text:
Civil servants to get pensions shake-up
GUERNSEY'S public sector final salary pension scheme will finally be scrapped under plans revealed today.
GUERNSEY'S public sector final salary pension scheme will finally be scrapped under plans revealed today.
The new arrangement will come into effect from January 2014 if it receives the endorsement of the States.
It will see benefits linked to an employee's average 'revalued' salary over a whole career.
Proposals will also limit the level of pensionable pay in any year for top earners at £85,000 – but an allowance in lieu of taxpayer pension contributions will be paid to members earning above this level.
In its report, the joint working group explained that for each year of employment, members would earn a pension based on income for that year.
Upon retirement, the yearly amounts, revalued to retirement in line with RPIX price inflation capped at 5% pa, would be added together to calculate the pension.
- The review group was led by independent chairman Rodney Benjamin, pictured.
Comments for: "Civil servants to get pensions shake-up"
About time too.
There was no mention of what will happen with new entrants.
I would have liked to have seen an attempt to move younger new entrants into defined contribution schemes instead of remaining in a defined benefit scheme as this would have been easier to negotiate.
Hooray - at last someone has seen sense
Sounds like this anachronistic pension scheme has finally been tackled. However, the old scheme needs to be closed NOW to new members, and some mechanism put in place to accept backdated members in 2014.
Well its a start but what do they mean scrapped? does the tax payer still not have to contribute over and above the normal pension scheme? Its a start but it does not tackle the real problem
(the deficit) I dont see why other people have to fund there own scheme when we have to pay for theres. This is to little to in my opinion. The day there is an even playing field for all is the day this has been tackled fairly.
Hmm not the changes some would have liked. Still defined benefits.
I expect the States will jump at the chance and agree to these changes. But will pressure for further reforms continue?
I'll look forward to reading the commentary when all the details have been analysed and digested.
This is going to cost big time.
All public pensions' staff will fight it with their unions and have not agreed to changes and will not agree.
So if passed in the States Guernsey it will end up in court if enforcement is attempted.
And that's not going to be cheap. when the unions win and they will, Guernsey will still have to pay the pensions and the court costs.
Meanwhile what's happens if all the public pension staff take industrial action everyone moans that they do anything, but just imagine what they could bring to a standstill fire fighters airport, nurses hospital, customs harbours Electricity staff, Water board staff Post office, to start.
And they won't be fooled by the past strategy of divide and conquer.
Believe me they are all ready to fight for the pension from the first sign of tampering with it.
At least we will have
Sounds like you're deliberately trying to stir up dissent against an attempt to sort out what just about every person in the island realises needs fixing urgently
guern abroad
Exactly Ray.
Maybe Noel is just being realistic?
Lets hope he is wrong.
Michael R
I doubt that Noel is trying to stir up dissent: merely stating the obvious. I'd imagine that some unions already have plans in place to voice their discontent.
Neil Forman
What would you prefer?
The taxpayer put just under £27,500,000 into this scheme last year. It cannot afford to keep doing this.
The fund is in a massive deficit already which is growing.
The only reason this scheme has been allowed to continue is that it can be bailed out by the taxpayer. If it was a private scheme it would have to close as it cannot meet its liabilities.
This way still gives you a pension and a lump sum payment and is more sustainable. You also have better job security than most people. I would imagine that there are a lot of unemployed / minimum wage earners who would jump at the chance of a public service job without the pension.
You have to realise that everybody is feeling the pinch in these uncertain times, most have already seen their similar scheme closed years ago.
"If it was a private scheme it would have to close as it cannot meet its liabilities"
That's simply not true.
It would only be in deficit if it was wound up in which case taxpayer would have to pay up the shortfall. As it is the funding level is fine and the deficit level will continue even if the proposed changes are approved.
Are you suggesting that the pension fund is in effect a Ponzi scheme?
Who me? No I don't think it is a ponzi scheme because it is circa 90% funded and there is a pot of £900,000,000. If there was no pot of money then pension payments would be paid from ongoing contributions which would be a quasi ponzi scheme but it would still be backed up by state assets.
Neil Forman
We have been over this recently, you have your view I have mine.
So, it cannot meet its obligations as I said.
The funding level is not fine, it is based on an assumed rate of growth.
"So, it cannot meet its obligations as I said"
That's simply an incorrect statement.
It CAN meet it's current obligations and it CAN meet it's future obligations based on an assumed rate of growth, an assumed life expectancy and a flexible uncapped employer contribution rate which CAN adapt to any future adjustments to these assumptions.
The underlying investments have been realigned to hedge for ongoing recession and it seems all reasonable measures have been taken to safeguard the value of the assets. You can see that the deficit has been growing but you fail to acknowledge that it has been allowed to grow.
You say it requires a "flexible uncapped employer contribution rate" in order to meet its liabilities. Exactly. That's precisely the problem.
The States of Guernsey cannot leave itself open to having to commit to find the odd extra £20m or £30m every couple of years to help cover the £300m-plus (and growing) deficit. Not only would that plsy havoc with States budgets, it would mean that there is not enough money for the health or education services. We already know what problems arise from that.
The only ways to carry on funding the scheme at a 90% plus level will be from either making drastic cuts in investing in the island's infrastructure, or from raising substantial extra tax revenues from the workforce. All so that our public sector workers can continue to receive a gold plated final salary scheme of a type which is being eradicated elsewhere in the real world on grounds of unsustainability.
Do you really think that islanders are going to accept huge extra taxes or declining health and education facilities just to keep this going? Not a chance.
Now that you have sobered up you have made a valid and coherent point.
The proposed change deals with the problem by capping the employer contribution rate at 14%. Clearly this will be a sticking point for the employees as in my view this transfers any risk to them contrary to RB's comment.
However in support of RBs comment, the risk is mitigated as the recommended 14% level seems reasonable and would only come into force in the event of dire under performance of investments.
No one knows what will happen in the future but over the long term all economic systems seem to run in cycles so it is I think inevitable that values will eventually improve again in due course. Over the much longer term assets are surely likely to at least retain value.
Regarding your comments about services and taxes I fully expect in coming years that both service cuts and rising taxes will occur irrespective of public sector pension arrangements. Bring on the tax review, the tax mitigation privileges enjoyed by the wealthy are starting to fall apart at the seams.
Is part of your employment remuneration package a Public service pension?
I bet not
"Everyone" does not include the Public service pension staff I assume.
And be a realist "quick" the same miss management that got the pension in this situation are trying to fix it by blaming someone else. It would be funded with no more being paid in than the new UK recommendations for everyone's equal playing field that you wanted. But they used the pot for a cash cow and now are trying to hide it
Instead we are going to fight an unjust battle in the name of a false assumption.
Look in to it you've been conned mate
Neil Forman
' They used the pot for a cash cow and are now trying to hide it '
Could you expand on that please?
The Guernsey pension pot is worth circa £900,000,000.
The UK pension pot is worth diddly squat, it is a ponzi scheme with no money behind it.
Public Servant
He means the employer hasn't always been putting money into the fund, simple really
Devil's Advocate
I suspect Noel is referring to the so called 'pension holidays' where the States stopped paying into the fund when investments were doing well. Subsequently, now that investments are doing badly, the fund is now in defecit. I think there is a lot of scaremongering about pensions, if in ten year's time investment returns are good then it'll be back into credit.
Can anyone confirm whether and if so, how much, money was taken out of the fund and not put back?
If withdrawals happened in addition to pension holidays it looks like the States have been allowing the fund to be mismanaged for years.
Fund managers are supposed to hold money back in the good years to get through the bad years.
Still only a proposal.
However, if its so good a pension any change will not be welcomed and as Noel says will be fought against.
But then as many say Civil Servants do nothing then any action they take will have little impact on us. Mmmm we may find out how true that is if they don't like the changes.
States workers will all have to agree to sign New contracts as the 6.5% currently paid is written into our current ones good luck with that!
Enjoy being retrenched then :)
I hope an immigrant takes your job, im sure they could do it better anyway...
Ooh toys out the pram!! funny enough we get most of our work from customers who have used cheap immigrant Labour trying to save money. They then get us in to sort out the mess they have been left in.Do try and be an adult in future.
Tough times ahead. I know many civil servants who are on low incomes and are not privileged enough to receive any staff benefits whatsoever. They are decent hard working people who saw the pension scheme as their only perk. For them this is a major blow especially this time of year when their friends are discussing Christmas bonus's, complimentary staff meals, sales commission, not to mention the basics like free hot drinks. I understand the need to make savings for the good of the island but can see their point of view. To clarify, I have worked for almost thirty years in the private sector.
Neil Forman
This will also stop the abuse of the scheme. Now it is worked out over the employees lifetime earnings it should stop the ' promotion ' in the final years which bump up the pension.
It is this type of abuse that has sounded the end of this scheme.
Metric Anvil
Abuse or performance management? I'm not sure you, Neil, can tell the difference.
You might call it abuse if everyone got promoted just before retiring. The SO positions are rare and filled by experienced, competent and performing individuals with something to give at a strategic level before they leave service.
Real world
I imagine some of their friends in the private sector are also discussing redundancy, no bonuses (again), no pay rise (again) and ever increasing working hours (with no overtime or time off in lieu), and no Xmas party (again).
Wake up people
The first thing that needs clarification is that nothing has been or will be scrapped! Even if this goes through, all accrued benefits from the final salary scheme will be retained!
It does amuse me to hear people refer to this as a "gold plated" pension! My definition of this would be anyone who is part of a non-contributory pension scheme which I am aware a large portion of finance sector belongs!!!
It would be interesting to compare two individuals - both of which earned the same salary and had been working for the same number of years! Person A is a civil servant on the final salary scheme. Person B is a finance worker who does not contribute to their pension, but in addition to their 'free' pension, they put the same amount as person A contributes into a private scheme in order to increase their pension.
I wonder if person A or B would end up with the better deal at the end of their working career? Perhaps the answer to this may clarify whether civil servants actually do have it that easy?
The answer to your question will depend upon many factors. All of which will be largely out of the control of Person B. Unlike Person A, who can currently calculate their entitlement, Person B has to contend with a number of variables, including stock market performance over the course of their working lives and levels at retirement. With market conditions over the past 4 years, the average Joe may not have seen their pension increase at all and may actually have seen a decline. Person A will still have a relative certainty, albeit at a potentially lower level than previously expected. Person B may, or may not be better off, only time will tell. As with most dilemmas, there is rarely a simple answer.
Calling_ planet_earth
Noel, Wake Up, time to wake up yerself.
You are both entirely missing the point, the island CANNOT afford to keep subsiding CS pensions, end of.
Why can't you get your heads round that?
Private pension schemes are not subsidised by the rest of the island and are prone to market changes, lately, much to their detriment.
The Civil Service pension scheme experiences theses same nuances in the market, but the short fall is largely subsidised by the rest of the island, thus the knock on effect is far lessened for the person receiving the pension, and takes money out of people's pockets who will never benefit from the scheme.
- so far, so unfair.
Some in the private sector (I know of at least one, I am sure there are more), are, despite years of faithful contributions, looking forward to b*gger all pension wise, thanks to the total failure of the scheme they were paying into, but that will never happen to civil servants under the current CS pension model.
Whether those in the finance sector have to contribute to their pension scheme or not, whether they are paid more or not - in many cases, not, your assumption that finance is still as generous as it was in the boom years is incredibly out of date - is, quite frankly, besides the point.
If the bank pays some or all of their staff's pensions, it doesn't cost us, Joe Public, anything, and if the end result is that employee ends up with b*gger all pension,then they're still going to be a damned site worse off than those in the CS with their entirely unsustainable (that means 'impossible to maintain', something which you both - and the Unions - appear incapable of understanding) pensions, that those same people will have been helping to maintain all these years....
and so now what? It's tough? The private sector had it good, once, so the CS can say, 'ding ding, we're on the bus, thanks for propping up our pension, sorry you've got nothing - c'est la vie'...?
Your ignorance and complete refusal to see things as they really are is staggering, somuchso that if you both aren't already in the CS, you should consider it, you'd fit in perfectly....
Wow... how sour are YOUR grapes!!
Resorting to insults is always a good sign.
