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Public sector pension bill £2.4 Trn


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6 minutes ago, scottbeard said:

Honestly, I don't think that I am.

What I take issue with is not the way that Public Sector pensions operate (which is a model that can work) but your challenge that capitalising future pension liabilities is in some way an inappropriate calculation, and especially "capitalising future salaries would be silly so capitalising future pension payments is silly".

In practice both sets of payments will be made using taxes raised in the future.  So in that way I agree with you there are likely to be funded the same way.

However, as you say, there will always be teachers.  Saying "the future value of salaries due to all teachers for the rest of humanity's existence is £infinite" is not a meaningful calculation.  Neither would be saying "the future value of pension payments due to all teachers for the rest of humanity's existence is £infinite".

However, saying "the future value of pension payments to public sector workers in respect of work that they have already done is £2.4 Trillion" is not meaningless.   It is noting, quite rightly, that this is liability that already exists today.

Yes there will be teachers forever, but the cost of teachers is reasonably proportional to the population - if the UK population doubles its taxpayer base doubles and its number of children doubles, and vice versa if it halves.

But no matter what happens in the future there is a £2.4 Trillion albatross around the future taxpayers' necks.  Even if (as we are seeing) the Eastern Europeans go home and the UK mothers stop having as many children, the reduced number of taxpayers left would still have to pay £2.4 Trillion PLUS the costs of future services.

That, to me, is why it's different.

It's not actually as big a problem in my view for exactly the reason you say - it's a big number, but at the moment I'd expect we will have the population of taxpayers to cover it.  But the £2.4 Trillion calculation is sound.

Good points, these.

I saw Mark Francois talking about how we should end online anonymity to combat the rise in hate crimes.

I agree with him, but it seems bonkers to me he's all for keeping tax haven anonymity.

I can't get over the feeling some of the 35 trillion reputatedly squirreled away in UK tax havens probably shouldn't be there or should have been taxed etc.

We at least need to know who and what is driving markets, politics, and all the rest using that sea of cash! 

 

 

 

 

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15 hours ago, markyh said:

My dad told me local government pensions like his (been retired for 8 years now) are completely unfunded and paid for directly out of council tax receipts. 

I was told by my dad that his council pension was funded but I am not sure he was right.

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7 minutes ago, iamnumerate said:

I was told by my dad that his council pension was funded but I am not sure he was right.

Local government pensions generally ARE funded.  So are universities.

Teachers, NHS, Police, Fire, Army are unfunded.

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8 minutes ago, scottbeard said:

Local government pensions generally ARE funded.  So are universities.

Teachers, NHS, Police, Fire, Army are unfunded.

LGA are meant to be funded. They fall far short.

There is a reason for this - central government worried, rightly,  about LG employ every daft relative on the payroll.

The speculation in properdee by LA is connected to this.

 

Teacher pensions are also meant to be funded, or at least a PAYG pot maintained - TPS exists as thing

https://www.teacherspensions.co.uk/

One insane thing that I only found out recently is that private school teachers can join the TPS.

Theres a massive panic now as the TPS contribution rises to 40% that private schools are refusing to fund/join.

 

 

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13 minutes ago, scottbeard said:

Local government pensions generally ARE funded.  So are universities.

Teachers, NHS, Police, Fire, Army are unfunded.

Everything is unfunded

How are we going to possibly afford all these "promises" made... We can't.

Ticking timebomb.

 

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3 hours ago, scottbeard said:

Local government pensions generally ARE funded.  So are universities.

Teachers, NHS, Police, Fire, Army are unfunded.

I thought there a valuation question mark on those?

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I think this is highly deflationary.

Imagine you thought your pension pot was £50mllion. You would not be as careful with your money as if you thought you had £0 in your pension. You would spend way more in the former scenario and save way more in the latter.

So in the former scenario, there is way more inflation, because more money is being thrown around.

When it came to retirement, if it turned out you had nothing, suddenly, your ability to spend would be vastly reduced and you would no longer be contributing to inflation.

