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Grounds Keeper Willy

Huge IOMG pension contribution short fall

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2 minutes ago, Numbnuts said:

Is anyone surprised about this. I'm not . Marndaring on without addressing it hoping it would go away was never a great option. So cut backs to services to the ordinary tax paying public and now that same money funding the shortfall to the protected species . Wrong on so many counts . These same CS and public sector workers can retire as normal.with there public sector pension while the people going home fund it in years to come are facing increased wait for there's . Very very wrong !!!!  

Sorry but could you make that a tad clearer

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It's not really surprising, it's just that this adminstration has departed from what you might see as a Manx sense of fair play

If public funds can be actively used to top up pensions of the CS & PS, then they can be used to top up the incomes of citizens to a minimum level too

I'd appeal for greater investment in social housing at the same time too

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4 minutes ago, dilligaf said:

Sorry but could you make that a tad clearer

So sorry ..done on original ..blinding headache which so isn't helping 

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i can't understand why we still have a problem as eddie balanced the books quite a few years ago.

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1 hour ago, piebaps said:

There were no "liquid" arrangements. Every scheme was and is unfunded.

So True.

Numbers - I think the Press numbers are just GUS but you really need to consider the lot. From detailed Government Accounts for 31/3/2019 the total cost of pensions was £100m. This is shown as met by 67m of contributions and 33m from PSPR.

However, PSPR is just govt cash and the contributions include 37m from the Employer ie government. I think, and I am quite tentative about this, that this means employees contributed 26m and the Govt had to fork out 74m in cash.

 

Language - we have grown used to calling the difference between pension contributions and pensions paid a "deficit" or "shortfall" but is this correct? These words imply that these two amounts should be or were planned to be equal, that one funded the other. I can't believe that this was ever the case. Why would contributions paid by current employees have any relationship with pensions paid to former employees who earned their pensions in different eras at different levels of salary and under different scheme rules. These two numbers are not the same thing but using language like deficit encourages us to believe that the answer lies in trying to balance the two amounts - I don't think it can and can't see why it should.

Cash - the issue really is that the government needs cash to fund expenditure and this includes pension obligations. I do not know if there is a problem going forward but if there is it is about balancing all of the governments various inflows and outflows.

Reserves - the PSPR is just an allocation of government reserves. When it runs out accounting will change but not the underlying reality. In fact, I think its use clouds our thinking. The optimal treatment would have been to account for the pensions as they were incurred ie when earned. We are accounting for them as and when paid but softening the blow by an accounting transfer which reduces the cost hitting the Income account but not affecting the amount paid out.

Solution - I am sure this is well known within Government but the answer lies in increasing govt. cash inflow or reducing costs. Suggesting this is purely a pension deficit causes us to believe the answer lies in adjusting pension rights which, I suggest, is a small part of the range of options available.

 

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16 minutes ago, WTF said:

i can't understand why we still have a problem as eddie balanced the books quite a few years ago.

Perhaps he did it in a commercially confidential way !?

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32 minutes ago, Donald Trumps said:

It's not really surprising, it's just that this adminstration has departed from what you might see as a Manx sense of fair play

If public funds can be actively used to top up pensions of the CS & PS, then they can be used to top up the incomes of citizens to a minimum level too

I'd appeal for greater investment in social housing at the same time too

Not more social housing, but more help for our young to buy their own homes. Lots of people in so called social houses should be in their own homes or in private rentals

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1 hour ago, piebaps said:

There were no "liquid" arrangements. Every scheme was and is unfunded.

That's not exactly true.  None were unfunded, except for that for Tynwald members (there may be some others I don't know about - judiciary?).  What the others were was underfunded.  And the underfunding came from two sources.  The first was the level of employee contributions which varied from token percentages (as for much of the civil service) to something more substantial but still insufficient (such as the police[1]).

