It’s not a £800 million deficit

Frank Field demands answers over ‘reckless’ running of Carillion
Regulators and pension schemes under scrutiny from MPs investigating £900m deficit

Just as the BHS one wasn’t £750 million or whatever.

Although the outlandish claims do have two things in common – Frank Field.

23 comments on “It’s not a £800 million deficit

  1. “I have always thought of Frank Field as a moron with a mysteriously good reputation.”

    Mrs Thatcher (pbuh) had a high opinion of Frank Field. My impression is that he’s losing his marbles now.

  2. Frank Field used to be a good guy, the sort of MP that Labour was founded for but as Tho says, he’s lost it.

  3. The Economist says this week that if all of Carillion’s 14 pension schemes end up with the PPF, “that fund may be on the hook for almost £900 million.” “All” and “may be” do a lot of work in that sentence, but it doesn’t seem like Field is making up his numbers.

  4. I`m not sure what you are getting at here. The aspect of this that I think many people struggle with is the bland fact that Carillion , in effect stole from its pension scheme to the tune of £800/ £900 m
    I appreciate it did so by not making responsible payments but quite how this is so different Maxwell escapes me
    Do we not have to look again at measures of solvency when it seems likely that similar risks are being run by many other companies with other people`s money ?

  5. Newmania, I can’t be arsed to check your statement but please provide proof of the stance taken by the trustees of all the pension funds in question as to funding adequacy?

  6. So stealing might be the same as not paying high enough contributions. Mr Ecks will explain the difference to you.

  7. @Newmania

    You are talking bollocks.

    The pension deficit is calculated using today’s interest rates as the starting point for various cautiously based projections of what the fund might be worth in the future and compares that against what amount will be required in the future to fund commitments.

    The contributions will have been made years, decades ago using projections calculated at that time. I don’t know whether you have noticed but we have had record low interest rates these last few years. Not only have funds not grown as expected, more funds than originally anticipated are calculated to be required as interest rates remain low and people live longer.

    It’s the reason why final salary schemes have virtually disappeared. You’d need in the order of 60% of salary being invested from employer/employee contributions to build a pot big enough to give the sort of index linked with spousal benefits pensions that were once common. And it is of course only defined benefits schemes that can have deficits.

    So no one has stolen anything. When the contributions were made, they were made in full and in good faith. Events 20 or 30 years after the event have shown those promised pensions to be virtually unfundable at today’s interest rates.

    If interest rates were to jump to 15% tomorrow, the deficits would disappear.

    And if every single defined benefits pension scheme is hundreds of millions of pounds short of what it needs and they’ve been forced to close as all but unaffordable you might wonder at the completely unfunded public sector pensions which have been nothing but tinkered with. Take me. 10 years with HMRC 1987 to 1997. Taking my pension early at 55 as a bit of pocket money and the lump sum. Nearly £6k p.a. indexed linked for life and £21k lump sum. There isn’t a private sector pension anywhere that could get anywhere near that.

  8. These numbers are easy and simplified.

    Mrs BiND gets £5k per annum index linked from working 14 years as a teacher,

    To pay that would need a fund of £250k earning 2% per annum above ithe inflation rate used for indexing. She often claims she paid in to her fund as she had a nominal deduction, but as I keep telling her, she didn’t pay in £18k per year.

  9. BiND

    Your wife and my examples also put in context the oft quoted “civil servants only get an average of £5.5k pension per year”

    It includes all those who worked for part of their career or part-time or even part-time for part of their career.

    And of course includes those who never got above the level of barely functional filing clerk and who would have been sacked in the private sector but instead eked out a 40 year career losing things and drinking tea before.

  10. Newmania – are you suggesting the trustees of the pension funds were not doing their jobs?
    Perhaps get the workforce to pay the deficit out of their wages each year? The deficit will change over time, currently its in deficit – but there will be times its not as much in deficit or even in credit.

  11. AndrewC said:
    “If interest rates were to jump to 15% tomorrow, the deficits would disappear.”

    I’d be surprised if it needs that much; think 5% (base rate) would generally do it.

  12. “but there will be times its not as much in deficit or even in credit.”

    Wasn’t there a period when pension funds were so flush the Treasury stopped firms paying in and claiming tax relief? Under Brown IIRC.

  13. I wonder where Frank Field was when 78% of my pension with Equitable Life went down the drain?

    Regulators are still getting theirs I assume…

  14. Equitable’s problems were created by their business model and management, but in the final analysis there was a class of policyholders (those with guaranteed annuity options) who thought they were entitled to a greater share of the pot. When they won their legal case, the company collapsed leaving them with far less than they were offered originally. But the lawyers walked away greatly enriched.

    There may be a moral here, somewhere.

Leave a Reply

Name and email are required. Your email address will not be published.