The Chancellor's Occupational Pension Surplus Thingy

Marcon

hugheskevi said:

zagfles said:

Here's the official press release, for those who think it's all media spin:
Pension reforms to go further to unlock billions to drive growth and boost working peoples’ pension pots - GOV.UK

Of course it's just full of government spin instead of media spin. Terms like "unlocking" and "trapped" and "tear down barriers" etc. The sort of "barriers" set up after Maxwell to stop companies accessing their employees' DB pension scheme seem to be amongst those being "torn down". 

But OP with a public sector scheme needn't worry. The "greater risk" will be taken by those of us with private sector schemes. 

It would be interesting to know the source of the alleged £160bn surplus. It is regrettable that key statistics such as that do not have a reference as it significantly reduces the credibility of the assertion.

There are multiple ways to value Defined Benefit schemes - at the bottom end s179 is commonly cited, which is the value of the PPF protected benefits. At the top end there is cost of full buy-out, which is the cost of having an insurer become responsible for paying all member benefits. In-between there is SCAPE, IAS19, and gilts basis. They all give very different figures.

Using estimated cost of full buy-out as at 31st March 2024, there were £68.1bn of assets in schemes with a surplus (source: PPF Purple Book 2024). That is much lower than £160bn. I wonder how many trustees would be confident to agree to release funds if their scheme is funded below the value of full buy-out. I think they would require a strong employer covenant (ie the sponsoring employer has deep pockets and is not in any trouble) to voluntarily reduce member benefit security.

Trustees would probably need short memories, too. Maybe those touting this idea might do a bit of historical reading eg https://www.theguardian.com/money/2016/may/27/mps-to-investigate-how-many-pension-schemes-risk-failing-deficit-bhs

zagfles

BrilliantButScary said:

zagfles said:

BrilliantButScary said:

The 'Government' has previous form for this, albeit one of a different colour 
https://www.gov.uk/government/news/government-ends-miners-pension-injustice

Yeah what a great deal. I'll suggest that to my employer - they take all the risk and guarantee to step in to pay our benefits if the scheme does badly, but if the scheme does well we should get the surplus.

The government made £4.8 billion out of the deal up until 2024 and are still getting 50% of the surplus.

The government took the risk. The trustees agreed the deal in return for the guarantee. I reckon we should all get pensions like that, a DB scheme where we get guaranteed govt backed benefits but if the investments do well we get extra on top. Wonder if it'll catch on. 

JoeCrystal

GunJack said:

JoeCrystal said:

King_Drax_I said:

In my case, I am a retired NHS medical professional and I am in receipt of the pension that I have contributed my own money towards for my entire career.

Hahahahaha, sorry, but taxpayers purely fund the NHS pensions. You have nothing to worry about that. 

So no NHS staff pay employee contributions???? I beg to differ, as would anyone seeing the deductions on their monthly payslip....

As stated earlier in the thread, it's funded by employee and employer conts, but ok the employer ones are effectively coming from central funding.

I am aware that the NHS staffs also pay the deduction.  Nevertheless the money to pay the NHS staff is from HM Treasury as well along with the fact that the NHS pension is granted the voted estimate every year just in case the employer and employee contributions are not enough to cover the current NHS pensioners' pensions.  Should they have any leftovers, they will give them money back, and if they need more money to cover the shortfall, no worries, HM Treasury will fund the shortfall.

Like all unfunded public sector pension schemes, HM Treasury is still responsible for covering the shortfall. Hopefully, in the future, the overall cost of such schemes can be reduced one way or another as the deals are highly generous to public sector employees.

Linton

GunJack said:

JoeCrystal said:

King_Drax_I said:

In my case, I am a retired NHS medical professional and I am in receipt of the pension that I have contributed my own money towards for my entire career.

Hahahahaha, sorry, but taxpayers purely fund the NHS pensions. You have nothing to worry about that. 

So no NHS staff pay employee contributions???? I beg to differ, as would anyone seeing the deductions on their monthly payslip....

As stated earlier in the thread, it's funded by employee and employer conts, but ok the employer ones are effectively coming from central funding.

As I understand it NHS DB employee contributions just go into the general pot.  There is no separate ongoing pension fund from which pensions are paid and into which contributions are deposited. Similarly NHS employer contributions per employee figures are a creation of the accountants and dont correspond to a physical reality. Ongoing payments to NHS pensioners are funded by the government.

hugheskevi

Linton said:

GunJack said:

JoeCrystal said:

King_Drax_I said:

In my case, I am a retired NHS medical professional and I am in receipt of the pension that I have contributed my own money towards for my entire career.

Hahahahaha, sorry, but taxpayers purely fund the NHS pensions. You have nothing to worry about that. 

So no NHS staff pay employee contributions???? I beg to differ, as would anyone seeing the deductions on their monthly payslip....

As stated earlier in the thread, it's funded by employee and employer conts, but ok the employer ones are effectively coming from central funding.

As I understand it NHS DB employee contributions just go into the general pot.  There is no separate ongoing pension fund from which pensions are paid and into which contributions are deposited. Similarly NHS employer contributions per employee figures are a creation of the accountants and dont correspond to a physical reality. Ongoing payments to NHS pensioners are funded by the government.

The accounting process used is that the cost of pensions paid out is deducted from employee and employer contributions received. If the result of that calculation is positive, the residual is credited to the Exchequer. If the result is negative, HM Treasury votes the funds to cover the shortfall. This vote is sometimes referred to as the cost of the schemes to the taxpayer, but that would be a misleading statement.

Money is fungible, whatever accounting conventions are applied so yes, it is all coming into and going out of the general Exchequer pot. But the movement of funds around the Exchequer, eg, via employer contributions, can confuse people.