State Pension Costs

Generali

StevieJ wrote: »

Surely if they accounted for it in the national accounts they would offset it by the estimate of future income re N.I.

It's pretty risky to offset current liabilities against future income. Just ask the banks that bought CDOs!

StevieJ

Generali wrote: »

It's pretty risky to offset current liabilities against future income. Just ask the banks that bought CDOs!

They are not current liabilities.

Generali

StevieJ wrote: »

They are not current liabilities.

They are assets that have been used by banks as part of their tier 2/3 reserves (not sure which) to offset against liabilities.

kennyboy66_2

Generali wrote: »

They are assets that have been used by banks as part of their tier 2/3 reserves (not sure which) to offset against liabilities.

I'm sure Steve meant that the pension committments are not current liabilities - or at least very little of them would be described as current liabilities. By definition they do not fall due in the short term.

I think the argument over how these liabilities should be shown in the national accounts is purely a red herring.

Until people advocating it are prepared to say that for example, that there should be no minimum income guarantee for pensioners and that the poor should recieve food stamps rather than cash, then its all a little pointless.

chewmylegoff

i think he means that future pension obligations are not current liabilities

Generali

kennyboy66 wrote: »

I'm sure Steve meant that the pension committments are not current liabilities - or at least very little of them would be described as current liabilities. By definition they do not fall due in the short term.

I see, I got the wrong end of the stick again then!

kennyboy66 wrote: »

I think the argument over how these liabilities should be shown in the national accounts is purely a red herring.

Until people advocating it are prepared to say that for example, that there should be no minimum income guarantee for pensioners and that the poor should recieve food stamps rather than cash, then its all a little pointless.

Why?

Recognising that you have a liability isn't the same as refusing to make good on it. Quite the reverse in fact. It shows the cost of future commitments being made today, hopefully forcing Governments to properly cost their commitments rather than just leaving them to be someone else's problem.

The reason the Government gives for not accounting for these sorts of liabilities is that they might just choose to renege on their promises so they can't account for the liability as it may not be there in future. That hardly fills me with confidence for the state-backed parts of the pension system.

Sapphire

Generali wrote: »

50,000,000 people can expect to get a state pension in the UK that do not currently get one.

At present, life expectancy for someone aged 65 is 17 further years for a man and 20 for a woman.

@ £90 per person per week and assuming an average life expectancy of 18.5 years on retirement the UK has an eventual liabiity of:

£90 x 50,000,000 x 52 x 18.5
= £4,329,000,000,000

Total liability in the UK national accounts? £0.00.

On top of that there is the second state pension, pension top ups, NHS promises, Civil Service pensions, any net local authority pension shortfall and other Government promises to people when they get old like no TV license fee. None of those things have had liabilities accrued for them.

You're kids will still be paying the bill. Unless they decide they don't want to of course. That would be an interesting standoff: baby boomers want their pensions paying and their kids don't want to pay the taxes.

Baby boomers' Governments put aside £0.00 towards their state pension liability. What is the moral, legal and pragmatic case for people to pay their parents' pension?

So how come Britain has the worst pension provision in the whole of Europe? How do other countries afford pensions? They probably waste a fraction of taxpayers' money that this 'government' does – on anything from MPs' luxuries, through diversity managers, management consultants, enquiries that take months or years, and quangos, to public sector pensions and benefits payments to those who should not be receiving them.

The whole thing makes me sick. Those who have paid their dues over many years should get pensions, as those who come after them will expect to do (along with what they inherit from their parents). If there is one set of people in society who deserve to be paid decent pensions, it is the retired. It's sickening and contemptible that we value elderly people so little – unlike virtually any country in Europe.

Generali

Sapphire wrote: »

So how come Britain has the worst pension provision in the whole of Europe? How do other countries afford pensions? They probably waste a fraction of taxpayers' money that this 'government' does – on anything from MPs' luxuries, through diversity managers, management consultants, enquiries that take months or years, and quangos, to public sector pensions and benefits payments to those who should not be receiving them.

The whole thing makes me sick. Those who have paid their dues over many years should get pensions, as those who come after them will expect to do (along with what they inherit from their parents). If there is one set of people in society who deserve to be paid decent pensions, it is the retired. It's sickening and contemptible that we value elderly people so little – unlike virtually any country in Europe.

Most of the rest of Europe (and the US) face the same problem - massive promises have been made with no plan put in place to pay for them.

LizzieS_2

You have to look back at state pension creation. The 1948 National Insurance Act created a system whereby people who had never paid NI suddenly received a pension, likewise many more only paid a fraction of the years they were paid out for. The same system is in operation today - NI today pays towards the current pensions.

Even in 1948 there was statistical data showing life expentancy was on the increase!

Todays answer is to raise the retirement ages to make people pay for longer than was first anticpated - in other words we are paying more years only to receive the same number of years as our predessors.

The major problem here is not so much the State pension itself, it is how Governments push the problem onto future Governments. There are some things that affect us all for far longer than the 5 years potential Government term and should be addressed as such - it would be far better if say the top 5 parties were given an equal number of candidates to vote on some issues (like this) to ensure each took the responsibilty seriously beyond the election term.

Generali

LizzieS wrote: »

You have to look back at state pension creation. The 1948 National Insurance Act created a system whereby people who had never paid NI suddenly received a pension, likewise many more only paid a fraction of the years they were paid out for. The same system is in operation today - NI today pays towards the current pensions.

The Economist a few years back described the state pension as being a classic Ponzi scheme - using money currently being paid in by new members of the scheme to pay out to existing members. The first person to get a state pension on this basis (according to The Economist) got it on the basis of 1 month's payments and lived for many years IIRC.