Complain about this comment (Comment number 8), @6LGPS has 4.6 million membersDon't know about NHS but that only includes England and Wales and not contractors, Complain about this comment (Comment number 9). Complain about this comment (Comment number 6), "They point out that gilt interest and principal payments are paid out of future tax revenues, just as future pensions are. Ill designed money obfuscates count of social profits and losses. Isn't that what PFI has done? At 18:02pm 3rd May 2011, AHB1 wrote: "Mr Peston fails to point out that the biggest public sector scheme for local government workers is fully funded, that is we have paid for our future pensions and he does not distinguish this from public sector pensions which include the Civil Service, Teachers, the Armed Forces and privatised services. However the 'Fools' have got themselves into the position that they cannot permit interest rates to rise ever again as the banks will almost instantaneously go bust! I'm sure they will enjoy using their voting power to strike revenge! David Norgrove said he was confident that the PPF could "continue to meet the claims on it". The notion of pension funds invested in stocks producing growth used to be tenable - it is not going to be so in the future - QE is inflating asset prices way beyond the underlying reality - there is going to be another big stock market crash, as sure as night follows day.6. Complain about this comment (Comment number 34). That led to the biggest financial crisis since the thirties of the last century!A bail out of banks which wrote CDS insurance on European countries would be a lot more expensive!We do not want to let that happen to our stupid banks in the "Eurocrisis", do we? However, I suspect that since this problem isn't going to become critical for many years, the current crop of civil servants and politicians are really leaving it for the next generation to sort out. One of these by itself could possibly have been managed but both together are totally calamitous.Life expectancy has been increasing far more rapidly than the life industry's tables have acknowledged - this underestimates the liabilities for paying pensions.What pensions are paid with is the capital of the fund's investment and the return on guilts in which the fund is invested. An albatross named Ponzi firmly clasped round all our necks. It has now moved to a new home, with a fresh format. At the time it was supposed to be self-financing and is I believe currently in surplus: nobody seems to mention this in all the talk of massive liabilities. It makes absolutely no sense to pre-save for pension liabilities. Stealth or in a broad daylight, by small chunks, or totally... as of now I see it as the wrong corner being wiped clean and the dust falling into externalities again. There are no financial limits on a sovereign government - only real ones.Once again this entire article concentrates on meaningless financial numbers and misses what pensions actually are - an allocation of all the real items produced that can be bought in Sterling. The key issue for the Court of Appeal here was whether an employee's salary could be increased without increasing the final salary pension liability. It's that simpleUnless the public sector can teach the rest of us the secret of alchemy, they are going to have to find another way. Discount that! The assets were sold to a new business trading under a new name but without the pension liability of the old business. Have you, Robert?Instead of that he worries us about a "discount rate" for public state pensions which is completely irrelevant. Comparing a sovereign government to companies is a meaningless exercise. So they can never be underfunded, as schools can never be underfunded, universitities can never be underfunded, the cost of climate change can never be underfunded.They are only underfunded, if the government of the day chooses to do so. And not all public sector pensions are 'unfunded', some of the better managed funds are in surplus, for instance the NHS fund. I am just trying to point out the power the BBC Business Editor, Robert Peston, has in setting the news agenda. The pension liabilities comprise of both the BBC Pension Scheme, which increased to £1.141bn in 2017 from £1.003bn in 2016, and the unfunded scheme, which also rose from £7.3m to £8.4m in the year. YESIreland - yes 40% - no 20% - Euro fudge 40% - st? At the same time they threw families apart. The Fools are not so ignorant as not to know that this policy would destroy pensions, savings and investment - one can only suspect that they thought that the zero/negative effective interest rates would not last long, so in the longer term they could get out of their bind. Not only did I read the item to the end but I understood most of it .Having drawn my pensions for a good number of years clearly the problem will bot effect me but one thing I have learned most polititians are more honest out of office. Welcome to PensionLine. The argument quoted can be extended in both ways. A ‘superfund’ ; a single pension fund backed by capital from investors, into which other pension funds can transfer their liabilities and assets, removing the risk from the company balance sheet. It