And sorry, but you're wrong. I have friends in finance, the trades and in the CS. CS staff are not overpaid - far from it. The CS can't fill lots of posts simply because the package isn't as good as elsewhere - and that includes this apparent golden pension.
People sacrifice salary in the CS for pension surety and entitlement. That is their choice. Take that away, and there will have to be some parity elsewhere.
And yes, times are tough in the private sector now, so it is whinging. Didn't see it whinging much when it was a boom time - basically there are peaks and troughs in the private sector where the CS is more "steady eddie"
Calling_ planet_earth
Billy, show me exactly where I state CS are overpaid please, and as for sour grapes, I see that you're having a pop at the private sector and how good they've got it....again.
I am being just as 'realistic' as Noel is. The fact you and CTR have a problem with that doesn't make me wrong.
According to you and CTR, the civil service pension scheme isn't (?), and civil servants deserve a better pension because they choose to take jobs where the wages aren't that good.
Well, that's it, I'm skipping the meds and going back to dropping acid, that way, I might be able to join your muppet show and pretend along with you two that it's all ok...
btw, if it is all so ok, I wonder why so many people have a problem with it's unsustainability and they're eventually deciding to scrap it?
Guess they must all be wrong, too.
Actually Billy, you are wrong - Calling Planet Earth is right on the money.
Change the record
How many more times...it is not a Civil Service Pension scheme you muppet!
You clearly have something against Civil Servants (are you the Gsy Press editor in disguise?) but the majority of the members of this scheme are not, never have been and never will be Civil Servants.
Do you also feel the same way about the many very lowly paid manual workers, cleaners,nurses, plus the Fire Brigade, Teachers, Police Officers etc?
Absolutely right, so many people are ignorant of the fact that that for every well paid Civil Servant there is probably twenty others that (in many cases) fall into the 'lowly paid' category.
Change the record is technically correct in that over the years out of habit it has taken on the title of the Civil Service pension scheme,which I'm sure has caused those in the actual Civil Service some unnecessary grief
I think the Press article correctly dubbed it the Public Sector scheme which encompasses all the other workers listed in his post
As an aside I wonder how many teenagers or twenty somethings enter the Public Service with a genuine eye on the pension entitlements
calling_ planet_earth
CTR. Pardon my audacity for asking, but at the risk of causing yet more foaming at the mouth regarding my calling a pension scheme a pension scheme.......(?)....
could you please expand on exactly how YOU propose Guernsey, in increasingly cash strapped times, with it's main industry due to shrink substantially, UK legislations killing it not-so softly, St Kev as yet unable to find an alternative to maintain the lucrative status quo (not helped by our telco sold to UAE, now we're really futu in terms of affordable comms) keeps on finding the millions and millions of pounds it requires to keep the scheme topped up ad infinitum, as you seem to think it should.
Where do you propose we get all that money from?
Simple question.
If you have the answer to that, it makes you far cleverer than anyone I've ever met, and I will vote you in for Chief Minister without hesitation and say not one more word on the subject - now there's an offer you can't refuse.
Look forward with eager anticipation to hearing your proposal.
Public sector pension scheme not civil service pension scheme! Lets get it right and we can all move on :-)
The new proposals are good enough (just) to be acceptable for new recruits but I suspect existing participants will struggle to agree to the changes, there is no incentive on the table. Maybe that's what needs to be accepted otherwise we can go down the route of industrial action/legal action/apocalypse scenario.
The money for existing payments is already there in the fund and in ongoing contributions, of which the new entrants contributions (at least) would be higher and the employer contributions capped (taxpayer sigh of relief) and in years to come when all current members have died it will at last be self sustaining. There you go. Simple answer.
You say that there's not much incentive for the existing public sector workers to accept the new scheme. There certainly is. How about the public sector workforce being cut by 10% as a consequence of not agreeing to the restructuring of the scheme, on the basis that the saving has to be made either directly or indirectly?
Guernsey CANNOT afford to maintain the scheme as it is. The status quo is not an option. Change MUST happen. If the scheme is to stay as it is, then the public sector workforce has to be cut commensurably. Its hardly recket science.
So while the public sector workers do not have to agree to the change of scheme, it will be irrelevant to them if they cease to be public sector workers. Redundancy on economic grounds is a perfectly valid reason for cutting staff, regardless of whether they are public sector or private sector employees.
Welcome to the reality of 2012, 2013 and 2014 and probably right through to 2020 for Guernsey. The States' revenues are just not going to be there to fund the scheme to the extent needed to deal with that £300m-odd deficit.
It's just your opinion that Guernsey cannot afford to maintain the scheme. Cutting the workforce is your idea that you have dreamt up - no-one has even suggested any consequences if employees do not accept the deal. It's a pathetic attempt to scare monger.
If the States of Guernsey announced 10% redundancy across the public sector on economic grounds we might as well shut up shop to new business as our credibility as an economically successful and stable jurisdiction would be blown out of the water. It would simply not be true.
Redundancy in order to shirk SOG responsibility for mutually agreed contract terms is unthinkable.
What makes you think we need to "deal with" the deficit? Do you disagree with SOGs decision, as recommended by the experts, to maintain 90% funding level? If so that is also just your opinion.
We will see how this all transpires.
Dear oh dear. Wake up and smell the coffee.
Its "just my opinion" that the island cannot afford the current scheme is it? Well - let's see now.
You are literally the ONLY person, other than those who are in the scheme of course, who I have ever seen or heard trying to keep it going as is. What does that tell you?
Why do you think the whole review process over the viability of the scheme was carried out? Because the States of Guernsey knows that it cannot afford to keep it going. Is that enough for you?
And don't be ridiculous. Do you not watch the news or read the newspapers about the need for governments with deficits to make big public sector cuts? It doesn't matter whether its the Obama Administration in the US, the coalition in the UK, or the States of Guernsey - if there is a deficit then public sector cuts need to be made. In Guernsey's case we can minimise the amount of public sector job cuts by first addressing something that obviously can and must be cut first before peoples' jobs are at stake. But don't be so naive to think that its not an option - in the real world, that's how things work. Maybe not in Spartacus-land where terms like "subsidy", "deficit" and "affordability" seem to have very different meanings. Is anybody buying you a new dictionary for Christmas? Maybe you should consider going on an elementary business course in the New Year where all those terms will I am sure be covered within the first couple of lessons.
As yo your second and third paragraphs, you've made some bizarre statements in recent times on this blog but that one is right up there with the best of them. We'd lose far more credibility as a business jurisdiction by continuing to hurtle towards bankruptcy by not dealing with something so obvious! I'm not saying that we need to cut 10% of the public sector workforce. I am saying that if we don't address the problem with its pension scheme then that will be the only solution. But let's deal with the pension scheme first and then hopefully public sector cuts won't be required.
Every employer enters into contracts with its employees. But if the employer commits to terms that down the line it can no longer afford because revenues have dropped, then those terms can no longer be honoured. Every contract can be terminated by giving notice. The public sector workforce is no different. The employer cannot meet its pension obligations if the House refuses to continue to funding any shortfall. Next step- employment contracts are renegotiated to something that the employer can afford. If the employee doesn't like those new terms then he/she walks away with their legal entitlement under redundancy law and with their existing accrued pension rights safe and secure. But they are then on their own going forward. No job? No final salary pension scheme with a new employer? Their choice.
The scheme is NOT at 90% funding level. It is around 75% funding level. If it was at 90% funding level then it would currently hold an extra £150m or so. Do you have a spare £150m to get it up to 90%? The States of Guernsey does not, and the taxpayer clearly has no appetite to see taxes increase exponentially so that it can be funded through taxation.
Do I support it being funded at the 90% level? Not really, as it would still leave another £125m or so shortfall which we, our children and grandchildren and so on will have to pay for, at a time when Guernsey's economy will be far less successful than it has been over the past 25 years. This scheme WILL bankrupt Guernsey down the line if it is not closed down, existing accrued pension obligations ringfenced, and completely moved over to a defined contributions scheme, instead of this cop-out announced this week, which won't solve the problem.
And if it costs the States of Guernsey more in salaryies to employ public sector workers in the future because of a less generous pension scheme, then we will simply have less public sector workers in the future, which is precisely the point I made earlier.
You don't seem to have even the most basic grasp of maths, economics or pensions - sweeping the problem further under the carpet so that nobody finds it for 25 years, is not the answer. It needs to be properly dealt with NOW.
Spartacus does not live in the real world just like the Unite union dinosaur who was on Radio Guernsey this evening. A real militant throwback to the 1970s with no clue whatsoever as to the economic and financial realities of the present day. There may be trouble ahead.
as usual you expect readers to have to sift through countless pointless childish insults and innuendo to work out the point you are trying to make which is no different to anything you have said before. We get that you don't like the pension scheme.
The "unsustainable" tag has been peddled through the media so much that it now sounds like a fact. I'm not the only one who has observed and this phenomenon.
Rodney Benjamin has said today in a separate news article, "chickens will come home to roost" due to the private sector decision to switch to defined contributions pensions. What do you think of his expert opinion? Are you going to tell him to ask Santa for a new dictionary too?
The Guernsey review was carried out due to public demand following changes to private sector pensions and the UK public sector pension review which is a different kettle of fish altogether because they are 0% funded! Changes to Guernsey's scheme are desirable but not essential. We have considerable recruitment obstacles to overcome due to being a small island and this needs to be borne in mind.
In my humble opinion, both sweeping cut backs in staff levels and attempts of forced changes to pensions would be equally disastrous in practice and in PR. We are not USA or UK there is no comparison. People come here to work and do business to avoid the volatility in those regimes.
In any case, you are talking about the states of Guernsey as employer as if we are some kind of tinpot dictatorship. We cannot afford to mess up our public sector, it is crucial to our stability and ongoing success. If anyone follows your HR advice I will join Scarlett in eating his hat with cheese. It is nonsensical.
75% funded? where did you get that from? Page 2479 of the attached Billet, the executive summary of the latest superannuation fund valuation states
"The overall value of the Superannuation Fund as at 31 December 2010 was £930million
and the Actuarial Valuation calculates the Scheme's liabilities to be £1,000million
which means that the Scheme is 93% funded."
it also says "the funding target is 90% of the benefits accrued as at
31 December 2007 and 100% thereafter."
see for yourself.
As I said in a previous comment which was printed in the press today, if the proposals are acceptable to any public sector workers the States should jump at the chance to approve them. Nevertheless I suspect there will be trouble ahead in even getting to that point and I expect further compromise will need to be reached but this is just my personal take on it I will be interested to see how events unfold.
What insults? Oh, the irony of you complaining that I'm just repeating what I've already said previously. You really don't do irony, do you?!
No - you are right. I don't like the pension scheme. Nor seemingly does anybody apart from yourself outside of the members of the scheme.
I haven't seen Rodney Benjamin's statement today so I can't see the context of it. But the whole private sector has had no choice but to move to defined contributions as scheme liabilities were causing them to be insolvent. It is a breach of company law to carry on trading whilst insolvent, with unlimited personal liability for a company's directors. Is the penny starting to drop yet?
I don't have access to the exact figures in front of me but I think you will find that the 2010 figures, which I'm sure even you will agree supersede your 2007 figures, showed a £300m-plus deficit, with around £900m of assets falling way behind the liabilities of close to £1.25 billion. By my maths, although probably not yours, that's a less than 75% funded scheme - correct?
Maybe if you were to compare your 2007 deficit of £100m with the increase to a £300m plus deficit just 3 years later, you might appreciate why I and everyone else, apart from you, seems to be panicking. That's over £200m extra shortfall in 3 years. Where will it be in 2013 at the next actuarial review? I'll give you a clue. Investment returns over the last 2 years have been poor, so it will have grown from £300m. Still say we can afford it?
Here is Rodney Benjamin's statement
The private sector has had a choice and there will be consequences of that choice. I suppose the liability problem for private companies was only because they were not prepared to make the requisite contributions to fully fund the schemes, in which case the risks would be higher of insolvency due to breaching company law. Increased funding would diminish shareholder returns and still leave the companies open to risk but would not be automatically unsustainable.
Rather than bite the bullet and bear the risk by sticking with the schemes and increasing contribution levels to manage the risk, they decided to pay off members in compensation instead and close the schemes. SOG is not in a position to do that.
