NHS pensions are bleeding the taxpayer dry

Andy_L

missile wrote: »

NHS employees work and earned their meagre pension, not like those crooks at Westminster who voted themselves a far more generous pension scheme.

The NHS & the MP's schemes are (like the rest of the Public sector excluding Police/File/military) much the same. MPs accumulate a bit faster & pay a bit less but have a lower revaluation rate

Andy_L

BobQ wrote: »

I think what he means is that in the CS Premium Pension - a 1/60th scheme- (closed to new entrants in 2007) you can get 75% by working 45 years. This only applies to those coming up to retirement.

So a theoretical situation that nobody is likely to be able to achieve seeing as how Premium didn't exist long enough for someone to hit 45 years service in it. Possibly there may be some people who transferred in a pension and bought extra years who could do it

Andy_L

uk1 wrote: »

The problem is the DC is never going to be enough for most people, so future generations will simply have to think of retirement differently from earlier generations.

DC is not enough because when companies moved from DB to DC they also carved the employers contribution down as well (from ~15 to 5% IIRC). Had they kept that at the level they'd been happy to pay for the DB scheme then combined with employees contributions DC people would be far better off in retirement.

uk1

Andy_L wrote: »

DC is not enough because when companies moved from DB to DC they also carved the employers contribution down as well (from ~15 to 5% IIRC). Had they kept that at the level they'd been happy to pay for the DB scheme then combined with employees contributions DC people would be far better off in retirement.

To a point, but not completely. Obviously 15% is much better than 5% but if they pay 15% into a DC scheme, that is the end of the company's obligation. If they pay 15% into a DB scheme instead, their obligation is no longer a closed obligation they are still responsible for any future open-ended deficits.

Jeff

bigadaj

Andy_L wrote: »

DC is not enough because when companies moved from DB to DC they also carved the employers contribution down as well (from ~15 to 5% IIRC). Had they kept that at the level they'd been happy to pay for the DB scheme then combined with employees contributions DC people would be far better off in retirement.

Sort of agree but there are a range of outcomes involved in such a transfer. I had an interview last week, employer contribution is 22%, so broadly in line with a db scheme.

However given the choice I'd still probably opt for the db scheme, dependent on other things of course, such as normal retirement age etc

The transfer of risk from the employer to the employee is still not accounted for even where much of the financial benefit has been transferred.

bigadaj

uk1 wrote: »

Companies are forced into administration when they have an unsustainable cash flow. A dividend isn't a debt. Not paying dividends doesn't increase debt. In fact, if anything not paying dividends improves a company's cash situation and has the opposite effect of "hastening it into administration".

Additionaly, a company not paying dividends but using the cash instead to pay down it's obligations - like their pension fund - will be seen by the market as a better long term risk.

So although shareholders might have lost some dividends in the short term they should - all other things being equal - instead see long term capital growth.

Jeff

Cash flow is the most frequent cause of administration but not the only one.

I don't mean administration is inevitable but that would make it more likely. The mere fact that there would be a presumably legal or regulatory obligation to not pay dividends would deter income investors and also provide additional constraints in the management in terms of how they might employ their capital.

Many shareholders aren't, of course, long term holders, certainly not in the us and uk at least.

There's also the question of how the dividend restriction might be applied, would it be an annual review, how quickly would any deficits have to be rectified, who would determine whether any deficit or premium was manageable and appropriate.

The effect of making this compulsory would affect a share price.

To be bought up by private equity or corporate raiders who would arrange for the pension to be wound up in some manner or other.

uk1

bigadaj wrote: »

Cash flow is the most frequent cause of administration but not the only one.

I don't mean administration is inevitable but that would make it more likely. The mere fact that there would be a presumably legal or regulatory obligation to not pay dividends would deter income investors and also provide additional constraints in the management in terms of how they might employ their capital.

Many shareholders aren't, of course, long term holders, certainly not in the us and uk at least.

There's also the question of how the dividend restriction might be applied, would it be an annual review, how quickly would any deficits have to be rectified, who would determine whether any deficit or premium was manageable and appropriate.

The effect of making this compulsory would affect a share price.

To be bought up by private equity or corporate raiders who would arrange for the pension to be wound up in some manner or other.

Let me try my argument from a slightly different entry point.

The main reason why the BHS pensioners and current employers are in this situation is because Philip Green was not prevented from being allowed to award his family and others several millions of pounds worth of dividends whilst the pension scheme was in deficit. What I am unhappy about, is that what he did whilst morally wrong was sadly not at the moment appear to have been illegal.

