Richard Murphy says:
January 13 2023 at 3:51 pm
Why can’t I look at it that way?The tax is about one quarter of that so abolishing relief gives a massive net tax gee as in still – and the saving is now and the tax paid many years hence
And most public sector pensions are not funded
Therefore most public sector pensions are not included in wealth estimates. Because estimates of wealth include only funded pensions.
Unfunded public sector pensions are not wealth as they are funded by taxes on others therefore net-net there is no aggregate change in wealth. What there is a MASSIVE liability from us to them that the public sector workers deliberately ignore when complaining about pay.
In the US it seems likely that there will be defaults on many government pensions due from States, Cities, Counties, School Districts, and so on.
Presumably the feds assume that their pensions are secure since fedgov owns the money printers.
As far as I know the only big funded government pensions in Britain are local government pensions. (There may be some small funded ones too.)
The basic idea of tax breaks on pension contributions is that tax will be paid on the future benefits, so tax when consumed not when earned – don’t do it twice.
Additionally, the taxation deferred does act as a bit of an incentive, or at least not a disincentive.
Prof Murphy doesn’t seem to acknowledge those effects.
@dearieme “As far as I know the only big funded government pensions in Britain are local government pensions.”
And there are massive black holes in funding for these pensions….
https://www.standard.co.uk/news/london/pensions-black-hole-for-london-councils-record-ps18bn-a4359036.html
Is one example.
And Sheffield City councils pensions are looked at here…
https://www.thestar.co.uk/business/dream-pensions-of-up-to-ps80000-slammed-as-sheffield-city-council-faces-ps44m-spending-black-hole-3450191
When local council pensions implode, I wonder who will pick up the tab. Although I can guess.
Some sense needs to be injected into public sector pensions, which are clearly unsustainable.
However, if municipalities – or worse, Whitehall – declared insolvency then the public sector unions would scream that this was a sovereign default.
Gilts are attractive not least because the Bank of England has not defaulted since the Union with Scotland, an event only precipitated by the failure of the Darien scheme.
So the prospects are pretty appalling, really. Net zero being the new Darien scheme, of course.
That last one is a big disingenous. Or even just an outright lie. Sheffield City Council isn’t paying a dozen pensioners £800,000. The local government pension scheme into which the pensioners and Sheffield City Council paid into in the past, is paying those pensioners. Sheffield City Council’s current spending is on *today*’s employees who will become *tomorrow’s* pensioners. That’s how a pension scheme works. Sheffield Council has zero liabilities for Sheffield Council’s pensioners.
“One individual has been receiving a pension for 46 years.”
Yeah, and? None of that individual’s pension payouts have come from the council, they have all come from the pension scheme. The fact they have been drawing a pension for 46 years has zero bearing on the council’s expenditure, it’s the pension scheme’s expenditure. Any expenditure by the council relating to this person’s pension was – by definition – 46 years ago. And that person is very likely to be somebody who is 96 years old and on about 8 grand a year.
I do feel, philip, that the Darien scheme had a much better chance of success than Net Zero.
I am in receipt of two pensions,a small private scheme one and the main one paid by the United Kingdom Atomic Energy (or whatever they call themselves now). As far as I am concerned I am fully entitled to both of them as both these employers deducted a sizable chunk of money from my pay packet every month as pension contributions.I am getting back what I paid in from a compulsory savings scheme.
As ex railway, I have a pension which I paid into it every week for 38 years. BUT, apart from the lump sum allowable when first claiming the pension, I cannot touch a penny of it – The Railway Pension trustees give me a sum each month out of my ‘pension pot’ but I cannot draw any as a lump sum to cover for any emergency. Now, that’s fine, it is how the system works, BUT, as a divorcee, when I peg out, IF there is any money left in MY pension pot, it goes to the general pension pot, not to my estate / kids / charity of my choice etc.
My mate, in a similar position to me but still married, was aghast when he found out that when he goes the missus will lose half his monthly pension……
@jgh
If the amount previously paid in by Sheffield Council is insufficient to fund the liabilities then the Scheme sponsor will be required to pay in more. That why these local government schemes are normally in deficit, the amounts paid in previously are simply insufficient to fund the benefit promises that have been made.
@johnd2008
In most cases, you will be getting back much more than you paid in, as they were vastly subsidised by your employer.
@Addolff
The scheme provides a pension to you while you are still alive. That’s what was offered to yo during your employment and what the costs of that scheme (and hence the contributions that you made at that time) were designed to cover.
As with all of these schemes, what you paid in is a small proportion of the total cost, the rest being subsidised by the employer / taxpayer.
Had the benefit included the full pension being paid to your spouse on your death, then you contributions (and the costs for the employer) would have been that much higher. This money has to come from somewhere!
@John the Actuary “If the amount previously paid in by Sheffield Council is insufficient to fund the liabilities then the Scheme sponsor will be required to pay in more…the amounts paid in previously are simply insufficient to fund the benefit promises that have been made.”
That’s the point. It’s not the fault of the pensioners of course, it’s the fault of the council that agreed to the arrangements, always on the basis that it would be someone else’s problem at some point in the future and that councils were dealing with “other people’s money”. Like some Ponzi scheme, except when this particular Ponzi scheme collapses it will be the council (or rather the council tax payers) or HMG (or rather taxpayers) who will be expected to stump up for the shortfall.
@Andrew C
Not sure of the point you are making – I think we agree?
I was simply correcting the errors in @jgh’s post, suggesting that the Pension scheme had all the liability and the Council would not be affected.
“My mate, in a similar position to me but still married, was aghast when he found out that when he goes the missus will lose half his monthly pension……” I could argue that your mate must be a fucking fool to have paid into pension scheme for years without troubling to understand a key point about it. In fact I think I will.
Meantime you say “IF there is any money left in MY pension pot”. You are kidding yourself. You don’t have a pension pot, you are in a Defined Benefit scheme not a Defined Contribution scheme. I hesitate to suggest that you are as delusional as Murphy but you are teetering on the brink there.
The answer is obvious. All final salary public sector pension schemes should close immediately and all future employer and employer pension contributions should be invested in Ritchie’s 1% bonds. All public sector employees should receive regular statements showing the value of their new pension and Ritchie’s home address and phone number.
I’ve never heard of a pension scheme where the pension continued to be paid unaltered to the spouse after death. 1/2 is common, 2/3 is superior. The argument is that the overall cost of living reduces for a widow(er).