Who is panicking? SOG is not panicking and the actuaries are not panicking. It took a year to put together the new proposals and if agreed it will take another year and then we will have another actuarial valuation to consider, I don't see any panic, except from you.
As you may see if you actually look at what I have written and look at the attachment is that yes you do have the 2010 figures right in front of you. That was the last actuarial valuation and that is what I attached.
Your figures refer to the 2011 SOG accounts however the funding level decision making is based on the actuarial valuation which is undertaken every 3 years.
The reasons for the decrease in asset value and increase in deficit in 2011 is explained in the notes to the accounts. The asset value has been amended from mid market price to bid price due to changes to FRS17 resulting in a revaluation loss of £96M. Correct me if I'm wrong, but if not for this minor accounting detail the deficit would have shrunk last year.
So the 2011 figures do not supersede the 2010 figures and SOG take all circumstances into account when deciding on the contribution levels. In any case "The asset and liability values on the FRS17 basis reflect market conditions at the year end and can be expected to vary from year to year without prejudicing the scheme's long term ability to provide the required benefits."
In other words yes we can afford it.
Rodney Benjamin is merely expressing his personal opinion. It is not he who needs to fund whichever scheme is in place. That's not saying that he is wrong, and its not saying that he is right. He may well be of a political lean towards the left and perhaps thinks that taxes should rise to pay to maintain a final salary scheme. Just because he is a pensions expert does not mean that he cannot lean to the left.
The private sector did NOT have a choice. The change in accounting standards meant that they were obliged to recognise the deficit in their final salary schedule on their balance sheets. This made them insolvent - unable to trade. This accounting treatment was not optional. So some companies went under and will default on their final salary scheme. Others were sold to other companies at rock bottom prices because of their pension scheme liabilities. A disaster all round, but it was perfectly correct to insist that they properly recognised their accrued liabilities if the balance sheet was to meet accepted accounting standards.
The fact that SOG commissioned the report says it all. Why do that if there was no problem?
I will indeed correct you if you are writing. I am doing just that. A change in accounting treatment has most impact in the year when it changes. Subsequent figures on a like for like basis result in consistency. What the change in accounting standard was to require the more accurate valuation basis to be used. It meant that under the old system the valuation was £96m over-stated. In other words, the previous figure was misleading as it overstated the assets by £96m.
You can skin the cat any way you like, but £900m of assets versus £1.25b of liabilities equals a £350m deficit - a deficit which has to be made up in order to enable the scheme to meet its liabilities. So without additional States' funding, where is that shortfall going to be funded from? We are in a long period of sustained low interest rates as the world tries to grow its way our of a deep recession. Total investment returns of around 5% per annum are infinitely more likely than the 10%-plus big returns of the 80s and 90s. Add to that an ageing population and a decreased workforce, together with a potentially huge contraction of our finance industry with loss of jobs and no alternative jobs, and there will be a huge reduction if tax revenues from employees. The island can't afford the scheme now and could not afford it 10 years ago. It most certainly cannot afford it in 10 years time. What bit of that are you unable to grasp? We simply cannot afford to fund it, and therefore we can't have it.
Neil Forman
I agree with you here, it will be interesting to see the next actuaries report, I know what it will show as I am sure you do.
Neil Forman
As I have said, I am not going to argue this again. I have one question for you.
If all was well with this pension fund and it was sustainable as you say, why would Rodney Benjamin recommend these changes?
Seeing as he was a joint partner in the company who provide the actuaries reports.
If it was sustainable I would have expected him to say that all was ok and no change was necessary.
Before you jump on it, ignore the typos in my 12.49 post, as well as my maths. I know that £1.25b less £900m equals £350m, not £325m, as the deficit. A combination of it being very late at night, too many tequilas and predictive text on my phone meant a littering of typos.
Its all academic though - whether the deficit is £325m, £350m or £750m makes no difference. We can't afford to cover the shortfall.
Rodney Benjamin has not made these recommendations, he is the independent chairman of a review panel who have been working in accordance with the terms of reference set by SOG. He is simply commenting on the outcome.
Before the decision to have a review and setting of terms of reference BWCI made no recommendations to change the pension scheme. BWCI said all was OK as you can see from the 2010 actuaries valuation and report.
It was a states decision to review the arrangements in response to public demand.
Read the attached and the terms of reference at the bottom to clear up your misunderstandings and stop asking me silly questions please ;-)
calling_ planet_earth
So, after all the insults and indignation regarding my viewpoint, I note that CTR and Billy haven't come back with their ideas as to where Guernsey will get the monies required to continue to prop up this scheme, other than, 'we just have to and it's not fair', and that, of course, Sparty has....
With regards to finance/market forces etc, well, Sparty, we could turn that on it's head, and say that because of the good wages finance paid, Guernsey was able to collect more tax, and those monies used to continue to prop up the scheme with relative ease, and for some considerable time, well beyond, in fact, the demise of final salary schemes in less wealthy places.
Unlike the public sector, private pension schemes have no public purse to fall back on, and no one in those schemes gets to decide whether they like it or not/if it's fair before a decision is made, so it's hardly the same thing.
Now, finance/the island isn't so wealthy (ironically, thanks to it's own greed, in some cases), people in finance aren't paid as well as they once were (with decreased/no pay rises and far less generous - if any - pensions) and imo, it is therefore only natural that there will be a detrimental knock on effect on the public sector scheme benefiting from that.
Logic dictates you can't keep taking the same amount out of something unless you keep putting the same amount in, and your argument, rather like the leaky bucket, holds no water, no matter how thirsty for more the public sector may be.
I will accept your apology for the numerous errors you have blamed on tequila! However I deduce you started drinking at lunchtime yesterday.
Rodney Benjamin is not just expressing his opinion, having worked darn hard to reach this consensus he is clearly now trying to sell it, or it will all have been a waste of time.
The private sector DID have a choice and indeed some companies decided to retain their defined benefits schemes and they are not insolvent now so what do you make of that? The companies that went under might have done so irrespective of pension arrangements as times have been tough. It is right that pension liabilities are taken seriously as they MUST be honoured. That's the point I have been making.
SOG responded to public demand for a review, that was the main problem, SOG tend to be public driven, whether views are fact based or perception based.
If you are going to argue that the investments were previously overstated, I have no problem with that, however the inconsistency in your argument is that if they had always been valued at bid price then the deficit would not have increased in 2011 obviously.
There is no shortfall which needs to be met, the funding target agreed by SOG is the funding target is "90% of the benefits accrued as at 31 December 2007 and 100% thereafter" and the scheme is in line with this target as of the last actuarial valuation. It will be interesting to see the 2012 position but the next actuarial valuation in 2013 will hold more weight.
Calling planet earth
We will see what happens, Scarlett. Where are you calling from Uranus? ;-)
In your 6.50pm post yesterday you countered my views by holding up Rodney Benjamin's credentials as a pensions expert. Now you are saying that he was merely chairing the working group, which completely undermines your previous expert.
It seems that for the views which you agree with he's an expert whose views should be regarded as sacrosanct, while for those views which you don't share he is merely chairing the views of a working group.
How very selective....
Some of us remember you treating Denis Mulkerrin's report on Education in an identical manner.
If you are so naïve that you think revaluing the scheme's investments at bid price would alone make that much of a difference to the value of the fund, then you probably also believe in the tooth fairy.
Forget the 2007 figures - they are out of date and obsolete. Their only value is show how much the deficit has grown by, and at what a frightening rate. You seem quite happy to wait until 2013 to see how it measures up. My guess is that the deficit by then would be £400m upwards. But hey, you seem to think its just imaginery money which will never need to get paid. Maybe you think the States will sell of Alderney to pay for it?
And no, I can assure I was stone cold sober yesterday during the day. I never drink during the daytime. I knew exactly what I was posting.
And your lack of knowledge of how the corporate world operates is highlighted again. Those companies whose valuations of their pension scheme liabilities under new accounting standards showed that they were insolvent absolutely had no choice at all. The law does not permit them that choice. Trading whilst insolvent is unlawful, with serious repercussions for directors. Look it up. If you think those companies had a choice to carry in trading, let alone keep their defined benefits schemes, then you are absolutely wrong. Try attending a Company Law course after you've attended the other introductory courses which you so clearly need before spouting off about things which you know nothing about.
"A little knowledge is very dangerous". That saying has never been more apt than with your posts.
Rodney Benjamin is a pension expert. All I am saying is that he has been tasked with selling these proposals to the public sector workers and the public which is what he is doing.
Anyone has the right to disagree with his views I just wondered whether you were going to insult him because you disagree.
I agreed with much of Mulkerrin's reports however the criticisms I raised are still valid one year later.
I'm not naive I'm just pointing out what the accounting note says regarding investment revaluation. The net depreciation represents realised and unrealised profits and losses of course however the change to FRS17 will surely have made a significant impact due to the size of the fund.
Where have I referred to 2007 figures? Have you been back on the booze again? My only reference to 2007 was a direct quote from the billet which states the basis of the funding level target. It's not obsolete it relates to the 2007 accrued benefits which are relevant to the funding target but this has nothing to do with 2007 investment values. You seem to be getting confused.
Yes I'm happy to wait and see how 2013 measures up. Yes you are correct, the deficit is not a tangible sum it is an accounting figure based on assumptions and projections therefore it basically is an imaginary sum which will not need to be covered t any point in time unless the fund is wound up. I beleive the actuarial report states that. Alderney is therefore safe stop panicking.
Although I'm not in the slightest bit interested about your drinking habits it would explain the glaring howlers in your posts earlier yesterday.
The companies that were solvent had choices, those who were insolvent with inadequate contingency provisions had no choice. I don't need to look anything up I have adequate business qualifications and experience thank you very much and have researched pensions in detail and therefore have been able to provide reference points to back up my arguments.
Calling_ planet_earth
Sparty, maluv, I reckon it's better to be calling from planet earth than talking out Uranus...;)
Rodney Benjamin is indeed a pensions expert. One of the best around. I know him well. I wouldn't dream of insulting him. That wasn't my point. My point was that when he says something you agree with then its because he's an expert, but when you don't agree its because he's speaking in a different capacity. Ridiculous.
You clearly haven't understood the implications of FRS17 at all. I'm not going to explain it here as it would take me all night, but if you understood it properly then you'd realise that the impact of using bid prices on the fund investments is negligible. The main reason for the fall in the fund was investment returns during the period, coupled I suspect with recognition of the long tail liability of all the extra public sector recruits in that 3-year period.
As for valuing the solvency of the fund the only calculation that matters is its current value versus its projected liabilities, which is based on tried and tested actuarial principles. You seem to think that actuarial calculations are hocus pocus and not to be taken seriously. Well, if that's not insulting Rodney Benjamin and his profession then I don't know what is!
You seem to also think that any shortfall on the fund is imaginary and irrelevant unless the fund is wound up. WRONG! Its a snapshot of how well or badly funded it is to meet its liabilities, and how much needs to be pumped in to meet those liabilities. Its why an actuarial review must be carried at least every three years. Its NOT irrelevant. Its a real liability. The process is the globally-established practice for valuing pension funds, for good reason. It can only be based on estimates because of the uncertainty of human life. How do you think your life assurance premiums are calculated? Throwing a dart? By taking cross-mortality rates, best estimates of human lives across a sizeable population can be made. Not sure how its done in Spartacus-Land but it looks to me like you haven't yet got past page 1 of "Pensions for Dummies".
2007 investments versus 2007 projected liabilities is totally relevant. Ditto 2010 investments versus 2010 projected liabilities. 2011 and 2012 investment values versus 2010 projected liabilities is slightly relevant but only because that's the latest liability figure available.
I will reiterate that you only seem to know a fraction of what you think you know about pensions, and an even smaller fraction of what you need to coherently debate the points you are making. I was spot on when I said "a little knowledge is very dangerous".
If you truly still think that a £300m-plus deficit based on actuarial valuations is nothing to worry about then I would strongly advise you to withdraw gracefully from the debate.
Another saying is that its better to keep quiet and let everyone think you might be an idiot, than it is to open your mouth and leave everyone in no doubt whatsoever.
Say what? What makes you think I disagree with Rodney Benjamin? I have not disagreed with him at all.