should be a mixture of both. (you are assumed to be bright enough to be able to work out if you are being ripped off in the pricing of them - if you cant you should not be buying them - if you are stupid (AIG) then you deserve it)The more relevant is - will a sovereign default in the medium term (within 5 years)Greece - yes 70% - no 10% - Euro fudge 20% - should they? Well in the private sector it can be seen as the number used to translate into today's money a commitment to pay £650 a week pension (for example) for 30 years or so to a retired employee (till he or she dies), so that we can see whether there's enough money in the pension fund to pay that employee (and all the other employees) during his or her long retirement. It’s because Indiana requires public sector pension liabilities to be funded where Ohio, Michigan and Illinois do not. (you are assumed to be bright enough to be able to work out if you are being ripped off in the pricing of them - if you cant you should not be buying them - if you are stupid (AIG) then you deserve it)"Well, okeen, I disagree. These are some of the popular topics this blog covers. Over the next 10 years price inflation will far outstrip wage inflation and this differential compounded year on year will ensure that the purchasing power of said pensions is affordable when they are paid out,Yours Aye,Graucho, Complain about this comment (Comment number 20). The Bank of England will have understood this - it has 200 economists and a few must be able to do arithmetic - perhaps the Governor and the MPC can't, and are so all powerful they can overrule arithmetic certainties. Is it really the largest? However a previous generation have contracts involving noncontributory pensions. BBC © 2014 The BBC is not responsible for the content of external sites. So has a flight from assets perceived to be riskier, meaning that gilt prices don't reflect their true social value, Complain about this comment (Comment number 12), The gigantic pensions deficit is directly the result of the combination of the long tern gross underestimation of life expectancy tables, and the dire incompetence of the Bank of England in setting the price of money. "All pension schemes are unfunded. So, as of today, this...". They argue that the Treasury has made a mistake in its choice of a new so-called discount rate. "But that is how pensions work! The Council’s pension fund deficit is … Should be done across the whole public sector tomorrow. Mr Dorrell took his and his wife's pension out of the scheme before the company closed, in an attempt to reduce its liabilities. Look at Japan- debts currently over 200% of GDP and bond yields of less than 1%; or the US.And you know what- the level of government debt is not and never has been a crisis. Complain about this comment (Comment number 26). The PPF is funded by levies on company pension schemes. Complain about this comment (Comment number 5). The BBC Pension Scheme has completed a £3bn longevity swap deal with Zurich and Canada Life Reinsurance, covering the risk of pensioner and dependent members. Pension funds on both sides of the Atlantic offloaded $14.5 billion in liabilities through pension risk transfer deals this month alone, including two huge longevity swap announcements. I can't think of any index-linked corporate bonds, though it should be possible to compare conventional long-dated corporate bonds with long-dated gilts, thereby suggesting a reasonable "premium" for the AAA government debt over AA corporates. It's only where managers are taking 'contribution holidays' that future problems occur. 31. Some 560 employers across the UK who joined the Plumbing Pensions scheme are facing similar liabilities, many of them former small business owners who have no means of paying it off. EU bailout of their banks then NOPortugal - yes 40% - no 30% - euro fudge 30% - sh? However, the growth in governemnt debt is a small fraction of the money supply, with the majority of credit created by private banks. This is why there are huge BBC cost going on with no licence fee increase and pension liabilities increasing massively the squeeze is … That is the betting market for Europeripherie countries going bust. It could, for example, decide to tax all pensions above £20,000 at 90%, to pay for the short fall in public sector pensions. Of course its basically what nearly every private sector company has been forced to do by both market forces and proper accounting of the liability. "Pre-pack is so easily arranged you can in a single day effectively remove a company's assets and leave the creditors and indeed the pension scheme out on a limb," he says. Complain about this comment (Comment number 43). At 18:36pm 3rd May 2011, matt_us wrote: I wondered whether Robert Peston will finally bring us his insight knowledge to the not inconsiderable news, buried under Kate Middleton's veil last Friday, that the EU has started to investigate the banks on whether or not they manipulate the Credit Default Swap market. The Bank of England (BoE) is the UK's central bank. One way or the other, it is gibberish to talk of governments needing to raise taxes to "pay off government debt". What is really disgusting is that this problem has been known