But the second reason for underfunding came from the employer's side with not enough (if anything) being paid into the fund over decades.  And of course that meant that taxes could be kept lower and all taxpayers benefited, especially the wealthiest and including all those public servants who are now demanding the high pensions and lump sums that they awarded themselves.  But those in the private sector benefited as well and both were able to invest more than if they had prudently put away enough to cover future liabilities.

So future generations were swindled in two ways[2] with regard to pensions and are now expected to subsidise the fecklessness of their elders.

 

[1]  Even 15% of salary (or whatever) over 30 years of service is going to be insufficient to fund a retirement period of 35 years (a 50 year old man can expect to live till 85).

[2]  There may be others as well.  For example I think civil service pensions are index-linked to a higher level of inflation than Manx ones.  And much of those personal surpluses went into property which those now unable to afford to get on the property ladder will have to pay high rents on.

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So change legislation to put a cap on the maximum lumpsum that can be paid out, say £75k, and that no more than median island wage can be paid out as civil/public pension p.a.

Reduce the amount being paid out.

 

Edited by b4mbi
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20 minutes ago, b4mbi said:

So change legislation to put a cap on the maximum lumpsum that can be paid out, say £75k, and that no more than median island wage can be paid out as civil/public pension p.a.

Reduce the amount being paid out.

 

Turkeys voting for Xmas comes to mind !!! 

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2 hours ago, dilligaf said:

Not more social housing, but more help for our young to buy their own homes. Lots of people in so called social houses should be in their own homes or in private rentals

Snob

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2 hours ago, WTF said:

i can't understand why we still have a problem as eddie balanced the books quite a few years ago.

Errrr, no....Eddie TOLD you he balanced the books.

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2 hours ago, Roger Mexico said:

That's not exactly true.  None were unfunded, except for that for Tynwald members (there may be some others I don't know about - judiciary?).  What the others were was underfunded.  And the underfunding came from two sources.  The first was the level of employee contributions which varied from token percentages (as for much of the civil service) to something more substantial but still insufficient (such as the police[1]).

But the second reason for underfunding came from the employer's side with not enough (if anything) being paid into the fund over decades.  And of course that meant that taxes could be kept lower and all taxpayers benefited, especially the wealthiest and including all those public servants who are now demanding the high pensions and lump sums that they awarded themselves.  But those in the private sector benefited as well and both were able to invest more than if they had prudently put away enough to cover future liabilities.

So future generations were swindled in two ways[2] with regard to pensions and are now expected to subsidise the fecklessness of their elders.

 

[1]  Even 15% of salary (or whatever) over 30 years of service is going to be insufficient to fund a retirement period of 35 years (a 50 year old man can expect to live till 85).

[2]  There may be others as well.  For example I think civil service pensions are index-linked to a higher level of inflation than Manx ones.  And much of those personal surpluses went into property which those now unable to afford to get on the property ladder will have to pay high rents on.

Are you sure?

If by "funded" you mean that someone is paying the pensions, then I agree the pensions are funded (by Government). However, I think that by funded most people mean that there is a separate ring-fenced fund manged by trustees into which contributions are paid and out of which pensions are met. If this is what you mean by funded, then none of the Government schemes are funded - except the Post Office (and SPCo, if that is included as govt).

Co. pension funds are funded and the liability to pay pensions lies with the trustees of that fund. In the Government case, there is no external fund and the liability sits with the Government and is on its Balance Sheet. This does mean the concept of underfunding is odd, as there is no fund the Government uses its own cash to pay the pensions and any contributions are absorbed into Government Revenue. Effectively, the whole of the pension liability is underfunded.

"Swindled" is harsh. The way the scheme has worked out is not optimal but I doubt anyone intended us to be where we are and the public have benefited in that money which should have been put in a fund was spent on Government services. That does now need to be rectified.

The arrangement is far from ideal but not as bad as it sounds. The Government has a significant asset that is not recognised on its Balance Sheet, the right to tax IOM residents. This will be used to fund future pensions, unfortunately, there are also some other commitments for this asset.

 

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