Could the Govt allow DC pot holders to buy public sector pensions to reduce the deficit?

michaels

Nebulous2 said:

Didn’t the government sort of do something like this with the post office final salary scheme? Take over the scheme, absorb the fund and agree to meet the pensions? 

Thrugelmir said:

Nebulous2 said:

Didn’t the government sort of do something like this with the post office final salary scheme? Take over the scheme, absorb the fund and agree to meet the pensions? 

Royal Mail technically was in the public sector prior to privatisation. 

So in order to give the privatised company a positive value they took the pension payments off its hands - pretty  analogous actually, the govt brought in money now in return for a future stream of pension payments.

Nebulous2

Thrugelmir said:

Nebulous2 said:

Didn’t the government sort of do something like this with the post office final salary scheme? Take over the scheme, absorb the fund and agree to meet the pensions? 

Royal Mail technically was in the public sector prior to privatisation. 

It was in the public sector, but with a scheme which was at least partially funded. The Government took the money, and agreed to underwrite the liabilities. 

https://obr.uk/box/implications-of-transferring-the-historic-deficit-of-royal-mails-pension-fund-to-the-public-sector/

michaels

Nebulous2 said:

Thrugelmir said:

Nebulous2 said:

Didn’t the government sort of do something like this with the post office final salary scheme? Take over the scheme, absorb the fund and agree to meet the pensions? 

Royal Mail technically was in the public sector prior to privatisation. 

It was in the public sector, but with a scheme which was at least partially funded. The Government took the money, and agreed to underwrite the liabilities. 

https://obr.uk/box/implications-of-transferring-the-historic-deficit-of-royal-mails-pension-fund-to-the-public-sector/

Great, another example of the govt taking money now in return for pension liabilities later, exactly what I am suggesting, if the terms made sense for the taxpayer I the post office privatisation then presumably there are terms that would make sense now for selling annuities.

hyubh

michaels said:

Nebulous2 said:

Thrugelmir said:

Nebulous2 said:

Didn’t the government sort of do something like this with the post office final salary scheme? Take over the scheme, absorb the fund and agree to meet the pensions? 

Royal Mail technically was in the public sector prior to privatisation. 

It was in the public sector, but with a scheme which was at least partially funded. The Government took the money, and agreed to underwrite the liabilities. 

https://obr.uk/box/implications-of-transferring-the-historic-deficit-of-royal-mails-pension-fund-to-the-public-sector/

Great, another example of the govt taking money now in return for pension liabilities later, exactly what I am suggesting, if the terms made sense for the taxpayer I the post office privatisation then presumably there are terms that would make sense now for selling annuities.

That what I was alluding to in my George Osborne refererence. Requisitioning assets intended to fund future pension payments that have been taken on and made more 'guaranteed' than ever is a funny way to 'reduce the national debt' in a substantive sense, I would have thought.

Malthusian

hyubh said:

michaels said:

Nebulous2 said:

Thrugelmir said:

Nebulous2 said:

Didn’t the government sort of do something like this with the post office final salary scheme? Take over the scheme, absorb the fund and agree to meet the pensions? 

Royal Mail technically was in the public sector prior to privatisation. 

It was in the public sector, but with a scheme which was at least partially funded. The Government took the money, and agreed to underwrite the liabilities. 

https://obr.uk/box/implications-of-transferring-the-historic-deficit-of-royal-mails-pension-fund-to-the-public-sector/

Great, another example of the govt taking money now in return for pension liabilities later, exactly what I am suggesting, if the terms made sense for the taxpayer I the post office privatisation then presumably there are terms that would make sense now for selling annuities.

That what I was alluding to in my George Osborne refererence. Requisitioning assets intended to fund future pension payments that have been taken on and made more 'guaranteed' than ever is a funny way to 'reduce the national debt' in a substantive sense, I would have thought.

Or, to put it another way, the proposal amounts to "Let's reduce the national debt by borrowing more money and paying off the debt with it".

(I'm assuming the OP meant the national debt rather than a "deficit" (there are several) because otherwise I have no idea what they mean.)

michaels

You are all assuming that the govt does accounting like you or I  - in reality do you see future unfunded pension liabilities in the national accounts?  SO if pension promises don't register as debt them selling them increases assets without increasing liabilities....

Sailtheworld

Would anyone really want to swap money they've saved up in a DC scheme for a government promise?

michaels

Sailtheworld said:

Would anyone really want to swap money they've saved up in a DC scheme for a government promise?

You mean like buying gilts?

Malthusian

michaels said:

You are all assuming that the govt does accounting like you or I  - in reality do you see future unfunded pension liabilities in the national accounts? 

Yep.

So your proposal now boils down to "Why doesn't the government increase its liabilities significantly, but pretend some of it doesn't exist". Pretending things don't exist works perfectly well in most aspects of government, but unfortunately not when it comes to the national debt because creditors aren't obliged to believe the government's alternate reality.

Sailtheworld said:

Would anyone really want to swap money they've saved up in a DC scheme for a government promise?

If it was on the same terms you get in public sector pension schemes, then sure I would - up to a point. (Not all my money but certainly everything over the point at which I could still live happily if the UK collapsed into anarchy and I had to flee with whatever I had left to Thailand or somewhere else cheap.) Why do you think public sector workers aren't campaigining via their unions to be paid in DC pension contributions instead of government promises?

Transfers out of unfunded public sector pensions may have been impossible since 2014, but there's a reason hardly anyone transferred out even when it was possible. "Pension freedoms didn't exist" wasn't a reason, a transfer out of a DB pension still gave you the opportunity to benefit from stockmarket growth, draw a higher income if you could avoid exhausting the pension, and pass on funds to your children / heirs.

hyubh

michaels said:

You are all assuming that the govt does accounting like you or I  - in reality do you see future unfunded pension liabilities in the national accounts?

The way the government accounts for existing unfunded occupational pension promises is already disputed by many, for various reasons, and is prone to political diktat directing the end result. However, the liabilities are still shown (on the government's preferred actuarial basis) in the 'whole of government accounts' (WGA).