Pension rescue to appear as £24bn windfall

[TrueBlueTerrier]

http://www.ft.com/cms/s/0/bd64f404-3c2d ... abdc0.html" onclick="window.open(this.href);return false;

The rescue plan for the Royal Mail pension scheme is set to appear as a £24bn ($36bn) windfall on the government books, in a bizarre accounting quirk that saves the government from having to raise more debt.

Although taxpayers will bear the burden of a pension deficit of up to £10bn under the plans to part-privatise the state postal operator, this bail-out will appear on the government balance sheet as a one-off bonanza.

The paradox arises because of the way in which ministers decided to account for transferring the scheme’s assets and liabilities, which one pensions expert described as “bewildering”.

One advantage is that the government will not need to raise debt in the markets to plug the scheme’s pension deficit. Once sold, the assets will also pay down the national debt stock, which helps to contain debt servicing costs. The fundamental liabilities, however, remain the same.

Lord Mandelson’s rescue plan will take the Royal Mail funded pension scheme, which has a pool of investments, and convert it into an unfunded “pay-as-you-go” public sector scheme.

This means the £24bn of assets in the Royal Mail scheme will be added to the government balance sheet as they are sold off. But the total estimated costs of meeting pension promises to 450,000 postal workers will not be declared.

Whitehall officials insist the treatment of the liabilities is in line with rules set by the independent Office for National Statistics.

But critics argue ministers rejected the more prudent and transparent option of maintaining it as a funded scheme, like the treatment of local government pensions. “The proposed structure is a government conjuring trick on a breathtaking scale,” said John Ralfe, a pensions consultant who identified the accounting quirk. “The pension assets and liabilities should not conveniently disappear into a black hole, but be transferred to a separate company, with a government guarantee.”

Gordon Brown’s part-privatisation plans face a big test in the Commons, where scores of Labour MPs are mobilising to oppose the bill.

The Department for Business, Enterprise and Regulatory Reform said the new “pay-as-you-go scheme” would “provide members with certainty that their benefit entitlements will be met while minimising the exposure of the taxpayer to investment risk and future volatility in the funding position of the scheme”.

About £8bn of assets in the fund are in cash and gilts. These will be immediately recognised on the government books.

[baldrick]

http://www.ft.com/cms/s/0/bd64f404-3c2d ... abdc0.html

The paradox arises because of the way in which ministers decided to account for transferring the scheme’s assets and liabilities, which one pensions expert described as “bewildering”.

.....................................................................................................................

But critics argue ministers rejected the more prudent and transparent option of maintaining it as a funded scheme, like the treatment of local government pensions. “The proposed structure is a government conjuring trick on a breathtaking scale,” said John Ralfe, a pensions consultant who identified the accounting quirk. “The pension assets and liabilities should not conveniently disappear into a black hole, but be transferred to a separate company, with a government guarantee.”

So after having taken the money which should have been paid into the pension scheme for 13 years,
they are now going to steal all the remaining money from the pension fund to use for Government spending.
The Conservatives are saying they will cut public sector pensions if they are elected, so we can expect to
see our pensions cut even more than they have been.
:mfo :mfo :mfo

[heapsy]

http://www.ft.com/cms/s/0/bd64f404-3c2d ... abdc0.html

The paradox arises because of the way in which ministers decided to account for transferring the scheme’s assets and liabilities, which one pensions expert described as “bewildering”.

.....................................................................................................................

But critics argue ministers rejected the more prudent and transparent option of maintaining it as a funded scheme, like the treatment of local government pensions. “The proposed structure is a government conjuring trick on a breathtaking scale,” said John Ralfe, a pensions consultant who identified the accounting quirk. “The pension assets and liabilities should not conveniently disappear into a black hole, but be transferred to a separate company, with a government guarantee.”

So after having taken the money which should have been paid into the pension scheme for 13 years,
they are now going to steal all the remaining money from the pension fund to use for Government spending.
The Conservatives are saying they will cut public sector pensions if they are elected, so we can expect to
see our pensions cut even more than they have been.
:mfo :mfo :mfo

I agree with you. It's no coincidence that few, if any tory MPs have signed EDM 428. They are itching to sell RM off to the highest bidder as soon as possible.

[TrueBlueTerrier]

I agree with you. It's no coincidence that few, if any tory MPs have signed EDM 428. They are itching to sell RM off to the highest bidder as soon as possible.

Accurate guess - 2 of them signed up to date

Conservative Party http://edmi.parliament.uk/EDMi/EDMDetai ... ESSION=899" onclick="window.open(this.href);return false;
Kawczynski, Daniel
Winterton, Nicholas

[savo]

....

[randompostman]

Flawed system that capitalism is why do the very people that are the consumers and spenders have to pay for the greed of the very few? What is wrong with getting a fair days wage, pension and services that we all pay for? Why must we tread on other workers rights, terms, pay, pensions and conditions to get a few crumbs off the table from the very ornate banquete we give to the idle rich to eat at our expense? Why do we make excuses for such folly? Maybe there contempt of the uneducated unwashed worker is not so misplaced after all.

[belle smith]

Lord Mandelson’s rescue plan will take the Royal Mail funded pension scheme, which has a pool of investments, and convert it into an unfunded “pay-as-you-go” public sector scheme.

http://www.royalmailchat.co.uk/communit ... 27&t=15337" onclick="window.open(this.href);return false;

[norbert]

Lord Mandelson’s rescue plan will take the Royal Mail funded pension scheme, which has a pool of investments, and convert it into an unfunded “pay-as-you-go” public sector scheme.

http://www.royalmailchat.co.uk/communit ... 27&t=15337" onclick="window.open(this.href);return false;

Didn't Brown try something like this in the private sector ( The Pensions Robbery ) which can be a disaster as it's at the mercy of the City ?