Firstly, I explained to the misguided Neil Forman that Rodney Benjamin did not make the recommendations. Nevertheless I agree with the proposals and if the existing employees agree (unlikely) I have stated that SOG should jump at the chance.
Then, I stated this morning at 10.54am that "The proposed change deals with the problem (of risk) by capping the employer contribution rate at 14%. Clearly this will be a sticking point for the employees as in my view this transfers any risk to them contrary to RB's comment"
RBs comment was that "the group's review was not designed to shift the risk on to employees, it was to find a system that was fair, adequate and sustainable".
I agree with RBs comment per se, however, even though a transfer of risk is not what the review was designed to do a transfer of risk to employees is what is effectively being recommended by the proposals. The risk would then be shared with the employer taking the brunt and the employee needing to make up the difference once the cap is reached.
You are the one who was disagreeing with Rodney and saying he was a lefty etc. You insult me when you disagree with me but I am just concurring with him and you say you wouldn't dream of insulting him! Priceless!
I don't claim to understand all the minute details of FRS17 I have read the accounts and understand what is stated, that's all. The chief accountants report explained "During the year, implementation of a revised investment strategy continued with a shift in the strategic asset allocation away from equities in favour of less risky alternatives. The real return target for the fund is now UK RPI + 4% but due to the turmoil in the world financial markets during 2011 performance over the trailing year was -3.8%.
This has contributed to the funding level decreasing to 70% (2010: 76%) under FRS17" So I deduce the fund is aligned to make up last year's loss. We'll see.
I don't think the actuarial calculations are hocus pocus of course not they are based on fair assumptions, but the deficit is not a tangible figure because the liabilities are not arising imminently, they are future contingencies. You surely know this you are just being silly. You sound just like Basil Fawlty when you get confused and then try and rant your way out of it. Highly amusing.
Why have the States agreed to the funding target of "90% of the benefits accrued as at 31 December 2007 and 100% thereafter"? It does explain in the valuation and in the accounts that the funding level is deemed adequate. You are free to have your own opinion if you feel the funding level is inadequate, all I'm saying is that SOG think it's fine as a matter of fact so you disagree with their decision. Even with changes to the pension fund it is unlikely SOG will increase the funding target to 100% as it makes no sense to set aside that amount of cash when we already have a £900m+ fund.
My knowledge is no danger to anyone, you are the one who is scaremongering and panicking, we can agree to disagree and we will both wait and see what happens next.
I've just had a debate with my dog which was considerably more intellectual than what I am reading from you!
Will you PLEASE bother to read what I ACTUALLY said.
I said that he "may" lean to the left and there is "no reason why he cannot lean to the left". Please explain where I stated that he did? I most emphatically did not say that he did.
The fund in 2011 was covered to the tune of 70%, after being covered to 76% in 2010. The States stipulated a target of 90% of the 2007 liabilities and 100% thereafter, yet we are only at 70% in 2011. So the States are 20% short based on their lowest target and 30% short based on their full target, based on the decision that THEY made. We are hundreds of millions short of the target and have no hope of making up the shortfall and you don't think it's a problem. Well - you can stamp up and down like a 5 year old having a tantrum all you like - which is exactly what you are doing - and you will still be wrong, wrong, wrong. It is a problem. It is a huge problem. It is a problem of the magnitude of several Derek Neale-designed secondary schools plus a Peter Roffey hospital thrown in for good measure, but Spartacus knows differently.
Spartacus thinks it will all be fine. Well it won't be, because the deficit won't disappear either through investment growth or by contributions. It will only disappear through the States pumping in another £325m (which by now is quite possibly more already), plus a lot more in the future as the workforce diminishes but the pension liabilities grow. How many new schools will our children and grandchildren have to miss out on when the Assembly in 2030 is facing a £500m, £600m or even £1 billion pension deficit? I am most certainly not scaremongering. If you are so sure that I am, then please explain how it is going to be made up. Please explain where the States are going to find the extra from to wipe out that deficit. The current States operating budget certainly isn't allowing for funding of that magnitude, and its operating at a £30m deficit as it is.
Here's how to make yourself very popular. If GST of 5% had to be introduced to raise an extra £40m and all of it would be ring fenced to make contributions to the public sector scheme, how do you think it would go down with the population? Or how about a tax rate increase to 30% for all, with all extra tax revenues going to the pension scheme? You don't seem to have grasped it but that's broadly what would have to happen, unless you have some other bright idea.
Back to my debate with the dog, who seems to have a far better understanding of this problem than you do. And he doesn't stamp his feet when it doesn't get it's own way.
GM (Basil)
You're the one jumping up and down and stamping you're feet and arguing with your dog! :-)
I'm just trying to help you come to terms with your disappointment over the pension proposals.
Perhaps you would care to explain the difference between the 2010 funding level of 76% under FRS17 and the 2010 funding level which was 91.6% of the accrued benefits and in line with the States funding target? Are you comparing apples with pears?
"Every three years, the Treasury and Resources Department commissions an actuarial valuation of the
Superannuation Fund. A valuation as at 31 December 2010 was undertaken and showed that the funding level was 91.6% of the accrued benefits and in line with the States funding target. As a result the States when they considered the Actuaries report in November 2011 agreed to make no change to the general employers' contribution rate from 1 January 2012." We don't know what the 2013 actuarial valuation will reveal.
Neil Forman
So I am also misguided now?;-)) You will need another dictionary of new names to call me soon, the old one must be running out.
I have already stated that I am not a financial wizard and when I first put the figures up on another post I was shocked and had an accountant look at the figures. The deficit is real and will have to be met in the future. It needs to be tackled as our children / grandchildren will have a hard time paying for it.
You keep quoting that the fund has £900 million and don't seem to see beyond that.
I have spoken to somebody in the know today which I was holding out for.
The deficit in real terms as of 31 Dec 2010 was £77,338,000.
The whole point of this review was to come up with a scheme which was affordable and sustainable. What does that tell you.
I don't think the proposed scheme is proposing enough changes, it is still a defined benefit scheme. I think this is just the start and other changes may be brought in in the future.
As to whether the employees will accept it, I have been told that the contracts state that members will pay 6.5% into the States Superannuation Fund. The States can therefore make any changes they like. ( could someone verify this ?)
Not only was that the deficit at the end of 2010, but the fund value fell by £33.5m in 2011. This fall was caused by a drop in value of investments if £36m, and by additional contributions exceeding pensions paid by a net £2.5m.
On the basis that the differential between contributions received and pensions paid is likely to remain constant UNLESS the States injects a huge extra contribution to make up the deficit, then the only other way in which the deficit can ever be made up is via outstanding investment performance. I suspect that 2012 iinvestment performance is likely to be quite flat, so this remains a huge problem.
How is that shortfall, likely to be around £110m now, ever going to be covered?
You didn't read all the material in the link I gave you!
Read appendix A. It says "The proposed arrangements are designed to provide an appropriate, guaranteed level of income in retirement whilst REMAINING affordable and sustainable".
The proposals are for the members rate of 6.5% to increase which clearly will require the employees agreement. The employers contribution is I suspect a contractual benefit which would therefore also require employee agreement to be changed.
The other thing you are still ignoring is that the States passed a resolution to maintain a deficit. They decided to set in stone that the "funding target is "90% of the benefits accrued as at 31 December 2007 and 100% thereafter".
If the new proposals go through the career average basis will inevitably impact the actuarial valuation in 2013 and possibly knock out the deficit altogether. Nevertheless, unless the States decide to have the fund 100% funded going forward they will just reduce contributions until there is a deficit again.
Neither you nor GM have commented on this vital detail and I can only assume that is because it does not suit your scaremongering agenda.
Neil Forman
I agree, I also think investment performance will be flat for a few years to come as well and the deficit will grow and grow.
I don't know how to deal with the shortfall, I don't think the taxpayer should be left to foot the bill. You seem very clued up on this subject, how would you deal with it?
I will ask the question of someone in the know next time I meet them, as I said, I am not a financial wizard but these figures make me worry for future generations.
I have read every link you have provided on this post, I suggest you read them again;-)
Two quotes for you.
Allister Langlois " we are pleased that we have found common ground for a revised pension scheme which will be both SUSTAINABLE and appropriate."
Rodney Benjamin " the groups review was to find a system that was fair, adequate and SUSTAINABLE."
You are right that the rise in employee contributions will have to be agreed but if what I am told about the contract wording is true, the States could just cap employer contributions at 14% and then the employees will have to decide whether to increase their contributions, lose some benefits or let the scheme bankrupt itself.
Firstly "The real return target for the fund is now UK RPI + 4%" as stated in the 2011 accounts.
What makes you think investment performance will be flat for a few years to come contrary to what the investment advisors are predicting? Do you know something they don't?
I'm not disputing that the new scheme is designed to remain sustainable, I'm saying that the idea that the current scheme is not sustainable is a matter of opinion not fact and I believe the two people you have quoted have never said the current scheme is unsustainable.
"I don't know how to deal with the shortfall, I don't think the taxpayer should be left to foot the bill."
Can't wait to hear how GM responds to that gem!
In the unlikely event SOG decided to make the scheme 100% funded then of course the employer (taxpayer) would have to pay the shortfall. The shortfall will change if the new proposals for a CARE basis go ahead as the future accrued benefits will decrease dramatically.
"Let the scheme bankrupt itself"
Another gem. The only choices would be reduced benefits or increased contributions which I suspect would also need agreement to be changed. At the moment the only choice is increased employer contributions which is the element of unpalatable risk. It will be equally unpalatable for the employee to take on this risk.
I don't know which investment advisors you follow but I follow many for my clients. UK RPI plus 4% is a heck of a challenging target for the foreseeable future. That doesn't mean that it shouldn't be a target, but the performance is likely to fall well short of that.
In case you haven't noticed, the world economy is in an awful mess at present. Interest rates will have to stay low for several years in order to stimulate economic growth, so income returns from cash and bonds will be negligible. Dividend returns will only come if corporate profits recover. That may well take 2 or 3 years at least. The US is on the brink of the "fiscal cliff" at present. If the US gets it wrong, then as its the world's largest economy, the rest of the world will suffer. So its quite possible that corporate profits and therefore share prices will really struggle to find any sort of upward momentum for several years. Any pension fund which is banking on a 6%-plus total return (UK RPI plys 4%) is likely to fall short, and if that's compounded for 2 or 3 years, then the cumulative net deficit of the pension fund will keep increasing.
In terms of how to deal with the shortfall, there simply isn't a realistic way to deal with it, unless long-term investment performance is exceptionally good (most unlikely), other than additional funds being injected by the taxpayer. This is precisely why the scheme must be terminated! The longtail liability can only grow in real terms, due to slow investment returns and because of the massive increase of public sector employee numbers over the past decade. This is what I have been saying all along.
An attitude of crossing our fingers and hoping for exceptional investment performance to provide a windfall gain to make up the shortall is akin to sticking the £900m on the 2.30 at Kempton. The odds are stacked against it. The investment managers of the scheme, in trying to chase superior returns, would have to take extra risk to loss of capital which would be reckless in the extreme. I'm afraid that the current shortfall is probably about as good as its going to get, so the shortfall should be capped and frozen to prevent it from getting any worse.
I don't care how "unpalatable" it would be for the public sector employee to take on the risk of living longer - welcome to the real world in which the rest of us live in relation to our pensions. Its the lesser of the various evils.
Oh dear where to begin.
The investment advisors I follow are BWCI as the UK RPI +4% is the target they have set for this pension scheme. If you think that's unrealistic you should tell Rodney Benjamin but he might disagree. They have expertly realigned the portfolio towards lower risk contrary to what you have said. If you bothered to read the accounts you would have seen all this.
The scheme is 90% funded as stated on the attached fact sheet of the current scheme (appendix C from the press release). This is good! Why would you want to clear the shortfall? We have already locked up a sizeable fund of capital to more than cover liabilities and contributions are adding to it all the time.
I have no idea why you are suggesting that "the shortfall should be capped and frozen to prevent it from getting any worse." How on earth do you think that could be done? The next actuarial valuation will determine the funding level taking into account any relevant calculations, assumptions, values and changes to the scheme. Then the states can adjust the contribution level if they so decide but they don't have to.
