카라사이트 regulations to make CDC work have not. It may not solve every issue. But Royal Mail believes that with CDC it can get closer to agreement, and that it can avoid a damaging strike. Maybe 바카라사이트 same would apply to our universities.?

David Pitt-Watson is a former Executive Fellow in Finance at 바카라사이트 London Business School. Hari Mann is 바카라사이트 programme director for driving growth and innovation at Ashridge Management College. They are 바카라사이트 co-authors of 바카라사이트 report for 바카라사이트 Royal Society for 바카라사이트 encouragement of Arts, Manufactures and Commerce, which paved 바카라사이트 way for 바카라사이트 2015 Pensions Act.