The public, led by the government and press have directed their anger at him rather than at the government for letting it happen. In my view it isn't Philip Green's "fault" because he was only doing most what (greedy) capitilists do and are permitted to do by a lack of appropriate legislation. There has been a break down in ethical corporate governance. We can of course ask legislators to make laws and they should do, and those laws will be circumvented. But there is a stake-holder in corporate governance that are potentially much more powerful and that is the shareholders. They can compel the company to do "their will."

Imagine that a law that in simple terms said .... I know that their is unfleshed detail ... but this is so you get my drift.

"Companies cannot pay dividends unless:

1. All of the corporation tax payments are up to date.
2. Their VAT payments are up to date.
3. They have been certified as genuinely meeting minimum wages
4. Their payments to suppliers are not over x days.
5. The trustees of the pension scheme certify that their is an agreed plan to pay deficits

etc .... we can all make up our own.

This would mean that all of the things we wish of corporations would receive attention from shareholders. All shareholders of all companies would be in the same boat. All corporations would have the same requirement so it's impact on company value would be neutral overall except that better more responsibly managed companies would be worth more and poor companies worth less until they conformed to what society says are minimum ethical corporate standards.

Why as a general principle would that not work?

(I'm warming to the idea now) :):D

Jeff

hyubh

uk1 wrote: »

5. The trustees of the pension scheme certify that their is an agreed plan to pay deficits

That was not missing in the BHS case because there is already a legal obligation on that score.

uk1

hyubh wrote: »

That was not missing in the BHS case because there is already a legal obligation on that score.

But not before he paid himself the dividends,

bigadaj

uk1 wrote: »

Let me try my argument from a slightly different entry point.

The main reason why the BHS pensioners and current employers are in this situation is because Philip Green was not prevented from being allowed to award his family and others several millions of pounds worth of dividends whilst the pension scheme was in deficit. What I am unhappy about, is that what he did whilst morally wrong was sadly not at the moment appear to have been illegal.

The public, led by the government and press have directed their anger at him rather than at the government for letting it happen. In my view it isn't Philip Green's "fault" because he was only doing most what (greedy) capitilists do and are permitted to do by a lack of appropriate legislation. There has been a break down in ethical corporate governance. We can of course ask legislators to make laws and they should do, and those laws will be circumvented. But there is a stake-holder in corporate governance that are potentially much more powerful and that is the shareholders. They can compel the company to do "their will."

Imagine that a law that in simple terms said .... I know that their is unfleshed detail ... but this is so you get my drift.

"Companies cannot pay dividends unless:

1. All of the corporation tax payments are up to date.
2. Their VAT payments are up to date.
3. They have been certified as genuinely meeting minimum wages
4. Their payments to suppliers are not over x days.
5. The trustees of the pension scheme certify that their is an agreed plan to pay deficits

etc .... we can all make up our own.

This would mean that all of the things we wish of corporations would receive attention from shareholders. All shareholders of all companies would be in the same boat. All corporations would have the same requirement so it's impact on company value would be neutral overall except that better more responsibly managed companies would be worth more and poor companies worth less until they conformed to what society says are minimum ethical corporate standards.

Why as a general principle would that not work?

(I'm warming to the idea now) :):D

Jeff

I like the idea but just think that ways would be found to avoid it if it were to be enacted, which I think might be a struggle with a conservative government.

Companies manage to avoid corporation tax seemingly at will in the uk now, with the use of intellectual property transfer and holding companies both within the EU and outside. On that point then shaming some big corporates seems to have some effect, especially Starbucks for example, and potentially with Philip green, we'll wait and see.

In terms of the issues you've raised then points 1 & 2 are covered already in existing legislation, with the caveat that in many cases the corporation tax is whatever a multi national may have managed to negotiate with Hmrc.

Point 3 on minimum wages is covered in terms of the minimum wage, or is this the living wage? Specifically in this point and with reference to Mike Ashley, who now seems to be a knight in shining armour compared to Philip green, the growth of zero hour contracts has been one of the worst things in the uk in recent times. It has the wholly depressing effect of meaning that people who want to work can be significantly worse off than those remaining on benefits, leading to no income and potential eviction.

Many companies would argue that payment terms are a commercial negotiation, and the price of goods and services is frequently discounted on improved payment terms, so the x could be hard to agree or define.

Many pension fund trustees seem to have little power or influences even their involvement seems to have little impact, in the case of BHS they didn't seem able to even raise the issue of the pension deficit such that management was aware of it, or so it appears.