Britons in £2 trillion Debt

bubblesmoney

Unfunded Pension liabilities.

In the case of BT, this "Crown guarantee" attaches to around £28bn of its pension liabilities. But that's only what's surfaced so far. The same guarantee also reportedly applies to the pension liabilities of around 20 other privatised companies, including the £15bn Railways Pension Scheme, the £10bn British Coal Staff Superannuation Scheme, and the £13bn Mineworkers’ Pension Scheme.

The companies might have been privatised but the tax payer is still eating the crap as shown above, because when these industries were privatised, somebody (guess who!!!) forgot to examine the smallprint.

Post Office privatisation plan, the taxpayer is to take full responsibility for the PO's £22bn pension fund liabilities.

Because public sector pension schemes are unfunded (with the exception of the local government pension scheme) taxpayers have to pay twice for the pensions: firstly for employer contributions and secondly for an annual bailout – the difference between employer/employee contributions and pensions in
payment.

Liabilities are also building up each year that will need to be paid by
taxpayers in the future through a higher annual bailout.

Over the five year period from 2006-07 to 2010-11, according to the Treasury, taxpayers are expected to have to pay a total of £14 billion over and above employer/employee contributions, £2.8 billion each year.

Treasury data extrapolated over a 50-year time frame, we would estimate that the bailout could reach £140 billion, £5,500 per household, in total.

Number of public sector workers with £1 million + of pension benefits is greater than 17,000.

MPs and BBC staff keep pension details secret but we fund their pensions!!!

Remember public sector pensions give pensions for spouse. so just like Anna nicole smith if an old timer marrys (for financial convenience) a 20y old and dies soon after, the young woman still gets a spouse pension which she will draw most probably for 60 years. Anecdotal cases have happened like this for getting spouse pensions for life !!!

In defined benefit schemes that are under funded employer contributions can be 26% to make up for the shortfall.

In 2006 the Government estimated the cost of the unfunded liabilities at £650bn but since then it has refused to publish an updated cost. the post above this by Andy L seems to say amusing assumptions is made in the 1 trillion calculations, my rebuttal is that the govt itself said unfunded liabilities are 650billion pounds in 2006 and later refused to give details. and the govts figure is likely to be an underestimate as it relies on an interest rate of just 1.8 per cent and unrealistically low life expectancy figures.
In its new report, Clearing the Pensions Fog, the CBI has put the total cost at £915bn but admits even this is a "conservative figure".
"Many commentators calculate the true liability figure to be well over £1 trillion," it says.

http://www.telegraph.co.uk/finance/personalfinance/pensions/3758169/Taxpayers-face-public-sector-pension-black-hole-of-1-trillion-CBI-warns.html

quite a few blogs cover this issue well.

In a new study, published today by the IEA, Neil Record, the leading expert on public sector pension deficits, puts the burden of future public sector pensions at £1.025 trillion – this estimate is nearly twice as great as the government’s own estimates and approximately equal to one year’s national income. Neil Record argues that government estimates do not take proper account of trends in mortality, likely public sector pay increases and market interest rates. http://www.iea.org.uk/record.jsp?type=release&ID=114

Sir Humphrey’s Legacy

Facing Up to the Cost of Public Sector Pensions

The Institute of Economic Affairs 2006. see the 72 page report on the link. see table 8 page 60.

This sum is over 80 per cent of GDP and over twice the size of the official national debt as of 2006.

There are currently 522,000 civil servants. The largest numbers are at the Department for Work and Pensions (116,000), HMRC (92,000), Justice (86,000), and MOD (78,000) thats excluding soldiers.

All public sector workers number as of 2006 5,826,000.

And it is estimated that the ratio of UK pensioners to workers will increase from 27% in 2004 to 48% in 2050. http://www.civilservant.org.uk/pensions.shtml

Civil service pensions are inflation proof final salary scheme. they pay 3.5% contribution in addition to their employer's 19-22% notional contributions.
Civil servants could therefore retire on a pension of two-thirds (40/60ths) of their final salary . (L Andy please note that the civil servants pension is 2/3 salary and not 1/2 final salary, makes a huge difference to calculations). also please note that policemens workers contributions has gone down from 11% to 9.5% since 2006.


Employers (ie we taxpayers) contributions for these pensions excluding workers contributions is:

• Civil Service: 12-20%
• NHS: 14%
• Local government: 20%
• Education authorities: 13.5%
• Police/Fire employers: 26%

which will cost each of us £40,000 to fund these pensions provided things havent turned worse following the economic downturn wrt these pensions.

see taxpayers alliance and burningour money blog for more details