Long ago, there was a radio programme “Round The Horne” in which one character was Rattling Sid Rumpole, a Kenneth Williams skit on TV and Radio gardeners and rural types. His catch phrase was “Arrgghh, the answer lies in the soil.” Applying this philosophic principle to pensions comes up with “demographics” in place of soil.
I have said about many things, “But we saw this coming….” Alas, many except the politicians and media types. For the public sector pensions, finance thing, it is “Been there, done that". Many of the pension schemes were in place many decades ago, and whilst they did allow people to leave early, there were no added years except in the case of serious illness, when a modest number were allowed. In those days it had to be terminal or nearly that to get one. By and large employees were expected to serve their time.
A good many did not make it to retirement age; and of these the men lasted only an average of about 4/5 years Pension Payment Years after 65, and the women 14/15 after 60. In any case many men did not get in the full years of entitlement because of military service or some such and few women did the full number of years or anything like it in an age when marriage and children meant that you did not work.
By the beginning of the 1980’s because of money and staff reductions the question of early retirement came to the fore. With the strength of the unions, one means of relatively easy staff reduction was to let staff go early, often with added years and extra lump sum payments. Additionally, the medical conditions for departure for illness was relaxed, which added to the numbers drawing invalidity benefits. So when early retirement came onto the agendas as an easy and popular way of getting the numbers down, there was a Gadarene rush by unions and politicians to go for it, and to hell with the figures, the future would take care of all that.
By the 1980’s, however, the demographics certainly were changing in several ways, a key one being the increase in the expectation of life and it was clear even then to those who could do basic arithmetic that the various pensions schemes were going to come under pressure. Quite simply, the total of Pension Payment Years for all those on the books was already rising steadily and the trend was likely to last for some time. Add on almost automatic early retirement, and given that many of the early retirement schemes allowed people to go at 50 instead of 60 or 65, you can see what was going to happen. Then relax the rules and criteria for “sickies” and away you go.
So a man who goes in his early fifties might get 25 or more years of retirement in, and a woman 30 to 35 often at close to full entitlement. Whilst in the past the monies paid in by those in post could cover the totals needs, in a world where very many will not go into such a job until their early 20’s, or even later, then the sums paid in will not go near the sums paid out.
So it is not working any more and huge deficits have built up nationally and locally. Instead of facing this and putting in place some sort of controls the Government has simply given away more in the public services and all the schemes are technically insolvent. Government borrowing will have to take the hit one way or another, because the money is not there from taxation, nor from the existing employees.
It adds to all the other severe pressure on borrowing, and cannot be covered by forcing captive banks to buy treasury bonds, although the government have been leaning heavily on those public sector pension schemes with funds to do so, but some operate on the "running bath" principle. However, this only means that the returns to those funds are impaired by effectively lending to the government at below real market rates. This “Enron” tactic is at best only a quick temporary fix. It cannot be a long term solution.
After the Government hit the private pension schemes (except for the seriously rich) and tinkered with other parts of it, the old occupational pensions have almost gone, as the actuaries, accountants, and others have calculated the consequences. The present government are unlikely to do much because a remarkable number are entitled to public sector pensions as well as their political ones, often at levels that are augmented by their previous employers to way beyond the actual level of work they did. Also, a good many of their relations and friends are set to benefit as well.
So if you think that those parliamentary expenses were a profitable racket, think about their extra pension funds and entitlements from before they were elected or appointed to Parliament, and protected by convenient privacy arrangements.
I have said about many things, “But we saw this coming….” Alas, many except the politicians and media types. For the public sector pensions, finance thing, it is “Been there, done that". Many of the pension schemes were in place many decades ago, and whilst they did allow people to leave early, there were no added years except in the case of serious illness, when a modest number were allowed. In those days it had to be terminal or nearly that to get one. By and large employees were expected to serve their time.
A good many did not make it to retirement age; and of these the men lasted only an average of about 4/5 years Pension Payment Years after 65, and the women 14/15 after 60. In any case many men did not get in the full years of entitlement because of military service or some such and few women did the full number of years or anything like it in an age when marriage and children meant that you did not work.
By the beginning of the 1980’s because of money and staff reductions the question of early retirement came to the fore. With the strength of the unions, one means of relatively easy staff reduction was to let staff go early, often with added years and extra lump sum payments. Additionally, the medical conditions for departure for illness was relaxed, which added to the numbers drawing invalidity benefits. So when early retirement came onto the agendas as an easy and popular way of getting the numbers down, there was a Gadarene rush by unions and politicians to go for it, and to hell with the figures, the future would take care of all that.
By the 1980’s, however, the demographics certainly were changing in several ways, a key one being the increase in the expectation of life and it was clear even then to those who could do basic arithmetic that the various pensions schemes were going to come under pressure. Quite simply, the total of Pension Payment Years for all those on the books was already rising steadily and the trend was likely to last for some time. Add on almost automatic early retirement, and given that many of the early retirement schemes allowed people to go at 50 instead of 60 or 65, you can see what was going to happen. Then relax the rules and criteria for “sickies” and away you go.
So a man who goes in his early fifties might get 25 or more years of retirement in, and a woman 30 to 35 often at close to full entitlement. Whilst in the past the monies paid in by those in post could cover the totals needs, in a world where very many will not go into such a job until their early 20’s, or even later, then the sums paid in will not go near the sums paid out.
So it is not working any more and huge deficits have built up nationally and locally. Instead of facing this and putting in place some sort of controls the Government has simply given away more in the public services and all the schemes are technically insolvent. Government borrowing will have to take the hit one way or another, because the money is not there from taxation, nor from the existing employees.
It adds to all the other severe pressure on borrowing, and cannot be covered by forcing captive banks to buy treasury bonds, although the government have been leaning heavily on those public sector pension schemes with funds to do so, but some operate on the "running bath" principle. However, this only means that the returns to those funds are impaired by effectively lending to the government at below real market rates. This “Enron” tactic is at best only a quick temporary fix. It cannot be a long term solution.
After the Government hit the private pension schemes (except for the seriously rich) and tinkered with other parts of it, the old occupational pensions have almost gone, as the actuaries, accountants, and others have calculated the consequences. The present government are unlikely to do much because a remarkable number are entitled to public sector pensions as well as their political ones, often at levels that are augmented by their previous employers to way beyond the actual level of work they did. Also, a good many of their relations and friends are set to benefit as well.
So if you think that those parliamentary expenses were a profitable racket, think about their extra pension funds and entitlements from before they were elected or appointed to Parliament, and protected by convenient privacy arrangements.
No comments:
Post a Comment