Government bonus from Miners pension fund

Discussion in 'Current Affairs, News and Analysis' started by Blogg, Aug 5, 2008.

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  1. It never ends. The future payback for all these dodgey numbers games to prop up excessive spending by Liarbor will be horrible

    "With a combined 350,000 members and £27bn of assets, the Mineworkers Pension Scheme and British Coal Staff Superannuation Scheme are among the largest pension funds in the country.

    They are also underwritten by the likes of you and me.

    Under a deal signed when British Coal was privatised in 1994, the Government guaranteed the schemes' payments, along with inflation-linked increases. In return for this guarantee, the Government receives 50pc of any surpluses (with the schemes' members sharing the rest in the form of an annual "bonus").

    It's a bizarre deal - with inherent conflicts of interest - that would no doubt be rejected out of hand by the Pensions Regulator if it were proposed by a private sector company today.

    But for the schemes' members and this cash-strapped Labour administration it has proved to be a very lucrative arrangement.

    In the past two years, the Government has received £1bn in surpluses (bringing the total pay-out since 1997 to £3.5bn).

    Thanks to a string of freedom of information requests by John Ralfe, the independent pensions consultant, we now know a lot more about the two schemes, their liabilities and exactly how the Government calculates the schemes' surpluses.

    Ralfe's findings do not make pleasant reading. The surplus that has helped to boost the Government's coffers is based on calculations by the government actuary (the same actuary that continues to underestimate the real cost of MPs' generous final salary pension scheme and that was heavily criticised by the Parliamentary Ombudsman in its recent report on Equitable Life).

    The schemes currently have a combined £1.9bn surplus - based on an "expected return on assets" calculation by the actuary. But, on the basis of the index-linked gilt rate, that surplus becomes a £900m deficit. The payments, Ralfe argues, are being made from "fictitious surpluses". And it's not just the calculation of the surpluses that he argues we should be worried about. Despite being mature schemes, with the vast majority of members collecting their pension, 70pc of the funds' assets are held in equities.

    A similar private sector scheme would be invested 100pc in bonds, but the Government it seems is prepared to gamble on the equity markets. Not that the schemes' current members are likely to complain, given that the actuary's optimistic assumptions have delivered such generous bonuses in recent years. The Government itself is also unlikely to lobby for a more conservative calculation of liabilities, given how desperate it is to prop up its battered balance sheet.

    But, if the actuary's assumptions prove to be overly generous - as Ralfe expects they will - future taxpayers will be forced to pick up the tab and honour the Government's promise."


    http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/08/05/ccom105.xml
     
  2. is taking surplus out of pension schemes what did for a load in the 90s you have good years and bad years and when a scheme is in surplus it means you can ride out the bad years?
    or am I just a thick smelly hippy :evil: