Rightwing thinktank reports have produced shock-horror numbers. Best was the British-North American Committee, which hit last week\’s news with this: \”UK public sector pension liabilities now 85% of GDP.\” Good grief! Does that leave the rest of us just 15% to live on while the fat-cat retired dinner ladies, ward clerks and binmen live the life of Riley? It is, of course, a nonsense number, a statistical prestidigitation done by adding all public sector pension liabilities for those now retired to a life-time obligation to every existing state employee. Roll up all the money and describe it as a debt owed in one year and you get silly numbers.
Well done in noting that one number is a capital value rather than an annual bill.
Last week\’s Telegraph leader repeated the refrain that the \”primary reason\” for the closure of private pensions was Gordon Brown\’s \”raid\” on pension dividends, but compared with the above factors and the stockmarket\’s collapse, that £5bn a year was a bit-player.
Ah, but this is exactly where we do want to look at the capital value. For what we\’re interested in is the capital value of those pension pots, what will be available to pay the pensions when they mature. And at 5% (a not unreasonable figure) that 5 billion a year has taken £100 billion off the value of the pension pots.
Even today that\’s real money….