Budget 2012: Government warned over Royal Mail pension

[TrueBlueTerrier]

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he chancellor’s plans to pay down the national debt using the £28bn in assets it would take over from the Royal Mail Pension Plan have been criticised for ‘lacking in prudence’ by accounting experts.

George Osborne yesterday told MPs that he would not be using the assets as a ‘windfall, but instead using them to pay down the government’s debt’.

But ICAEW technical manager for Public Sector accounting, Sumita Shah, has pointed out that while government might pay down debt today, it needed to consider how it would pay out in pensions, which will now become a ‘future liability’.

‘The Royal Mail’s £25bn of assets comes with £37.5bn of liabilities. We want Treasury to consider what is best for the UK in the long term and to be prudent about the accounting treatment,’ said Shah.

‘Drawing down on the deficit will leave future liabilities unfunded which would not be sustainable in the long term,’ she added.

Government plans to take over the Royal Mail Pension funds would see about £37.5bn in historic liabilities transferred to a newly established unfunded public pension scheme, the Royal Mail Statutory Pension Scheme.

The liabilities will sit in the Whole of Government Accounts with an estimated £28bn in assets being transferred to government, which the Treasury said would be disposed of ‘in a measured fashion, subject to achieving value for money for the taxpayer’.

But Shah is concerned that government has not produced the detail of how they would account for their future liabilities.

‘In terms of accounting treatments, it is not prudent to think you can use this right now. This is no windfall – it’s actually a shortfall, when you consider that there’s £37bn in liabilities and £28bn in current assets. Cash needed in future, to pay out for these pensions might end up being raised from future taxpayers. Government should instead be accruing this for the future payouts for the Royal Mail pension,’ Shah said.

[Straight4ward]

This gives voice to all our fears.

George Gideon Oliver Arsehole spunks the assets and somewhere down the line a future government says "Sorry, folks but we've nothing to cover your pensions, go whistle."

A 28 billion heist.

[fishtank]

You could certainly imagine the scenario where public pensions are being constantly squeezed and downgraded...and somebody called Tarquin pipes up...what about the posties pensions?
Why are we still paying those when Royal Mail is now TNTDHL Virgin Mail.?

[chunk]

wish id read this thread and some of the other pension threads earlier.
this is government sponsored daylight robbery .