about since the 60’s and no government has done anything about it because like Martin Campbell posted when the problem hits the politicians will be long gone and any change would have been political suicide and that’s why I hate our party politics system which is full of bumbling amateurs who like the current lot are demonstrating that they simply do not have a clue about economics. The government owns the Bank of England and the currency that real output is denominated in. And you don't do that by cutting education or investment today. The question isn't about gmta understanding, it should be about The misrepresentation of economic facts by the government and the press. Imported inflation is eroding the value of incomes and as food, energy and manufactured goods get in ever scarcer supply, living standards are going to go on falling whilst pension incomes fail to keep pace.2. Pension Liability –IAS 19 (Council) The Local Authority Accounting Code of Practice and IAS19 require the Council to make extensive disclosures within its financial statements regarding its membership of the Local Government Pension Scheme. In 2002, the Age Pension cost 2.9 per cent of GDP and was forecast to rise to 4.6 per cent by 2042. "The worst case scenario is I could lose probably 30 to 40% of my pension - it's not just me as it must be 200 to 300 people that have an interest in the pension scheme that are going to have their futures affected," he told BBC File on 4. With inbalances like that in our system whether we draw any pension at all seems both irrelevant and totally unpredictable, Complain about this comment (Comment number 41). The 'Fools of Threadneedle Street' have set interest rates idiotically low for over a decade and so the return on guilts is far too low. For the latest updates across BBC blogs, visit the Blogs homepage. How scary would be a cartoon version of me explaining how banks work? A branch of the civil service called RBS is paying one "Sir" Greedie hundreds of thousands each _year_ from an unfunded pension scheme. Complain about this comment (Comment number 42). David Norgrove, its chair, defended the regulator's record. The pressure on public spending is bound to result in public pensions being scalled back - its happening already - things will get really bad when those who have already retired see their pensions being cut too, not only those still in work.5. Many see their houses are their pension pot - yet the OECD says Uk prices are 40% too high - in Eire, the USA, Spain etc there have been falls of this scale already - odds are sooner or later there will be a major realignment here too and the asset will simply not be worth anywhere near what people expected.We need to wake up to the impending collapse in the standard of living and quality of life which is comig rapidly towards us - WE'RE SLEEPWALKING TOWARDS A TOTAL MELTDOWN. David Blake, director of the Cass Business School in London, also believes pre-pack administrations are being used to dump costly pension fund liabilities. It is a necessary lever for growth in the economy. George Osborne's blunt warning to BBC after leaving them 'no choice' over free TV licences; The Department for Work and Pensions should be braced for a surge in demand for Pension Credit, it … The Pensions Regulator brief includes ensuring that companies do not place unfair burdens on the fund. More than 30,000 people rely on PPF, but six times this number are waiting for their scheme to be accepted into the fund, which has a £1.2bn deficit. ALCHEMY.........See they can turn GOLD into LEAD!! This is what will happen over the next couple of years as a result of Osbornes plans. Robert Peston | 17:18 UK time, Tuesday, 3 May 2011. Complain about this comment (Comment number 15). We have a nation full of parasites that expect to live off others. I happened on the US National Debt Clock recently where the CDS economy seems to have value of 572Trillion dollars whereas their GDP is a mere 15 Trillion, about the same as their national debt and their mortgage debt. Money is an instrument. "The pension liabilities and assets [of a company] go into the Pensions Protection Fund and then that company restarts under a different name and then finds itself doing business a few weeks later with its pensions liabilities off the books," he told File on 4. One of the major sticking points is the pension liability of BBC Resources staff, with many opposing the sale because it could cost their pension funds thousands of pounds in penalties. Personal debt levels are soaring - everything from mortgages through credit cards to student loans - the idea that people can save enough for a pension to lift them above the benefits level is a delusion.7. Read Next. Before we get too hung up on exactly what discount rate to use to value them, can the government please stop hiding these pension liabilities off balance sheet?Companies have been forced (quite rightly) to put pensions on the balance sheet for years.If we can afford the pensions, put them on the balance sheet now. Its board, commonly referred to as 'the Trustees', consists of 11 directors. !So the collapse of pensions (and savings) income is the direct result of propping up the banks and bankers