As for your allegation of "the massive increase of public sector employee numbers over the past decade"
this is complete myth as Yvonne Burford pointed out recently on this forum.
You would care if there was industrial and/or legal action, it could get very messy and expensive.
You are way off the mark. Once again - way, way out of your depth on topics that you simply do not understand.
BWCI are NOT investment managers or investment advisors. They are actuaries and pension trustees. They are not regulated to conduct investment business. Do you ask a plumber to fix your electrics? Thought not.
It seems like "target" is another word which your faulty dictionary is struggling with. In the current market, chasing returns of UK RPI plus 4% is NOT lower risk. It is in fact quite high risk. Risk-free money returns are only around 1% at the present time. To target returns of UK RPI plus 4% requires taking considerable risk. But then again you would know that if you knew even the first thing about investments. Or pensions. Or actuaries. Ths list goes on.
You say: "We have already locked up a sizeable fund of capital to more than cover liabilities and contributions are adding to it all the time". How can you say "more than cover"? Not sure which school you went to but a shortfall of £75m-plus is not "more than cover". Its a shortfall, which means that its nowhere near being covered! Look it up in the dictionary. Preferably not the one that you have been using though as its full of wrong definitions.
The whole idea of freezing the scheme is to try to cap its shortfall at £75m, so that it doesn't become £100m, then £150m, then £200m. Is that beyond you to understand? You suggest that the States could simply change the contribution level if necessary. NO, NO, NO!!! That just means even more taxpayers' money being injected to try to minimise the shortfall - which is exactly what must NOT happen. You seem to think that the States has a bottomless pot of money to throw at the pension scheme just so that the defined benefits system can continue. Are you totally oblivious to the whole issue? The States cannot afford it! Taxpayers have no appetite to keep paying taxes to support something so obviously unaffordable and unsustainable. Where else do you think that money is going to come from? When will that penny finally drop with you?
The amended figure of public sector employees after Yvonne Burford's correction was still 2% per annum between 2004 and 2012, which over an 8-year period is a 16% increase. That's huge. But according to you its a "complete myth". Er...no it's not.
Please tell me how many people worked for the Guernsey public sector in 1982, 1992, 2002 and 2012. I think you will find that just like everywhere else in the world, the public sector in Guernsey has risen massively. That means more longtail pension liabilities. A 20-year old in 1982 is now 50 years old, and in 15 (or 17) years time will be drawing a pension from the scheme. The fund is already in deficit. There is no appetite to increase taxpayers' contributions. The deficit is going to grow and grow and the only way to address it is by injecting taxpayers' money.
You say that it will get "messy and expensive". Yes - it will. But it will equally get "messy and expensive" if the public sector stays as bloated as it is and if taxpayers refuse to keep supporting the current scheme, as it will bring Guernsey to its knees in 20-30 years time. Just because you couldn't care less about that does not mean that the rest of us should not ignore it.
If you were not such an idiot I might be offended by your remarks. However actually it is you who is off the mark and you who does not understand.
In the 2011 accounts the chief accountants report stated "During the year, implementation of a revised investment strategy continued with a shift in the strategic asset allocation away from equities in favour of less risky alternatives. The real return target for the fund is now UK RPI + 4%"
We've been here before the shortfall does not represent an actual figure which must be paid in one go, accrued benefits will be called upon over time in future, depending on various factors such as survival of members. At no point will circa £900M need to be used up, unless something drastic occurs.
I asked HOW you would expect to be able to freeze the scheme as it is. It is not possible. You are assuming the shortfall will rise but that is just one possibility. It is intended the shortfall will be maintained, that's the plan. There are risks yes and the burden lies with the employer sure but the situation is being carefully managed and if the new proposals are approved the risks will completely change.
I don't think 2% increase per annum is huge. I gather our public sector numbers still compare favourably with other jurisdictions, but we can agree to disagree. The incorrect figures quoted by the press in the opinion column were a complete myth and misunderstanding due to a change in the way some public sector workers were recorded in the accounts and the Press admitted that.
I think if you are going to be able to relax at all without hitting the tequila bottle you really ought to wait and see how things pan out with regard to the new pension proposals. The bottom line is the scheme members have rights and it is absolutely evident just from some of the comments on this forum that they have every intention of exercising those rights. Negotiations are not over yet and I would hope some compromise will be achieved.
In 20 -30 years time chances are we will have been through at least one more boom and bust cycle - you have no idea where Guernsey will be. Its not that I couldn't care less its just that I'm more realistic than you about the facts of the situation and wishing things were different and ranting about it will solve nothing.
Appendix G of the 2010 actuarial valuation (page 2545 of the Nov 2011 billet) notes the following in relation to Allowance for funding shortfall
"If the funding shortfall was to be eliminated over the average expected lifetime of the Fund, a period of
broadly 30 years, annual capital payments of £66,000 increasing in line with Guernsey inflation would be
Neil Forman
That is mainly what I have been told today, one thing that was mentioned is that this scheme will cost a lot more in admin costs. The investment management and other fees from 2007 - 2011 amount to £17,546,000. I don't know if this is reasonable but this comes out of the ' pot '.
The real return TARGET is RPI +4%. If it gets anywhere near that I will eat my hat.
Oh dear. Put the spade down and stop digging....
BWCI are NOT regulated to provide investment management services. Check the list of investment manager licencees on the GFSC website. If you had even the faintest of clues what you were talking about, you would know that actuaries provide investment monitoring services and set benchmarks. They do NOT make investment decisions. They would be committing a criminal offence by providing investment management advice without a licence. But you would know that if you knew what you were talking about.
If you think UK RPI plus 4% is "low risk" in the current climate then you are an imbecile. But we already know that.
If you think that 2% per annum growth in the public sector isn't anything to worry about in an island with an officially static population, then you really are away with the fairies. Do you understand compounding? Do you know what that means for the size of the public sector in 20 years time? The entire workforce would be civil servants! What do you think that means for the pension scheme?
You have clearly not understood the correction that Yvonne Burford made to the Press calculations. The net civil service growth between 2094 and 2012 is still 16%. But then again why should we be surprised that you haven't understood it?
You are simply crossing your fingers and hoping about Guernsey in 20-30 years time. I'm saying that in 20-30 years time current employees and members of the pension scheme will, remarkably, be 20-30 years older. Isn't that startling? Are you denying that? Are you denying that the demographic studies for Guernsey in 20-30 years time are fictional? We know how many 40-60 year olds are here now. We know what the average life expectancy is. We know that they will age at an exact rate. It really isn't too difficult. Anybody with half a brain cell can see that. Well, that seems to rule you out.
Sorry in advance if I am going to insult you, but you really do ask for it. You are out of your depth, you keep swimming out deeper, and you continually prove that you just don't know enough about topics which are beyond you. Stick to what you know or just accept that you will repeatedly be exposed for your ignorance.
Does it not occur to you that you are being ridiculously pedantic?
I correctly pointed out the fund investments have been realigned and that the target is now 4%. I have used BWCI as my reference point because they, as trustees are in charge of the investments. Of course they are not the broker or qualified investment advisor, they employ separate regulated advisors nevertheless they DO make the investment decisions in consultation with their client, SOG. Investment decisions and strategy to achieve targets are ultimately their responsibility. They can agree and implement any advice or reject it and have a duty to monitor the performance against the benchmark which they themselves must decide on. You clearly have not read up on the strategies they have adopted to mitigate risk.
Regarding the size of the public sector, Matt Fallaize said that he agrees with me that the size and structure needs to be reviewed, nevertheless I personally do not agree with the concept that the size of the public sector of our island should match the ratio against population as measured elsewhere. We still need to provide the same range of services as if our population was double or treble.
I also disagree with your belief that the public sector will continue to grow at the same rate for the next 20 years, that's nonsense. It might continue to grow but there are so many factors which will determine that, population being one factor. I am in favour of combining resources with Jersey where common ground can be found.
I have understood the correction that Yvonne Burford made! The press stated "there were 2,637 employed in public administration when the reforms of government were launched in 2004 while today, after a period of alleged austerity, the number has risen by 110% to 5,558" This was admitted to be a complete misunderstanding as Yvonne Burford clarified as in the link. My interpretation of your earlier comment was that you also misunderstood these figures.
I'm not denying what the demographic studies for Guernsey reveal however you seem to be treating that information from an observers point of view, not from a government point of view. Much can change in 20-30 years and government policies can influence the demographics. Population control is high on the States agenda in case you hadn't noticed.
I am in favour of controlled population growth. Meanwhile all you want to do is scare monger and panic. Not very helpful. You're the one who is out of their depth. If there is something I don't know I find out for myself you just stick to your dogma.
Me? Pedantic? Oh what irony!
No - I am not being pedantic. Just stating correct facts. You seem to think that's fine when you do it, but not what anybody else does it, especially when they disagree with you.
I think you will find that the investment target is "UK RPI plus 4%", not just 4%. UK RPI is currently 2.7%, so the target would be 6.7%. Any investment advisor will tell you that chasing a return of 6.7% when risk-free returns are around 1% to 1.5% results in a significant risk of loss of capital. But of course you would know that if you knew anything about investment management, about risk-adjusted returns and about modern portfolio theory.
I think you will also find that BWCI do not "make the investment decisions in consulation with their client". I think you will find that the trustees appoint the managers, who make those decisions on their own. Their client, the States of Guernsey, does not make investment decisions either. That is not their area of competency. They simply liaise with the trustees to agree the overall strategy for the investment manager to follow. But of course you would know that if you knew anything about trusteeships, or about pensions, or about investment management.
Re. the size of the civil service, how do you justify a 16% increase over 8 years? You seem to think that it's Ok because its in line with other places. Those "other places" also have vastly over-bloated public sectors! Inefficiencies and employing people for unessential jobs is one of the biggest plagues of the past two decades. And yes, for every unnecessary extra public sector employee there is the inevitable taxpayer-funded, gold-plated, longtail liability final salary scheme.
You are absolutely right (for a change) that the public sector will not keep growing. But that's not because of lack of desire by many. Its because everyone is finally waking up to the folly of it all. Blimey, and I agree with you as well re combining resources with Jersey. Certain specialist areas of health would be an obvious start.
No - I did not misunderstand the Burford correction of the figures at all! The Press figure of a 110% increase was completely wrong. The 2% per annum increase is correct. I am saying, as I thought was crystal clear, that even a 2% per annum increase, or 16% over 8 years, was totally excessive. Please read what I said, not what you think I said.
Re demographics, you are missing the point completely! You say "much can change in 20-30 years". Well, some things can change, but I think you will find that in 30 years time every 50 year old today will be either be (a) 80 years old, or (b) dead. Unless you know something that the rest of us don't know. We know that every 40 year old will be 70 years old or dead. We know that every 10 year old will be 40 years old or dead or perhaps living off island. We know how many have been born in the past 20 years and we know the current net birth/death trend. We know how many people who live here currently will be of working age in 30 years time. So we know, give or take some tiny statistical deviations, how many pensioners there will be drawing a pension (whether still resident here or not), how many extra care homes are likely to be necessary, how many extra immigrant workers will be necessary to maintain a ratio of workers to retirees in order to fund the State pension. This is precisely what statistics are used for, and what actuaries do. Your apparent approach of "so much can change so let's see where we are when we get there" is precisely what any responsible government cannot do! Its also what the States of the past two decades have been guilty of doing, rather than introducing policies to address the inevitable future problems which we KNOW, with some certainty, will happen. Its not rocket science - its common sense.
I too am in favour of controlled population growth. And I mean active growth of importing people of working age who will add to the workforce and who will ideally not add to Guernsey's future stored up problems.
I can assure you that I do not "scaremonger and panic". I use reality. I use facts which are already out there, and which can be relied upon to reasonable predict the future. You just ignore facts and statistical trends and seem to devalue them as being meaningless. Our policians don't ignore the facts and statistical trends, but are more bothered about not making tough vital decisions in the interests of the island in case it prevents them from getting re-elected next time around. That's politicians for you, and Guernsey is not unique in that.
As for being out of my depth, I will leave others to be the judge of that. Your opinion really doesn't bother me one way or another as its so heavily discredited.
