The TPA writes:
In earlier research, the TPA has revealed that, despite taxpayers paying for massive employer contributions equivalent to £1 for every £5 raised in council tax, there is a huge £54 billion black hole in council pension schemes. There is a real risk that the cost of closing that gap will fall on taxpayers particularly because, in an ageing society, there are more and more pensioners for the active members of the schemes to support.
New TPA research this week showed that in 2010-11 there were fewer than 1.6 active members of local government pension schemes for every one drawing a pension. Five years earlier there were nearly 1.9 active members for every one drawing a pension and in the wider UK economy there are 3.2 people of working age for each person of State Pension Age or over. To find out how dangerous your council’s pensions time bomb is, you can enter your postcode on our new pensions web tool.
There needs to be continuing reform to the Local Government Pension Scheme if we are going to avoid a serious liability for taxpayers.
Fine, there well might be that need but the problem is the overall numbers. Taxpayer numbers are falling due to:
1. Govt incompetence/ideological policy causing businesses to fail and unemployment to soar;
2. Sheer demographic shifts.
Pensioner numbers increase due to:
1. Sheer demographic shifts.
There are a few ways to tackle this:
1. Gen X reneges on the social contract which has always seen the working generation support the older and the children;
2. Govt taps into that feeling and reneges for them, failing to honour written agreements, as Yeltsin did;
3. Govt gets into extrinsics e.g. contrived financial crises, war etc. to get them off the hook and depopulate;
4. Govt. enslaves the older members of the society, tips them out of work, to be replaced by box ticking newly qualifieds with no education, thus keeping the older population at subsistence level.
This is not a time to be:
1. Getting older;
2. Out of work or approaching retirement;
3. Ill;
4. Capable of thinking for yourself;
5. Expecting any sort of integrity from other demographics and especially from govt.
If you look at how children are treated in this society, why would those getting older expect any better from those dealing with them?
In the end you are on your own, do not depend on the state.
Pensions are a Ponzi scheme which only work while the tax paying population increases at least as fast as retired population.
It’s probably why no government wants to significantly reduce immigration. When they claim immigration is good for GDP they mean more people paying taxes to support the unsupportable.
Biggest problem is that the public sector pensions are paid out of general taxation and have never been funded properly, which is the opposite of the private sector where funds are usually invested.
These ‘black holes’ are also nothing new, they’ve always been there. The accounting rules were changed some years ago so that future liabilities like pensions to be paid out in the future had to be included in today’s accounts. Lo and behold there were ‘black holes’ in the accounts of a lot of companies and gave them the excuse to change the rules and offer lower amounts through money purchase schemes rather than final salary arrangements.
In the public sector when added into the government’s accounts it increases the overall level of debt i.e. future outgoings to be covered. As it does when PFI is included in the balance sheet. And the consumer debt figure is a lot higher when mortgage debt, including future payments, is also added in. All works the same way.
Problem is, as with anything in the future, we can’t know today what income in terms of taxation there will be to cover these pensions. Though I think a lot of people are waking up to the fact that there is likely to be very little left in the pot to go round.
Private pensions aren’t going to produce anything like the level of income a lot of people have been expecting. I well remember the projections (pick any number out of thin air you like) that sold me on the idea of a personal pension in the ’80s ’til I got wise to the fact that the ‘personal’ pension wasn’t anything of the sort. I don’t OWN my pension, it is owned by the pension company. And all I have is a vague promise to pay with so many caveats that I doubt it’ll be worth anything by the time I retire, particularly taking into account all the management charges taken out over the years.
Hmm. This analysis rather neglects the vast transfer in wealth from younger to older people that’s been caused by the 50-year house price boom. Today’s retirees were able to buy family homes for a relatively modest share of income; today’s young people were not.
Equity release schemes, allowing older people to realise their wealth in cash form, are the answer. Far preferable to taxing the young now, solely in order that they can finally get the assets when they’re middle-aged and their parents die…