Ticking parcel for taxpayers is biggest nationalisation in..

[TrueBlueTerrier]

Ticking parcel for taxpayers is biggest nationalisation in 30 years

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Despite all the talk of cuts to come in the Government Strategic Defence and Security Review today, then the Government Spending Review tomorrow, we are still stealthily adding billions to the tax bills our children – and, very probably, their children – will have to pay.

Take, for example, Business Secretary Vince Cable’s plans for the Royal Mail. All eyes have focussed on his hopes to privatise the business next year and, stock market conditions allowing, raise a billion or so in ready cash. But very little has been said about Mr Cable’s plans to nationalise the Royal Mail’s pension fund where liabilities – or promises to pay 450,000 posties index-linked retirement incomes – currently exceed assets by a cool £8bn.

That’s serious money when you consider that all the fuss about Child Benefit was caused by Government attempts to save £1bn. The Royal Mail’s pension fund deficit is a ticking parcel for future taxpayers and the biggest proposed nationalisation for more than 30 years. You might well ask why the Government is doing this. The answer, as so often with pensions policy, is all about short-term gain and long-term pain.

Mr Cable knows he has no chance of floating Royal Mail unless the taxpayer keeps the bad bits. He also knows that nationalising the pension fund means the current Government gets to grab its assets – shares, bonds and real estate worth about £26bn today – while leaving politicians, perhaps as yet unborn, to pick up the fund’s promises to pay liabilities currently estimated at £34bn.

In other words, about half a million posties and their families – here I had better declare an interest; my Dad was a postman for many years when he first came to London – are swapping real assets in an underfunded scheme for a pack of politicians’ promises.

Pensions expert Dr Ros Altmann said: “Post office pension proposals are brilliant for the postal workers but deeply troubling for future taxpayers as we will be creating yet another huge unfunded pension scheme.

“We have billions of pounds set aside for paying postal workers’ pensions, yet this is now going to be spent today, leaving future taxpayers to find all the money in decades to come. That’s pretty irresponsible budgeting, although I do understand the temptation of the Treasury to raid pension assets in the current environment. But for the workers themselves it is great because they have their pensions underpinned and no-one else would take on that massive deficit.”

Similarly, Tom McPhail, pensions expert at Hargreaves Lansdown, said: “The good news for the posties is that if this deal goes through, their pension scheme deficit will get added to the growing bill that the taxpayer will have to pick up – presumably at the sorting office, after 48 hours. This is a more reliable promise than the current scheme which is holed below the waterline and sinking fast.

“Unfortunately for the long-suffering taxpayer, in the long run this means adding further liabilities to the huge existing public sector scheme bill. The Government probably feels that once you’re up to around £1 trillion in debt, an extra £20 to £30 billion isn’t going to make much difference.”

But Max King, global asset allocation strategist at Investec, takes a more cautious view: “All around the world, countries are adopting the model of a national funded pension scheme pioneered by Chile in the 1980s. This has been shown to provide pension security, fairness and often choice as well as significant economic benefits. Earlier this year, Argentina moved in the opposite direction by confiscating pension funds in return for a risible promise to pay the same pensions in the future.

“With the nationalisation of the Post Office pension scheme, the UK is going down the same path, appropriating £26bn of assets in return for a promise of future payment. Unbelievably, employees, trustees of the scheme and trade unions appear to think this is a good idea. Such naivety would be regarded with incredulity in many parts of the world where a pension promise without assets is regarded as worthless.

“In the 1980s, UK employees were allowed to contract out of the State Earnings Related Pension Scheme (SERPs), later renamed the State Second Pension (S2P), and have their National Insurance Contributions (NICs) rebated into a private scheme. Large numbers did so, but many were later persuaded that they had been poorly advised by independent financial advisers (IFAs) and mis-sold schemes.

“They were told they could claim compensation, and encouraged to opt back in to S2P. With the benefits of S2P being whittled down to nothing, those who remained opted out and accumulated real assets will be feeling smug. Postal workers should take note.”

[DGP1]

Unbelievably, employees, trustees of the scheme and trade unions appear to think this is a good idea. Such naivety would be regarded with incredulity in many parts of the world where a pension promise without assets is regarded as worthless.

Do I think that the Government stealing £26billion is a good idea..................no I friggin don't, I want the Government to put in the money it should not take away the money we've already put in for some future promise which will probably be taken away from us in the future anyway.

Right wing walkers................at least I think that spelling is right

[Broxi51]

I dont like the idea either DGP but I do like that it is being aired in the media and
not hidden. Maybe, just maybe it will make the apathetic people of the UK
mutter and shake their heads a bit longer.
Have always said that if they f*ck with my pension then I will commit
a major crime such as bank robbery that will end up with me
behind bars enjoying 3 meals a day in a warm padded cell plus I
will be too wrinkly to be anyone's widdle puppy

[fishtank]

I dont like the idea either DGP but I do like that it is being aired in the media and
not hidden. Maybe, just maybe it will make the apathetic people of the UK
mutter and shake their heads a bit longer.
Have always said that if they f*ck with my pension then I will commit
a major crime such as bank robbery that will end up with me
behind bars enjoying 3 meals a day in a warm padded cell plus I
will be too wrinkly to be anyone's liddle puppy

We have the same retirement plan Broxi...i may be looking for a fast driver in the near future.

[Wessex]

Lets hope the public and at long last journalists are starting to ask questions and not relying on the spin from dodgy politicians or rm's propaganda department.People on here have asked what can we do.Our strongest weapon is us the postal worker .Weh ave to let the public have the true story and also let the media know the entire facts,something which they may not be able to square with their own ideologies easily but so what.the truth is the truth.

[belle smith]

while leaving politicians, perhaps as yet unborn, to pick up the fund’s promises to pay liabilities currently estimated at £34bn.

liabilities of £34bn Those are discounted liabilities. The undiscounted liabilities are much more.