 

The same scenario will play out in the US where I believe they have over $200trillion in unfunded liabilities, on top of the deficits. 

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33 minutes ago, Mikhail Liebenstein said:

I thought there a valuation question mark on those?

That's the danger of any pension scheme that piles a load of people's fortunes in together, there's always a question of whether the levels of inflows and outflows and the current contents of the pot are actually going to add up. Really the only way not to have that question mark is individual SIPPs where you get whatever's in your pot and that's it.

Edited by Dorkins
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1 hour ago, Mikhail Liebenstein said:

I thought there a valuation question mark on those?

By funded I just mean "there is an actual fund that pays the pensions not just future taxation" not that the fund currently has enough money in it.

 

4 hours ago, Warlord said:

Everything is unfunded

How are we going to possibly afford all these "promises" made... We can't.

Ticking timebomb.

The LGPS and USS are actual pension funds with actual money in them that pay pensions for council workers and university workers.  They are funded.  Some of the schemes have a deficit, so they are currently less than 100% funded at the present moment, but that's not the same as UNfunded.

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1 hour ago, Dorkins said:

That's just factually untrue. If the pension scheme holds actual assets (equities, bonds etc) then it is funded. If it's just a list of who is owed what then it's unfunded.

They don't play by the same rules as workplace pension schemes with individual cash pots, the LGPS etc. rely on setting a very high employer contribution, without ongoing taxpayer based contributions the outgoings would very quickly exceed income. 

Edited by Tiger131
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4 minutes ago, Tiger131 said:

They don't play by the same rules as workplace pension schemes with individual cash pots, the LGPS etc. rely on setting a very high employer contribution, without ongoing taxpayer based contributions the outgoings would very quickly exceed income. 

But as with all funded pension schemes that's why there is a fund of money there, so that even if contributions stop entirely you still have money to pay pensions promised.

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8 hours ago, scottbeard said:

But no matter what happens in the future there is a £2.4 Trillion albatross around the future taxpayers' necks.  Even if (as we are seeing) the Eastern Europeans go home and the UK mothers stop having as many children, the reduced number of taxpayers left would still have to pay £2.4 Trillion PLUS the costs of future services.

That, to me, is why it's different.

It's not actually as big a problem in my view for exactly the reason you say - it's a big number, but at the moment I'd expect we will have the population of taxpayers to cover it.  But the £2.4 Trillion calculation is sound.

No you are nitpicking, because you work in pensions and this is how you are used to seeing things.   The calculation of the £2.4 trillion is factually correct, no argument, but I still say there is no real difference to the taxpayer whether that money is called "pension" or "salary".  So then I wonder about the motivations of those who calculate it and publicise it.

It's perfectly valid, for comparison purposes, to calculate the future cost of NHS nurses to be almost infinite, because we are going to have NHS nurses for the foreseeable future.

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Here is a potential solution to the broader crisis from the OECD: 

https://www.telegraph.co.uk/business/2021/10/19/britons-must-work-longer-avoid-debt-crisis-oecd-warns/

BTW, I read something today (need the link) saying in the 1970s the average ratio of workers to pensions was 4.2 :1 1 (i.e 20%), but this rose closer to 3.3:1 today (30% odd retired) and will reach 2.3:1 by 2050.

I did find this chart which makes the same historic point.

https://fred.stlouisfed.org/series/SPPOPDPNDOLGBR

Edited by Mikhail Liebenstein
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What are you talking about @scottbeard.  Everything is fine and dandy according to you but a quick google shows state pension liabilities to be over 6 trillion+ and it's geting worse every year:

 

Government-managed pension schemes (see Glossary) had liabilities of £6.4 trillion in 2018, of which state pension liabilities were the largest component: £4.8 trillion. State pensions are unfunded, mandatory and contributory. ... Non-government-managed workplace pension liabilities were £2.6 trillion in 2018.

