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Phillip Dearden

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Everything posted by Phillip Dearden

  1. I am sure the question is well meant but I suspect that some unfairness will be perceived from the other way round. In health and education, pensions are a big part of the remuneration expected, this is really an element of deferred salary. We, the population of the Island, have had the benefits of the efforts of these workers and, via govt., have promised to pay some remuneration later. To break that promise (or even to mitigate it) seems unfair to me. However, what I think does not matter. It is a legal liability, if the government were to take steps to reduce their liability I am sure their would be many protests and some would look for redress in court. There would be a practical downside in that the govt.'s credibility would be damaged and certain groups of (important) employees would be less likely to come here. I have not heard any politician suggest that this is viable course of action. I suspect just the fact that such actions are being talked about will make some people think twice about coming here. If services were reduced or taxes raised, CS/PS members would be hit in the same way as the rest of us. I realise that this is a big issue and that it has caused a lot of concern for some people but I really don't think cutting pensions can be the solution.
  2. Ah, I see. Some groups are emphasising that they have always contributed, which I am sure is true. But those contributions never made it into a pension fund - they were used to fund expenditure.
  3. I wouldn't want anyone to think I am an expert on these or that I have any inside knowledge but my inexpert opinion is that only the Post Office and Local Government operate traditional funded schemes (and now the Steam Packet, if you think that is part of Government). I am fairly sure the rest are funded out of current revenues. I know there has been lots of tidying up including the combining of some separate schemes and changing the terms of some (increased contributions) but I am not aware that any of these changes involved creating actual pension funds.
  4. A funded scheme would be great but the transition is difficult. If you started one today and moved all the CS/PS onto it, then for 30+ years you would have to funds the scheme (current contributions) and pay pensions out of other revenue. Thus, in time we might get to a good place but for most of our lives, the cash-flow burden is doubled. This is the sort of thing to start when revenue's are healthy.
  5. I agree, the Island and/or the Government are very unlikely to go bust. I wonder if the question is being framed inappropriately. The way it is being discussed points us to particular solution but there are a wider range of solutions available. The problem is not a traditional "pension deficit" problem. A traditional pension deficit arises when a pension scheme has insufficient assets to meet its liabilities - we have no fund so there can't be a shortfall. The deficit often discussed in the context of the IOM CS/PS is the difference between Pension contributions and Pension payments, this can be called a deficit but it is the difference between two values that were never intended to be the same. There is no sense in believing that current employee and employer contributions should meet current pensions payable, why would these two totally different figures match? The concept of employer contributions is also odd, in this case the employer is the government which also has to pay the pensions so an employer contribution, in this case, seems to have no overall economic effect (I can see it helps internally with Budgeting and cost-control). The real issue is that Government Revenue, including pension contributions, is smaller than Government Expenditure, including pension payments. The shortfall is small compared to existing funds held and has been met by reserves and by taking monies from elsewhere. This might continue for a while but it would be best if a permanent solution was eventually arrived at and this could include some or all of; a) increased taxes (more tax, either tax more things, or more people or raise the level) b) reduce expenditure which might mean reduced service levels but might also mean deliver the same level of services more efficiently c) reduce pension commitments - possibly reduce indexation or accrual rates. I can't really see existing obligations being cut but it is possible. d) new or increased charges for some services. None of these would be welcomed and I can see why MHKs wish to avoid them. However, that does not mean they may not be required. Framing the discussion as a Pension deficit points us towards reducing pensions (or increasing employee contributions, which has already happened) but it does seem unfair to focus the pain on the CS/PS pensioners who had no say in designing the scheme and who, if asked, would I am sure, say that they would have preferred their contributions to go to a fund to provide for their pensions. We are talking about teachers, nurses and those who maintain our infrastructure - all they have done is accept remuneration which is partly deferred, it is not their fault that funding the deferred element turns out to be difficult.
  6. I think you have properly described the past, I hope it does not happen again. The IOM population and CS/PS have grown significantly over the last 30 years, retirements will be happening now which will cause a bulge in pension payments. If many thousands of new residents arrive and pay tax, the pension increase might be funded. If we also increased the size of the CS/PS. which to some extent we would have to, we could repeat the problem. I am not convinced we can increase the population by the numbers I have been hearing so this could be academic. We would then have to deal with the problem in the short to medium term.
  7. Isn't it more likely that pensions are changing. Most modern pensions are defined contribution schemes ie you and the employer put some money in and the pension is whatever that fund can produce. With these there can be no deficits. I suggest these will become more common as funding for retirement becomes more problematic. Final salary schemes were attractive to employees but they did create risk for employers and most have now changed, at least in the Private Sector. The IOM Government scheme involves no saving and no fund and so is quite a strain on public finances. I doubt anyone would start such an arrangement now. I would not use the word Ponzi as that was a fraud, there was an intention to deceive. Whilst the IOM CS/PS scheme is not the most cautious thing going, I don't think there has been dishonesty or any desire to deceive.
  8. That might be the Treasury Act 1985; "an estimate of the income and expenditure, for the purposes of the Government during the next financial year, distinguishing the same under the respective heads thereof and providing an estimated surplus of income over expenditure." but, in fact, recent budgets and accounts tend to show expenditure greater than income. I think this is made acceptable by a transfer from reserves, after which there is a surplus. BUT - you said they could not borrow, that is a different matter and I cannot see any such bar.