I thought I was pedantic until I came into contact with you!
Yes yes, RPI +4% as I have said numerous times in the posts above but omitted RPI+ in the last post, my bad.
It's a target and BWCI and SOG obviously agree it is realistic. You are welcome to hold your own view.
The trustee always makes the decisions. FACT. I simply cannot believe that this pension scheme is managed on a discretionary mandate. What makes you think that? There is plenty of evidence to the contrary. I'm sure they do have regular meetings with SOG to discuss investment strategy and SOG do make decisions which the Trustees will take into account in their deliberations. I know a lot about a lot of things thank you very much.
Regarding size of the civil service I'm not in the slightest but interested in your opinion you are wasting your time. I would like to know the facts and for the numbers and structure to be reviewed but until then I will reserve judgement. I'm sure there is much that can be improved but not without evidence of the best way forward.
That's fine then if I misunderstood you re the Burford correction, my bad, I don't know whether the 2% annual increase has been excessive. I'm open minded about it.
Re demographics, you are the one who has missed my point completely! I DID NOT SAY "so much can change so let's see where we are when we get there" that is the opposite of what I said! The government can look at the figures make judgements and take steps to address problems and the reality is they are looking at a population strategy.
Whether they have failed in the past is a matter of opinion. We are in a strong position right now. You tend to catastrophise. Yes elections and personal ambitions can get in the way but not insurmountably.
Its my day job to get finer details exactly right. That's not being pedantic. Its avoiding getting sued for getting it wrong.
Whether its RPI plus 4% or just 4% is still "chasing returns" when risk-free returns are some 3% less.
I think you will find that the investment portfolios ARE discretionary. Why would they be merely "advisory"? Who in the States of Guernsey or on the board of trustees has equal or better qualifications than the investment managers to make specific investment decisions?
It would be perfectly normal for the trustees to make the decisions as to what the mandate and risk parameters should be, and then to issue a mandate accordingly to the invetsment managers to get on with managing the portfolio on a discretionary basis.
The original decision to "target" UK RPI plus 4% was made some time ago. Is it still valid? It was only "valid" then because it was based on the States' attitude towards the shortfall. Was that attitude appropriate? I would say not. Has it been revisited since? If not, should it have been? These are all questions which should be getting asked, but to ask them will result in answers which politicians do not want to hear. Its the perpetual sweeping under the carpet so that it becomes somebody else's problem in the future, rather than actually confronting the issues, which is the huge worry.
At least progress has been made. You have now started to admit errors in previous posts. That's a start. Perhaps you are human after all :)
No one here is going to sue you but you are definitely not getting the finer details exactly right in this instance.
Page 2485:
"In early 2009, the Investments Sub-Committee of the Treasury and Resources Department initiated a process to reduce the risk of adverse short-term volatility involved in the Superannuation Fund by further diversifying the investment portfolio in
terms of asset types, manager and currency. The key reason for this objective was to make the portfolio more dynamic and flexible with targets set at the total fund level and the appointed managers given flexibility to make key decisions within their specific area of expertise whilst still ensuring compliance with the investment rules approved by the States."
doesn't sound like a full discretionary mandate to me.
The RPI +4% target was initiated during 2011 as you can see if you bother to glance at the accounts. We will see if there has been any change when we get the 2012 accounts but surely it is unlikely they would change strategy again so soon.
Contrary to your moans and groans you can bet that the assets are being regularly reviewed and the right questions are being asked. There is no reason to be concerned that this is not in safe hands.
In the investment management world, the client sets the mandate. The mandate can include all kinds of parameters re. risks, volatility, currencies, sectors to exclude, maturity of bonds etc. The agreed mandate is then given to the managers. It can be and indeed usually would be fully discretionary within those parameters.
You miss my point entirely. The target of UK RPI plus 4% was set BECAUSE the States only resolved to cover the liabilities to a target of 90%. Its cause and effect. If the States were aiming for higher cover, then they would need to aim for higher returns, meaning greater risks which they can't afford to take. Or to put in more money, which they cannot afford either. Which leaves the taxpayer. My point entirely.
When there are multiple fund managers involved, the overall pension scheme and balance of portfolios/assets to achieve the overall target (RPI+4%) will be looked after by the trustees on an advisory/monitoring basis to the client, SOG. Thats what I said to start with.
The penny drops. Yes the target of UK RPI plus 4% WAS set BECAUSE the States only resolved to cover the liabilities to a target of 90%. The states are not aiming for higher cover. That is my whole blinking point. It is fine as it is. There is no need for SOG, ie the taxpayer to put any more money in, you are panicking for no reason.
You are right that what the banks pay their staff cost the taxpayer nothing.
However, I think the banks have cost us all far more than any gold plated pension will.
Isn't this whole recession down to the greed and incompetence of the banks senior management? And they earn far more than any Civil Servant (salary or pension wise).
Calling planet earth :-)
"If the bank pays some or all of their staff's pensions, it doesn't cost us, Joe Public, anything,"
I disagree with the above statement, sorry. It doesn't cost us directly but whether or not the bank pay pensions as part of their total remuneration affects market forces, market forces dictate the level of remuneration required to attract workers to the public sector and due to the high demand for staff of the finance sector this has been a huge cost to Joe Public in public sector pay deals. Maybe conditions have changed but this will continue to affect the market rates.
I also disagree with your use of the word "impossible" and think you mean "unpalatable" but feel free to defend the semantics, you would have a hard job proving it!
It's a cop-out. It's still defined benefits and it still leaves the liability with the taxpayer for any subsequent shortfall in the fund.
Nowhere near enough of a change compared to what is required.
Neil Forman
With a cap being put on taxpayer contributions, more risk is put on the employee.
I can see a big argument coming but it needs to be done.
I think this is just a start and they are waiting for the investments to improve, cannot see it happening soon.
Yes, still based on average salary over the time employed but all the risk is on the employees.
If the fund is short they have to contribute more or have their benefits reduced, not taxpayers
There is no risk on the taxpayer. I think that is an important point and one you have missed/misunderstood. Theoretically employee contributions could be 100% of their pay!
You are living in cloud cuckoo land.
None of my staff have a pension provided, earn less than the equivalent ion the States Works Dept,work a damn sight harder and don't have the job security that CS staff have.
If its so bad in the CS what are you still doing there?
Personally I don't think these measures go anywhere far enough.
Too much has beem based on the assumption of ever increasing public prosperity. Now that continuing and increasing revenue stream is threatened by the possibilities of economic difficulties, the fool's paradise in which so many Deputies and their supporters have been living in is being confronted by the realities that the rest of us have to confront in our daily lives.
Is there any hope that Deputies and the States cease spending monies that will only be paid in full in the future? We would all like excellent pensions, but even government cannot expect to spend more than it can afford.
Change the record.........did you just say Firefighters are lowly paid???
Change the record
No I didn't, well certainly didn't mean to imply it anyway, hence the "plus" in the middle.
Sorry, but thats garbage. Whilst I agree that cleaners, caretakers etc are lowly paid, maintenace staff, tradesmen etc are not, when compared to the private sector.
On another point private sector tradesmen work 39 hours and not 36!
Help the island get out of this mess by forcing everybody to do a 39 hour week, it would be a start!
The 2012 hourly rate for a tradesman public service employee varies between £11-£13 an hour depending on the pay grade for their particular job, I know of several tradesmen in the private sector that are earning £15-£16 per hour so your argument falls flat I'm afraid.
The fact that a PSE works a 36 hour week makes no difference at all because they get paid 36 hours pay.
If you could possibly let me know of any tradesmen in the private sector that charge £15 - £16 an hour, please can you let me know? I need a carpenter, a builder, a sparky and a plumber please. Oh and a roofer too
Sorry, I didn't make myself very clear - I meant they were paid £15-£16 per hour by their employers.
I'd be pretty surprised if any of the above charges much less than £24-£25 an hour,even gardeners and suchlike charge £17-£18 per hour and that is for a relatively unskilled job in tradesman terms.
I had a tradesman come to see me about a job very recently. He is currently working in the Public Sector as a Tradesman on £14.36 per hour plus £1,750 pension contribution paid by his employer ie: the taxpayer.
I employ several men and they are not on £15-£16 per hour. The guys you are talking about may have different holiday, stamp, sick pay etc arrangements.
The proposed shake-up of public sector golden pensions is a start but still seems quite generous. The outrageous confrontational ravings of the United union person reveal a complete ignorance of the depth of support from islanders for a radical reduction in the cost to the tax payers to fund public sector pensions and benefits.Long over due bring it on.
It would be good to see the reaction to unite members who would be daft enought to take action?
Like when the shopping was to be done sorry cannot serve you as you are holding our island to ramson etc, same for filling their vehicle etc, that fellow needs to put his thinking head on before he takes the island on
His members certainly would get nothing from me at all, and that includes food and fuel.
You wouldn't have any food or fuel to give the Unite member - the harbour and airport would be the first places affected in the event of industrial action so how do you expect to receive your food and fuel?
Sara Thompson
Welcome to the real world States employees.
The union ranting is so typical and if it wasn't so serious would almost be funny.
This issue is bringing the island to its knees.
Wake up, States employees, do something now, before it's too late.
Lights Out
Your quite Sara this will bring the Island to its knees.
Quite rightly so as well. I have not spent the last 16years paying into and planning my retirement around something that is now to be changed!
After the teams go out for the second half the rules cannot be changed, whilst I accept that terms can or should be altered for the future. This will be based on people accepting the terms in front of them just as I did all those years ago!
I will be fully behind my pension remaining as I agreed when signing my contract and I hope this group of workers all stick to their guns and prove their values and the services we provide. It is not all about the finance industry so lets see exactly how little we actually do.
Just remember when the firefighters dropped categorey at the airport the chaos that ensued, well I certainly would hope they walk out of the door this time along with the rest of us and turn the lights out!
As I understand it the only way a exsistings workers rights can be changed is with both parties excepting it. Anyone already receiving a pension cannot again haven it altered unless they agree.
But all new States employees should be told as from the 1st Jan 13 the pension scheme is closed to new employees.
As for the Unite union getting up in arms, and saying it just a saving that the States wish to make, how right they are but so what we all have to make savings and we must all except that if we want to live in the safe surrounding that we all enjoy in this Island of ours.
calling_ planet_earth
Thank you for your veiled threats, Lights Out, and for expressing so perfectly the mentality that has brought the public sector to where it is today, and why it is not particularly popular in some quarters.
I appreciate your sentiment, however, your set jawed determination to not acknowledge the devastating effect the worldwide financial crises has had, how the scheme you are in has been phased out pretty much everywhere but here for very, very good reasons, just how bad things are in the private sector, where many of the very less fortunate taxpayers who are expected to prop up your arrangement regardless of the fact that they haven't had a payrise/bonus in years - and have pensions worth far less than THEY were promised to look forward to (in some cases, none) work, - plus, dare I say, your lack of understanding that, in fact, what you are being offered is still incredibly lucrative compared to many, isn't surprising at all.
Thank god everyone in the private sector who thinks the way they're treated is unfair and not what they signed up to, or the island really would grind to a halt, along with your pension scheme, that wouldn't have their tax money to prop it up any more.
Why not close the pension scheme with immediate effect with all those currently paying into it receiving a lump sum of all they have paid in contributions and then include an extra percentage payment to be directly linked to the length of time they have been paying in?
Would be too simple I suppose.
Too illegal more like.
It would be a breach of contract concerning a deferred payment. The employer wouldn't even try because they know they would be taken to court and be defeated resoundingly (losing the taxpayers tens of thousands more money!).
Fair comment, but do you expect the States employees to accept what is proposed?
Either way I suspect the unions and lawyers will be getting involved.
Certainly those in the fire service and those in the police service will not accept the proposals as they stand. Nor probably the other 'stakeholders'.
Sara Thompson
@Lights Out
I have spent much, much longer than you paying into a pension at a private company.
Mine was changed to the Care scheme 6 or 7 years ago.
No rises and no bonuses for five years.
That's the real world, get used to it.
