BBC Radio 4 "Money Box" - D.B. Pensions. 14/04/18.

[BELIAL]

But the problem is the liabilities also rose during the 2016/17 year – up by over £2 billion. Those liabilities would continue to rise over time if the scheme stayed open to future accrual. While more money going in doesn’t necessarily mean more surplus.

But the problem really is ,that the so called "liabilities" are calculated by actuaries in the paid employ of RM management. We've already established that these "liabilities" are based on assumptions ,might it be possible that actuaries employed by RM might produce findings that meet their employers requirements?

[nataddick]

The following article is helpful for anyone wanting to understand the differences between accounting and trustee treatment of pension fund liabilities :-

http://www.engagedinvestor.co.uk/home/a ... 61.article" onclick="window.open(this.href);return false;

[fishtank]

It's interesting to read that it's the trustees not the actuary who decide how much prudence to apply when assessing mortality rates and future investment returns.

I don't think it's a leap of faith to imagine that a group of trustees who are risk averse to a ridiculous degree may have overegged the pudding when it comes to applying that prudence. As an example would they make the assumption that the scheme would still be as heavily invested in bonds in 10 years time?

Anyway as the scheme is now closed most of this is irrelevant apart from the point that you really don't want risk averse trustees overseeing a DC scheme, collective or otherwise. It's a whole different ball game.

[Celgar]

In practice there are yearly ‘audits’(for want of a better word) that give a short term view of how things are performing and are based on market values at the time. So either a good or bad year investment wise, would skew the figures to some degree. These are the figures you’re referring to

No they're not, IAS 19 is the internationally recognised accounting standard for financial disclosure (is that the better word you were looking for), it is prepared by the actuary themselves not some trainee in a back office. What it shows is that Royal Mail's pension situation is not in the precarious position we were told, nor was their any imminent danger of deficit. There would have been an increase in contributions this year to offset the poor performance of Corporate bonds in 2016/17 but there was nothing to suggest that this would have been an on going liability.

Of course another elephant in the room is why did the pension trustees continue to rely so heavily on gilts and bonds when it became obvious that they were so badly underperforming as an investment vehicle?

Why is that relevant now?
Who will the trustees of the CDC scheme be? The same risk averse numpties that drove this one and the previous one onto the rocks no doubt.

Gilts and bonds are probably the very safest option there is for them to invest in. Ordinary individuals doing some research can make great percentage returns on the stock market etc so I don't see why our trustees cannot do the same. I think most pension companies invest in the larger companies such as BAE etc. (Which don't have that good ethical & moral records admittedly.) that should give reasonable returns over time.
I worry that once, or even if, our pensions are sorted out that Zurich or whoever it is that currently runs it will continue to do so. They have shown themselves to be completely inept and possibly even biased and corrupt. I have a horrible feeling it may end very badly indeed.

[BELIAL]

The following article is helpful for anyone wanting to understand the differences between accounting and trustee treatment of pension fund liabilities :-

http://www.engagedinvestor.co.uk/home/a ... 61.article" onclick="window.open(this.href);return false;

Very useful . Basically bullshit ,all things to all men, but extremely useful if you are anticipating mass redundancies.