  9. Are you sure? There is a few hundred million of loans on the Government Balance Sheet - maybe they missed this? There is a loans act which says; "3 Power to borrow [1958/2] (1) The Government may from time to time, with the approval of Tynwald, borrow such sums as may be so approved for all or any of the following purposes —...."
  10. Your words suggest there is a straightforward solution and that you know what it is. I wondered what that solution might be?
  11. I am sure you mean well but this does not mean much to me. I certainly don't see how the Government can fix its pension issues by following this advice.
  12. Are you sure? Where is this 13k that I owe, for this year alone? You are correct that I did not sign up for such a loan.
  13. Almost. 19/20 involves a 33.7m transfer from Reserves, 20/21 is budgeted to utilise 48.5m of reserves. These include 33.5m in 19/20 and 36.3m in 20/21 re the PSEPR. In both cases, there is a surplus after the transfer from Reserves. I am not sure this really means anything and prefer to note that expenditure exceeds income by 22.5m in 19/20 and 36m in 20/21.
  14. Isn't there a chance that this would increase the total amount payable?
  15. Because the pensions are not owed by a company or some pension trustees, they are an obligation of the government.
  16. Well said John - I didn't want to say this again as I was sounding like a stuck record. CS/PS Pensions have always been paid out of tax revenues. The reserve and the fact that some of the payments are charged to it is an accounting detail - the cash used is tax revenue and there is no separate fund, as there is with company pension schemes. Rather than worrying about the reserve, the matter to be concerned about is whether future revenues will be adequate to fund all government commitments, including pension payments.
  17. Well said Derek. The Forum would also be a more effective forum if commentators focused on issues rather than insulting each other or third parties.
  18. When I have met dual-residence it was often due to poor planning or lack of effort so I think you are generally right here but it can sometimes be the result of very good of expensive [or both] tax planning..or just the result of a complex lifestyle. I appreciate we are going down a bit of an irrelevant tangent for which I apologise but you did say "You can’t be tax resident in both. " when, in fact, you can. In a similar vein, most IOM resident have not been taxed in respect of UK source dividends for some time [similar, in that it is a bit of a tangent but I just wanted to clarify for the readers]
  19. You can be dual-resident. It's not a nice thing but it can happen.
  20. I was referring to the total of all funds, reserves, capital and revenue accounts ie the total of the Balance Sheet ie Net Assets/Liabilities.
  21. There are two important points there. 1. The PSPR is not very relevant. The government funds pensions with its own cash (there is no separate ring-fenced fund, as there would be with a company pension scheme). When pensions are paid the costs needs to be charged somewhere, while the PSPR has capacity we can charge them there. Practically, it is the availablilty of cash that matters, not the PSPR. [In accounting, when we pay pensions, we credit cash and have to put a debit somewhere - to most taxpayers and pensioners it will not be of great import whether the debit goes to PSPR or General Revcenue Account] 2. I think CT did say that pensions had now become sustainable. It is good that CT is confident and I expect he has either seen cash flows or spoken to people who have. I hope they were prepared on robust assumptions. This is the key to PSPR affordability.
  22. The quoting of reserves figures for the IOM Government is not a very helpful thing. The total of all Funds, Reserves and Revenue accounts in the 2019 accounts was minus 58m. This is obviously not an attractive number but the Government's main source of income is its power to tax the population and that is not in the accounts (although the revenue this "power" produces is in the Income statement). If you think the Government Balance sheet is important, this is a worrying number, personally I suggest interested parties should focus on cash flow. The Government needs cash to fund services and pay pensions and the Reserves figure is not very helpful here. Total Funds and Reserves and Revenue account (ie Balance Sheet total) were plus £3bn in 2010 so they have reduced significantly. Much of this reduction is due to re-appraisal of pension provisions. The "billions in reserves" comment arises because the Government treats certain of its capital/reserves accounts as official reserves. The Capital Fund and Reserves were 2.9bn in 2010 and are now 1.7bn. Both are significant numbers but I suggest it is more sensible to look at the total figure rather than to pick a figure or group of figures to look at in isolation. The NI fund was £914m. If you thought that was "ring-fenced" or unavailable (I don't), the remaining "funds" would be much reduced.
  23. I say this with some trepidation, but... are you sure? I have two queries; 1. Ordinarily seems to be an amplification of what we mean by resident ie it is adding extra description to the term resident. If this is right, you would have to be resident to be ordinarily resident. This would not be the case if there was a separate definition of "ordinary resident" but I can't find one in the ROTPA 1005 or the Regs. I accept it might be somewhere else unknown to me. 2. In the tax world, which I appreciate we are not in, Ordinarily Resident, means resident year after year ie not a one-off. The tax definitions might not mean anything for voting legislation but I suspect they might be taken into account if there is no definition within the voting laws. If there is no clear definition, this would seem unusual for something so fundamental but that is the way UK and IOM tax operated for many years. Tax was/is applied on the basis of residence but there was no clear statute to say what this meant. There was case-law but some of this conflicted and much of it came from a time when people were not as mobile as they are now and so was not too helpful. [BUT don't be alarmed, in most cases a person's residence is clear - it is the marginal cases that became tricky].
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