How on earth can we afford this. Answers on a postcard

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37 minutes ago, kzb said:

No you are nitpicking, because you work in pensions and this is how you are used to seeing things.   The calculation of the £2.4 trillion is factually correct, no argument, but I still say there is no real difference to the taxpayer whether that money is called "pension" or "salary".  So then I wonder about the motivations of those who calculate it and publicise it.

You are disregarding the fundamental points I am making and then suggesting that since one can take it as a given that YOU are right, the people publishing the numbers must have ulterior motives.  Not worth me saying more really.

11 minutes ago, Warlord said:

Government-managed pension schemes (see Glossary) had liabilities of £6.4 trillion in 2018, of which state pension liabilities were the largest component: £4.8 trillion. State pensions are unfunded, mandatory and contributory. ... Non-government-managed workplace pension liabilities were £2.6 trillion in 2018.

How on earth can we afford this. Answers on a postcard

If we had to pay it all today we couldn't afford it.  However, some of that £6.4 trillion is due to people currently aged 16 as pension payable to them when they are 116, so not due for 100 years.  And of course there is pension due every month from now until then. 

This monumental sum will be paid very gradually and that's why it might still be affordable.

But I certainly wouldn't say that it is definitely affordable, because too much can change over the next 100 years, of course.  The whole UK could be physically or financially underwater by then!

 

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9 minutes ago, scottbeard said:

You are disregarding the fundamental points I am making and then suggesting that since one can take it as a given that YOU are right, the people publishing the numbers must have ulterior motives.  Not worth me saying more really.

If we had to pay it all today we couldn't afford it.  However, some of that £6.4 trillion is due to people currently aged 16 as pension payable to them when they are 116, so not due for 100 years.  And of course there is pension due every month from now until then. 

This monumental sum will be paid very gradually and that's why it might still be affordable.

But I certainly wouldn't say that it is definitely affordable, because too much can change over the next 100 years, of course.  The whole UK could be physically or financially underwater by then!

 

Fair enough Scott

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1 hour ago, scottbeard said:

Well they have £275bn assets and pay about £12bn in pensions each year, so about 23 years.

https://www.lgpsboard.org/index.php/2020-financial-investments

If there was something special about how the LGPS works why hasn't the UK rolled out a general LGPS style scheme to cover every employee which would have solved any pensions crisis? The only difference between a "fully funded" LGPS scheme and a workplace pension seems to be then the very high employer's contribution. What makes the LPGS work in a superior way than any other private pension scheme so it can "afford" defined benefit pensions where the private sector had to give up DB schemes as they were unaffordable?

Edited by Tiger131
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19 minutes ago, Tiger131 said:

If there was something special about how the LGPS works why hasn't the UK rolled out a general LGPS style scheme to cover every employee which would have solved any pensions crisis? The only difference between a "fully funded" LGPS scheme and a workplace pension seems to be then the very high employer's contribution. What makes the LPGS work in a superior way than any other private pension scheme so it can "afford" defined benefit pensions where the private sector had to give up DB schemes as they were unaffordable?

(1) The government is prepared to pay a higher cost of pensions than most private employers

(2) It's not so much the cost of the ongoing accrual that private companies don't like it's the risk of investments falling in value and huge deficits opening up.  The government can't ever go bust, so it can sit out investment market slumps and just wait for investments to recover (or put up taxes) whereas many private companies have effectively gone bust because of their DB pension scheme deficit.

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43 minutes ago, scottbeard said:

(1) The government is prepared to pay a higher cost of pensions than most private employers

(2) It's not so much the cost of the ongoing accrual that private companies don't like it's the risk of investments falling in value and huge deficits opening up.  The government can't ever go bust, so it can sit out investment market slumps and just wait for investments to recover (or put up taxes) whereas many private companies have effectively gone bust because of their DB pension scheme deficit.

I've lost the original point of all this but you've just validated the point all along that it's the taxpayer or "government" that is funding these DB pensions.

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