Sunday, March 18, 2012

Luvverly Jubberly Short Termism

Pension windfall to reduce deficit

Apparently Osborne will use a £28 billion windfall from the transfer to the state of Royal Mail pensions to reduce the deficit and not to pay for anything else. Once transferred from the Royal Mail, Mr Osborne will be able to sell off the billions of pounds worth of shares, bonds and properties that have been accumulated among the fund's assets. The jolly decent accounting rules mean that the £37.5 billion of pension liabilities can then be absorbed by magic into the rest of the state pension system and so won't show on the Government books as debt.

Posted by enuii @ 11:01 PM (1305 views)
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3 thoughts on “Luvverly Jubberly Short Termism

  • stillthinking says:

    What windfall? More false accounting.

    Here is the Royal Mail Pension fund asset report;
    http://www.royalmailpensionplan.co.uk/56/plan-report-and-accounts

    Even a cursory look shows their assets (page 14) as “Global Investment Grade Credit” and “Real Estate Index-Linked Bonds” and “Index-Linked Bonds” ..!!! These are all IOUs. There are no real assets to sell, and the whole reason for the financial crisis is because pick any debtor at random, and they won’t be paying up. If everybody was paying up then the banks wouldn’t be in trouble ..

    So what is the government doing here, first, they are not going to sell any of this stuff. They don’t want to flood about 15 billion worth of IOUs (and its probably much more~) onto the market with the concomitant price discovery pushing yields up quite aside from the funding gap expected in Europe and so on for all the commercial debt rollover, even without that. Some of these IOUs are the governments anyway. Absolutely no way they are going to sell and they don’t need to.

    They are going to hold these, just write them down at top optimistic notional value, and boost this into the general accounts as extend and pretend the fake health of the UK. So the government holds down yields, pension funds take losses from these reduced yields and collapse, the government take future responsibility for the losses. Hardly a winning investment cycle.

    End result the government is responsible for more losses and additional debt. The media have taken a spin on this which is absolute b******t.

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  • “We’ve consistently argued that the Government has a moral obligation to take on the pension deficit, partly as owner of the company and for allowing Royal Mail to take a 13-year contributions holiday”

    Ah, in other words “You helped us buy the whisky, then we drank it and now you have to nurse us back from our hangover”

    Wut?!

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  • @1. Sparkling good analysis here. You forgot one small element. By the time this matures to a full blown bailout Dave and Gideon will be enjoying the rerwards of all former power brokers. They are already acting like John Major did when he realized the game was up. We have been given the shaft once again by semi-corrupt leaders.

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