Maybe a few long overdue redundancies - and yes they happened at business I work in - will concentrate the minds a little
Reagan for CM
Every European government is or already has gone through this process, why do the Public Servants in Guernsey think they should be any different. In its current form it is simply unaffordable along with other services the States provide. It's all well and good saying "we won't accept change and we want wage rises and we want more money for HSSD etc etc" but none of you are willing to say where all the extra cash should come from, apart from tax someone else. So the only alternative is The States gives us less or they take more which is it to be?
Still looks a Gold Plated Pension to me!
1/80th of Pensionable pay each year for Pension.
3/80th of Pensionable Pay per year for Lump Sum.
Both the same as now!
Main Changes:
1: Pension worked out on Average Pay, NOT last year salary. Normally a person gets promoted and more pay to get a better pension at the moment.
2: Pension age to increase to 65 then to 67 by 2031.
3: Employee Contributions will be 8%. Now 6%.
I expect they will get an extra 2% rise in salary to compensate for this!
Taxpayer will still pay into the Scheme, max 14%.
I thought all the talk was about getting rid of the Gold Plated Pension Scheme?
As I said in an earlier post on this thread - its a cop-out.
If there is to be a battle about changing it then let's at least make it a battle worth winning.
As a high earner it is very easy for you to stand and say its a cop-out - you may well be right but looking at the other side of the coin have you stopped to consider what the lower paid public service employees think of the proposed changes?
There are many that don't earn a fifth of your wages and their only worthwhile perk was a decent pension to look forward to at the end of their working life, under the new proposals they could now be asked to work two extra years, pay 2% extra of their already low income and accept a lower pension.
It should come as no surprise to you (or anyone else) that there is some pretty hacked off States employees out there!
If you were quoted £800 to decorate your lounge and signed a contract to guarantee the job would be carried out at that price would you then accept a bill for £1200 and not create a fuss?
I think not!
Bring it on
Lets not worry about about the civil service striking. If we do not see a fair system in place (same for all) you will see a much bigger kick back from the working tax payer. The wonders of modern technology make this quite possible.
@calling_ planet_earth
Very well put, but methinks you may as well speak to the proverbial brick wall.....it isn't sinking in with the public sector at all.
This needs more publicity from the States side
Union leaders usually thrive on conflict so I wouldn't trust what they are telling their voting fodder about the pros and cons of the proposed replacement scheme
The animosity shown on here at this very early stage indicates that the States' side had better get their PR spot on right from the start and for once it may justify professional help in doing so
I work in finance and earn approx £80K per annum.
I get a 30% bonus every year minimum.
The company pays for my pension so i dont pay a penny.
I pay in to a private RATS to avoid paying additional tax where I dont have to building a nice nest egg which I use to purchase properties through to avoid paying stamp duty on the property and fund my childrens future.
My work also gives me £500 per year towards a holiday as times are tight.
They also provide me with access to an accountant every year so that I can fiddle my tax forms and ensure I pay as little as possible.
My brother earns £30K a year as a firefighter. He will get a nice lump some when he retires. He's srewing me as I have to fund his pension.
All the best - Slinky
OK if we're drifting into the realms of fiction to make a point .. I am an OAP with a little business on the side to make ends meet
I pay tax and insurance at the going self employed rate towards my own Old Age pension because my combined income just exceeds the annual tax allowance
I also have rats but that is being attended to.My children will inherit my house clear of debt if I can hang on just a few more years
I don't have a holiday and I pay my own accountant who insists that my tax forms are spot on. My cousin is a senior CS based at Grange House earning just under 100K. He will get a very nice lump sum when he retires.We don't get on because I know that I've paid throughout my working life,and I am still paying to fund his pension
My name is the Doctor. because of my time travelling machine, I am able to go back to in time and see the world that Slinky lives in.
It's nice back there where Slinky lives. Banks paid well and provided great pension schemes, and the States coffers were full with the taxes generated from those well paid bankers, whilst the public sector paid a modest to very good wage, and provided an excellent pension.
I then travelled forward to now, and things don't look as good. Worldwide financial disaster means the halcyon days of finance are gone, but a strange time/space anomaly means that for the public sector, time has stood still!
They still have pay rises, that excellent pension, job security, whilst everyone else who has none of those things and increasingly less year on year is paying for it!
What a totally cr*p world the present day has become....
no wonder Slinky wants so desperately to live in the past.
The Doctor.
I didn't hear the well paid bankers bleating a few years ago when they were coining it in - how times change!
It also seems to have escaped a lot of people's attention that public sector employees pay income tax as well.
I think you are the one who would like to live in the past Mr sour grapes. Even if the pension proposals go through you will still be bitter and resentful.
Poor Sparty, so, having run out of input for intelligent debate, I see you have resorted to insults...surely not at me...?
I worked in finance briefly, the public sector temporarily, am now self employed and earning a pittance, and very, very happy. I want for nothing and ask similarly, however when I see a situation as wrong, in particular, something that is potentially detrimental to the island I very much love, then yes, I have an opinion on it, which I've stated, how exactly does that make me the partaker of sour fruit...?
If anyone on here's very obviously sour, and indeed, perhaps smarting from recent events that again, have effected our whole island very publicly (and that they took the fall for), then it's certainly not little ol' me, seems some really do see their own worse faults in other people.
Time to stop taking the pith and start making lemonade out of all that fruit that's been chucked at you, Sparty.
Right, over to you for the last word if it makes you feel better, dear.
Scarlett WTF
You are a star please don't ever change. Any sour fruit coming my way I will hurl straight back at ya! It's just banter.
She should have studied more at school then
Bet she's gutted she's paying for a runway and harbour to be fixed if the cant go on holiday!
Neil Forman
Coffee over the screen again, all was going well till I got to the rats bit.
You should not feel to bad Ray as you are also paying for your own final salary pension that you receieve or have got the wrong person
There is no worry of the civil service taking industrial action over the propose changes being put foreward with pensions.
Its taxpayers money propping up the public servants pension scheme and the purse is ever increasing from the taxpayer.We just cannot afford under the present system to allow the states of guernsey to keep topping up.
this fund needs to be transferred into a private insurance fund and allowing the states to invest into health,education and the wellbeing of all islanders.Build cheaper housing.
Of course we all envy the huge lump sums they will recieve and very large weekly pensions which is 3rd of their present wage ontop of old age pension.
plus 2 extra days holidays this year for public buildings 24th and 31st December at the expence of the taxpayer.
Actually, the buildings are shut but the staff don't get the day off unless they take it as annual leave.
A bit of piece and quiet to actually catch up on some work I imagine....
The worst thing about all this is there are civil servants who don't want to be tied into the pension scheme but have to!! I would prefer to have control of my money rather than the states of guernsey.
Sorry, been away for a few days! Lots to catch up on.
Just wondering, can anyone point to where it is demonstrated that the current scheme is unsustainable?
I'm not saying there isn't anything - just can't recall seeing any...
No that would be impossible to demonstrate, one can only hypothesise and it is therefore merely a matter of opinion.
The latest actuarial report and more recent accounts is all we have to allow us to consider the current position and form our own opinions about the future.
one thing i found interesting is that the pension fund has actually taken in more than it has paid out for the last 10 or so years ranging between 3 and 20 million in surplus per year. Unsustainable?
Neil Forman
The figures can be found here
Page 28
Let's see what you make of this.
In terms of annual contributions coming in and ordinary pension payments going out, the outgoings exceed the incomings by around £3m in both 2010 and 2011. The outgoings by definition are pretty constant and predictable.
The other movements on the fund are one-off movements which by definition are volatile.
Unless incomings constantly exceed outgoings, or investment performance is strong consistently, the fund's finances can only deteriorate.
The last actuarial valuation and report (page 2489 onwards) gives more detailed information including details about the risks for the fund which are set out on page 2524.
Neil Forman is concerned about the deficit on page 28 of the 2011 accounts however this is in line with the funding target and therefore is of no concern. The actuaries refer to a "funding shortfall" which would be the amount if the scheme fell below its funding target, and in the event this occurred this amount would then need to be made up over a period of decades.
What I make of it?
page 8 Shows contribution exceeds payment in 2011. States that the last valuation shows the funding level was in line with targets (1.6% above target), 91.6% with the FRS 17 funding level showing only 70%.
This says to me that the accounting standard is at odds with the actuarial valuation and to be honest, I am more trusting of the industry expert - the actuary.
p30 shows how the fund is susceptible to movements in markets - £92m gain in 2010 and £48m loss in 2011. I think I read the investment strategy has altered to try to smooth this out.
So in summary FRS17 shows a large deficit (about 30% underfunded). The actuarial valuation shows a 10% underfund which is the target set by the States. At the time of valuation, FRS 17 showed a 24% underfund, which again highlights the difference in methodology between the bean counters and the industry experts.
I therefore conclude that the industry expert is to be trusted, no knee jerk reaction is needed until the results of the next trienniel valuation are known.
What do you make of it?
calling_ planet_earth
don't expect a reply any time soon, Neil, I am still awaiting with slightly less eager anticipation Billy's ideas as to where he thinks - or perhaps knows (?!) - the money can come from to keep propping up his pension scheme, ad infinitum.
Were you? Sorry, I'd been away for a few days.
Well, as can be seen above, the latest opinion of the industry expert actuary, endorsed by the States was that status quo is fine, no increases need to be made.
An interesting point.
The target funding level is based on the States' view of the extent to which the fund needs to be covered. Historically, because there was anticipation of economic growth (prior to zero-10 and the global economic crisis), the view seems to have been that "normal" investment growth would be sufficient to recoup any shortfall.
What has changed is that the sorts of investment returns earned up to 2008 for the previous two decades were very substantial as markets moved pretty much continually in one direction. We are now in a very different environment indeed, and there is lots of head-scratching about how to make up the shortfall if those levels of returns are no longer available.
So - the key questions are:
1. To what extent should the States be looking to ensure that the fund's liabilities are covered, as opposed to the status quo?
2. If that level is higher than the current level of cover, where will the extra money come from to fund the existing shortfall?
3. If much higher investment returns are sought, how much extra capital risk can be/should be taken to "chase the returns", and what are the consequences of incurring further capital losses.
You will see that there are huge potential implications for the taxpayer, whichever decisions are made. So the logical conclusion has to surely be to draw a line under the scheme, close it to new entrants, ringfence all existing liabilities and deal with all future benefits via defined contributions rather than defined benefits.
The implications re. the current shortfall will still need to be addressed, but no additional future shortfalls could then arise.
Open question
Will GST will introduced in the future to fund Civil Service pensions?
Any thoughts / Opinions ?
Saints Bay
I hope not, but I am struggling to see any alternative way of covering the shortfall.
GST will always be unpopular, but public sector workers really would be unpopular if it was introduced specifically so that their defined benefits scheme could continue.
Spartacus will no doubt claim that its only a mythical figure which never needs to be repaid, which as we know is clearly not the case. A bit like claiming that a mortgage doesn't need to be repaid because it can be cleared through selling the property. All hunky dory until negative equity territory is reached and the bank gets twitchy. In the case of the pension scheme the taxpayer is "the bank" and negative equity territory is here.
What shortfall?
If you are referring to the deficit, this exists purely due to the funding target being approx 90% which has been set by SOG.
If you are referring to a funding shortfall this does not exist. There is currently a funding surplus. See glossary for funding shortfall and funding surplus definitions. Appendix F page 2542 of the link.
I'm talking about the shortfall between the market value of the fund investments and the monetary value of the accrued liabilities of the scheme.
Whether its a deficit or a shortfall is academic. Its a hole and holes need to be filled. In this case with money. Money which the island does not have and which taxpayers will have to cough up.
That keeps it short and simple as requested by AJ.
Ah you are talking about the approved strategic deficit. Deficit and funding shortfall have different meanings.
"Its a hole and holes need to be filled" I have thought about several inappropriate responses to that! Instead I will just say you are wrong as a matter of indisputable fact.
SOG have resolved to keep the hole (deficit) and utilise that taxpayer money for other things until such a time it might be needed (i.e. never).
How can you say that I am "wrong as a matter of indisputable fact"? I am disputing it and its not a "fact" at all. In what way is it a fact? Its anywhere between a £77.3m hole as at 31 December 2010 and an extra £36m as at 31 December 2011. Those are the "facts".