excessive remuneration! The government debt (like for example QE) could be funded directly by the Bank of England directly creating the money to fund Government spending. It provides benefits for employees of the British Broadcasting Corporation (BBC) and other participating employers. The assets required to be transferred are typically above the cost of running a self-sufficient scheme but below the cost of a full buyout. No ifs no buts. Under pre-pack adminstration the company's assets are sold immediately after it has entered administration and often the previous previous directors or management buy the assets from the administrator to set up a new company. No matter what "pension experts" say - who are these "experts" anyway - and who is consultant John Ralfe? Any idea of its size as a proportion of public sector schemes? The only time that governments need to worry about the level of government spending is when inflation picks up. Something anybody with any knowledge of the finance industry suspected all along.Robert Peston has heard of Credit Default Swaps, I am sure. More so than the fact that the EU is investigating all the big banks world wide for collusion in the market for credit default swaps, which results in yields in countries being driven up, enormous profits for hedge funds and speculators and untold misery to lots of Greeks, Irish and Portuguese. Knowing a problem is one thing curing it is quite another, thanks for doing your bit. Very poor journalism, biased, subjective and the major reason I read less and less of his outpourings. Private occupational pension schemes liabilities were estimated to be €99.1bn at the end of 2018 and equate to 21pc of the total. It can choose to discount these at whatever rate it likes, but its meaningless in that it has no intention of putting in place a lump sum now to cover those future payments. There must be something really wrong in the reasoning. Never heard of him! Read more. Nor does he account for the millions taken out by government when the economy was booming. Complain about this comment (Comment number 47). Take the teachers, keen to strike over reductions in pensions. That is an elementary bit of knowledge, which should not have escaped the business editor of the BBC!So why is this story worth even mentioning by the BBC business editor, I am intrigued? Belatedly, I've got round to looking at the Treasury's recent decision to change how it calculates the necessary contributions that have to be made to cover the future costs of unfunded public service pensions. - is not really an important question - to buy or sell them you have to be a sophisticated investor and there are proably only a couple of thousand of these in the world. Pensions represent, to coin the phrase, a massive off-balance-sheet debt. QE also disproves assumptions of finite sourcesThere probably is specific amount of money that can be created before demand inflation kicks in, but we are certainly not acknowledging it as part of the current discourse. If the state's discount rate is wrong, it can decide to impose new taxes on the rich, and wealthy, or any other sub-group it choses to pick on. They are right to be concerned, the GDP fans seemed to have wilfully discounted the fact that there is at least one recession every ten years, which will knock a huge hole in their growth predictions. How about ... Betsan's...", Richard Black:"Thanks for having read my blog over the last few years. In the interest of clarity, what is the current yield on AA corporate bonds ? How typical to pick a subject that he disagrees with (occupational pensions for millions of generally low paid public sector "tax payers") and illustrate his arguement with a 600% exaggerated example of the average pension earned. I wondered whether Robert Peston will finally bring us his insight knowledge to the not inconsiderable news, buried under Kate Middleton's veil last Friday, that the EU has started to investigate the banks on whether or not they manipulate the Credit Default Swap market. Nice article but surely the bigger issue is why the obligation is off balance sheet in the first place? But it has left a bad aftertaste for employees such as Steve Hall. Put it this way: if all the persons in the UK were to retire except one, would it matter if some fund would have enough money to pay for pension liabilities? If we can't, let's confront the problem now, not wait until the whole system collapses. - is not really an important question - to buy or sell them you have to be a sophisticated investor and there are proably only a couple of thousand of these in the world. Prior to the 1970s debts were always above 50% and as high as 200% after WW2. "...in that the yield on index linked gilts will always be lower than the yield on AA corporate bonds". These led to several problems including most callous... As a solution national schemes of provision for some groups of subjects, then citizens were introduced. 06/11/2020 - Retirement savings in pension funds, pension insurance contracts and in other vehicles exceeded the USD 50 trillion mark worldwide for the first time at the end of 2019, with USD 49.2 trillion in the OECD area and USD 1.7 trillion in other reporting jurisdictions.