I don't BELIEVE it! How incompetent can these dysfunctional plonkers get?

[non sociopath skin]

http://www.guardian.co.uk/politics/2011/jun/18/pensions-reform-unions-public-sector-treasury

I'm used with the sheer nastiness and vindictiveness of right-wing governments but the miracle ingredient of the Orange Book condems seems to have injected an element of sheer incompetence rare in the recent history of Western Europe.

I shudder to think how it's all going to end.

The Skin

[fedsron2us]

1. I think there may be other worries on the Treasury's mind

Unlike most other public sector pension schemes the LGPS is funded (ie it is backed by a portfolio of investments rather than being paid directly out of taxation). It currently owns £120 billion in assets most of which is invested in the UK. Alexanders proposals would have effectively meant that all Local government workers earning in excess of £18,000 were faced with an increase in their contributions to about 12-15% of earnings (since LGPS has much higher employee contributions to start than other publics sector schemes such as the Civil Servants). At the same time some lower paid workers in local government would have seen falls in payments. Ironically this redistribution of pension wealth amongst the workforce threatened the funding of the whole scheme as it was likely that higher earners would either quit or never join in the first place. If this was to happen then the remaining fund would have to be managed very conservatively to survive (ie be invested in Treasuries, fixed bonds etc). All those City fund managers would suddenly find that a lot of the money that they use to punt on the stock market would have gone and the FTSE might be in for a one way trip to Palookaville. Naturally any plunge in shares would hit not only public sector pensioners but those in private sector defined contribution schemes as well as a lot of very wealthy people who also have their money in those markets. Worse for the Treasury any shortfall in schemes such as the LGPS as members quit could result in agreater burden on the taxpayer in the short term a existing liabilities have to be funded

http://www.efinancialnews.com/story/2011-06-17/high-contribution-rates-could-destroy-council-pension-schemes

http://www.lgcplus.com/briefings/people/pay/making-assumptions/5030488.blog

Of course, the government could avoid this scenario by compelling people to belong to the schemes but then that would probably have to apply to the private as well as public sector workers. The net effect is that employee pension contributions would effectively just be another hidden tax on workers. It would also make the government unpopular with a lot of private employers who for their own selfish reasons dont want to provide pensions for their staff (or at least for workers other than Directors and favoured senior management).

There is also the not inconsiderable issue that workers who currently retire at 60 and get a modest pension are excluded from JSA and most other benefits (it is worth remembering that the average public sector pension is between £125-150 per week). If workers suddenly had to wait to 66 to receive their accrued pensions but were forced out of their jobs at 60 with a minimal pay off then they would be entitled to JSA at £60 plus a range of other means tested benefits (Council Tax Benefit etc) if they had no savings apart from the money locked in their pensions. As a consequence many of those much vaunted tax 'savings' might actually end up costing the Treasury more in the longer run.

Suddenly what looked like a wizard money saving wheeze has become a very hot political potatoe right across the political spectrum.

I expect the Government will take each public sector scheme on an individual basis since they all have different rules and contribution rates. It also means that the Unions can be divided from each other as groups such as Civil Servants tend to belong to different organisations than local government workers or teachers. In the longer run they might also think about introducing an abolute cap on pension payouts to all classes of pensioners and limiting the tax relief on pension contributions to the basic rate though naturally this would provoke howls of rage from the wealthy who as always think different rules should apply to them.

http://www.telegraph.co.uk/finance/personalfinance/pensions/8584342/Why-pensions-tax-relief-faces-a-rocky-future.html

Anyway it is clear the sort of one solution fits all being touted by Alexander had no chance of flying.

[muriel_volestrangler]

2. Thanks, feds, that's an interesting analysis (nt)

[non sociopath skin]

3. Many thanks for your full and erudite explanation, Feds.

:wow:

We economic illiterates can only stand back in amazement and respect!

But, of course, Orange Book Beaker has no excuse for his economic illiteracy.

The Skin

[fedsron2us]

6. There is a bit more to the 'pensions crisis' than meets the eye.

Unfunded public pensions are only part of the story, as is greater life expectancy. The big issue is that demographics in the western world means that from 2020 there are more people who will be wanting to cash in their pensions than pay into them. This obviously has an impact on pension funding and this process is widely discussed in the press. What is less talked about is the wider economic impact that this mass liquidation of assets to pay pensions is going to have particularly on the financial sector where the so called Master Of The Universe grew fat for 30 years on the inflow of funds from post war baby boomers saving for their retirement. When this process goes into reverse and financial assets start to be liquidated on a large scale many people who have been doing very nicely from taking a cut from these funds are going to feel a very cold wind. It is this horrific reality for certain areas of the elite that underlies some of the attempts by the press to demonise 'boomer' selfishness. In fact when you see commentators criticising boomers for their excessive sense of entitlement the subtext is the suggestion that these people should not get their pension savings back at all. The problem is that swindling this one group is almost certainly going to put off future generations from handing over their dosh to the City and Wall Street. Indeed, this reluctance of people to be skinned has been manifest already. This means the evil day when the 'luck and the money' run out is likely only to postponed rather than cancelled unless someone can come up with a very cunning plan. In fact I suspect that the only place where the financial system will gets its seed money in the future is from the tax system. Unfortunately that is going to make the process by which money is transferred from the poor to the rich very transparent (unlike pension savings) so making it a hot political issue. This is why those future promises of Tory Tax cuts are likely to remain always just over the horizon.

[dipsydoodle]

9. From last October year

Some details of the different schemes across the Public Sector with mention of which are self funded and which come from taxation.

http://www.bbc.co.uk/news/business-11446833

[LeftishBrit]

4. Thanks for info!

[LeftishBrit]

5. Danny is a Tory, and not the nicest of them either (nt)

[non sociopath skin]

7. As I see it, we still have three right-of-centre parties

On one of them,there's some limited potential for change.

For the coalition parties, no chance.

The Skin

[LeftishBrit]

8. The way I'd put it..

we have one party that is right-wing by definition; one which is currently (at least at the levels with any real power) majority right-wing, and is sinking anyway; and one with a large right-wing minority.

The latter is preferable. But I am horrified by the economic and social attitudes of a few members. As far as I'm concerned, anyone who is explicitly against the post-war welfare settlement deserves to be expelled from the human race, let alone the Labour Party.

[non sociopath skin]

10. Wouldn't argue with that.

The Skin