How can you possibly say it will "never" be needed? Absolute nonsense. What planet are you on? Are you saying that the actuarial valuation, being the tried and tested method of evaluating all pension schemes, should be ignored altogether? Do you have any idea what you are actually saying? On the one hand you are saying that the actuarial valuation means something because the 90% target is based on that, but on the other hand you are saying that its meaningless. If its meaningless, why base a target on it?
I have never said, or even implied, that the actuarial valuation is meaningless. That's absurd.
The indisputable fact is that not all holes need to be filled and this is a prime example.
As long as the funding target is 90% the 10% deficit will exist and will not need to be filled. That is obviously too logical for you.
You seem to disagree with the decision to have the 90% funding target and that's your personal opinion but you seem to be alone in holding that view.
Rubbish! You have on several occasions expressly ridiculed the actuarial projections and have dismissed the importance of the deficit. So please explain to what extent you have "not implied that the actuarial valuation is meaningless".
You clearly have no idea what an "indisputable fact" is. What you are stating is no such thing. It is your personal opinion. The hole is a contingent liability. That is a fact. And its indisputable. Its not just a personal opinion. At some stage in the future, the pension liabilities upon which that contingent liability is based will actually be paid. That is also an indisputable fact, not a personal opinion. It is therefore highly prudent to fund the payment of those future liabilities. So where is that going to have to come from? We know the answer.
Am I alone in holding that view? Clearly not, otherwise the current review would not be happening. Am I alone in being concerned that the current policy has resulted in the fund being some £76m to £110m short of that 90% target? Definitely not, as you can see from this thread.
No I haven't ridiculed the actuarial projections, I ridiculed your personal interpretation of what they mean.
In relation to the deficit, I think "important" is the wrong adjective to use. The deficit is not important it is just an accounting figure reflecting the fact that the fund is 90% funded. What is important is that there is a £900M value of assets supporting the scheme and that is a very strong and prudent position.
While the scheme is 90% funded the 10% deficit of contingent liabilities will never need to be found by extra cash. That is an indisputable fact. If the scheme was 0% funded (as many schemes are) then the scheme would rely on current contributions to pay its liabilities. If this was the case the "hole" you speak of would be a 100% deficit but even this would not need to be found fro extra cash because it would be "filled" by the regular contributions even at the existing level. You are clearly having difficulty getting your head around this.
As Billythefish and others have pointed out the level of contributions in 2011 exceeded the payments out, therefore there is no "hole" to worry about in terms of funding. If the payments out exceeded the contributions, and if contributions stopped for some reason, in that hypothetical scenario there would be a £900M "insurance policy" ensuring that the liabilities could continue to be met and that would last a very long time indeed before anyone would need to worry about the 10% "deficit".
You are alone in your view that the policy of a 90% funded scheme is not prudent, it is extremely prudent. This policy is unlikely to change following the outcome of the review. If anything the funding level might decrease due to the lower risks if the proposals are approved.
The fund is not short of the 90% target. The 2010 actuarial valuation is the only thing used to determine this and the level is 91.6%. Therefore there is a funding surplus. There is no shortfall. We will not know the position again until the next actuarial valuation of 2013 however everything might have changed by then due to the new proposals which, if approved, could drastically affect the 2013 calculations.
Let's cut the crap. You seem to have a real blindspot with figures so I'll spell them out for you.
The audited accounts of the scheme (page 32) show an asset balance as at 31st December 2010 of £929,979,000. They also state the scheme liabilities as at the same date of £1,216,473,000. The stated deficit (the exact term used by the auditors) at that date was £286,494,000.
That means that as at that date, the scheme was funded to the tune of only 76.45% of its actuarially-stated liabilities, despite the decision by the States in 2007 to aim for a target of 90% cover of the 2007 liabilities, and 100% thereafter.
The 90% target level as at 31st December 2010 was therefore £1,094,825,700. The value of assets as at that date was only £929,979,000. So, at 31st December 2010, the scheme was £164,846,700 short of even the 90% target, just 3 years after that target was set. This doesn't even take into account the additional commitment to target 100% of post-2007 liabilities.
The 2011 audited accounts of the States of Guernsey reported that the fund fell in value from £930m to £896.5m during the year to 31st December 2011. This reduction of £33.5m was made up of new contributions of £45.2m, less payment of pensions of £42.7m, less a fall in investment values of £36m. The report states: "This has contributed to the funding level decreasing to 70% (2010: 76%) under FRS17". So as at 31st December 2011, the scheme's liabilities now exceeded its assets by £319,973,000, and fell short of the 90% target funding level by £198,325,700.
Yes, new contributions slightly exceeded pension payments in 2011 by £2.7m. But at some point in the future that deficit of £319m will INEVITABLY cause the scheme to run out of money unless the shortfall is made up. Whether the deficit of £319m deficit at 100% cover or the deficit of £198.3m at the 90% target cover level is used is a debatable point, but even a £198.3m shortfall at the 90% target level HAS to be made up at some point in order for future pensions to be paid. That is the current size of the hole.
It is impossible for these figures to be clearer. Guernsey has a huge ticking timebomb problem with this pension fund and at some stage the shortfall of money has to be found to pay the future pensions.
Kicking the can further down the street, or sweeping it further under the carpet, is both naive and reckless. We are storing up a massive future debt which at some stage simply has to be repaid by Guernsey taxpayers. I'll repeat that and shout it out - BY GUERNSEY TAXPAYERS.
Its exactly like having a house valued at £900k and an interest-only mortgage of £1.2m. The mortgage lender might be temporarily relaxed about negative equity of £300k provided that the mortgage payments continues to be met by the borrower's annual income, but ultimately the £1.2m capital debt has to be repaid in full, with no assets to pay it from. The States of Guernsey already has an annual deficit, and so it has no extra source of available income to be injected to reduce the shortfall. That can only mean extra taxes, massive extra taxes, being imposed on the Guernsey taxpayer. That rather looks to me like a GST is inevitable. Unless somebody else has a brighter idea.
I call that a very serious problem indeed for every single Guernsey taxpayer. Spartacus - your state of denial of there being any problem is precisely the attitude which has put Guernsey into this mess.
Is there anybody out there who still thinks that the current scheme is sustainable? Time to wake up and smell the coffee.
No wonder you are getting confused if you are using the FRS17 deficit as a guide. That's not what BWCI and SOG are using to get to the 90% funding target. The FRS17 figures are shown for information only.
Page 2486 of the November 2011 Billet explains I suggest you read it. The scheme is 91.6% funded which represents a FUNDING SURPLUS.
If there was a funding deficit then yes that would be addressed. However that is not the case.
I am well aware of what that paragraph states.
However, I do not believe for one moment that merely adopting FRS17 results in a £320m deficit, and that no deficit exists if FRS17 is not used. This is £320m that we are talking about, not a mere rounding error.
Whichever way you skin the cat, a pension deficit of £320m, made up of assets less liabilities, is still a pension deficit of £320m.
Until somebody whose opinion I respect, which unfortunately rules you out, is able to coherently explain how a 91.6% funding level reconciles with a 76% and then to a 70% funding level whilst a £320m deficit actually exists, then I am afraid that I will not be persuaded otherwise. You seem happy to take that at face value. I certainly am not.
I am well aware that FRS17 became the new and accepted method of accounting for pension schemes for a very good reason, which is that it provides a more accurate valuation of the real liability exposure of the scheme.
The bottom line is very simple. Does Guernsey actually have a £320m shortfall on its public sector superannuation scheme or does it not? If it does, then it MUST be provided for as those liabilities are real and will have to be met in the future. I am satisfied that the assets exist, and I am satisfied that the actuarial valuation of the scheme liabilities is accurate, and so the difference between the two is a genuine hole which has to be filled at some point by the States of Guernsey.
Who said "no deficit exists if FRS17 is not used?" There IS a deficit but it is an actuarial deficit, not an amount of money which needs to be found. It is a figure which will change from one actuarial valuation to the next and is used for strategic decision making only. You are never going to understand this so we may as well just agree to disagree.
The 91.6% funding level is never going to reconcile with the 76% FRS level. There is no FRS target. These are completely different calculations, the FRS calculation is heavily discounted and is recorded for information only. I explained to you 4 DAYS AGO that you were comparing apples with pears. You don't need me to explain, the explanation is in the notes to the accounts and in the actuarial valuation but it seems you cannot read accounting notes.
Look at page 2511 of the Nov 11 Billet which explains the funding situation. It says:
Funding target (90% of accrued benefits to 31 December 2007 and 100% hereafter = £834.759M
Market value of assets = £840.994M
Assets in EXCESS of target funding liabilities =£6.235M
The scheme has a funding SURPLUS of £6,235,000 FACT
Note 22 on page 30 of the 2011 accounts states "FRS17 has NOT been adopted in full and the deficit on the Fund is, therefore, not included in the Balance Sheet" Note 1 on page 17 explains "the actuarial deficit has been calculated in accordance with FRS 17 but has NOT been included in the Fiduciary Balance Sheet"
The balance sheet on page 16 of the 2011 accounts shows that the balance of the superannuation fund is an ASSET of £896.537M. No liabilities shown here, no deficit shown here, therefore NO HOLE and THAT is the bottom line.
I will try to be as polite as possible. You don't make that easy based on this post, but here goes.
1. You claim that an actuarial deficit is merely used for strategic decision making only. Incorrect. It is used to inform the States of Guernsey what its liabilities are under the scheme, using the tried and tested method for pension schemes. Of course the money to pay those pension benefits needs to be found.
2. Your attempt to explain the difference between the 91.6% figure and the 76% and 70% figures fails miserably. Try again.
3. The stated liabilities in the audited accounts of 31st December 2010 was £1,216,473,000. Please explain what that figure represents. Are you seriously suggesting that the actuaries and the auditors have invented an extra £320m of liabilities just for the fun of it?
4. Why are you focusing on the fund value against its 2007 liabilities? That's history. The liabilities have mushroomed in the subsequent 4 years due to the 2% per annum compound growth in the number of public sector workers and their accrued pension rights, together with big losses in the investment markets. The combined effect is massive.
5. The 2007 figures were not calculated under FRS17, whereas the 2010 figures were. I accept that this is not comparing apples with apples. I therefore take the logical view and ignore 2007 altogether, as its now obsolete. My logic tells me to measure what assets the fund has now (or up to 31 December 2011 as the latest available figures) against the most recent valuation of its liabilities. Result - £320m deficit.
Back to basics I'm afraid - gross assets less gross liabilities equals net assets (or liabilities). In this case it's net liabilities,
6. Your last paragraph is absurd. You are ignoring the liabilities altogether. Even you cannot seriously be suggesting that there are no liabilities!
It's fair to say that the selective application of FRS17 is most unhelpful. It unquestionably causes confusion. That may well even have been the intention in order to hide the bad news.
What I'm interested in seeing is an impartial expert assessment of the real net position, not from politicians, not from the scheme trustees, and not from the actuaries. And not from you either.
I am a highly experienced financial services professional with 30 years experience as a director of regulated businesses and I read and analyse balance sheets and actuarial valuations regularly. I confess to being extremely puzzled by the rationale for the contents of some of the Notes to the Accounts. If I didn't know better, I'd suggest that it is deliberately misleading. But surely not....
1. The actuarial valuation is used to inform the SOG of its estimated liabilities under the scheme in order to make a strategic decision of what the deficit should be. The decision is that the scheme should be 90% funded and the deficit should be 10%. The money for the benefits is there already in the contributions which are accounted for as an expense paid from revenue on an annual basis with a fallback of a huge £900M fund. The £900M fund is therefore a net asset.
2. 91.6% is an apple the other two are pears.
3. That liability is an actuarial liability, a calculation for information purposes. You will see in the audited accounts of 31st December 2010 the figure of £1,216,473,000 is not a SOG balance sheet liability and is not deducted from the asset value of the superannuation fund which is listed as a SOG asset.
4. I'm not focusing on the fund value against the 2007 liabilities. The funding target is set in stone as "90% of accrued benefits to 31 December 2007 and 100% hereafter" Look at the billet. That is what SOG have decided the funding basis will be. The scheme rules changed on 1 Jan 2008 which is why they froze the liabilities at that date. Thereafter the teachers scheme was amalgamated with it.
You need to get your head around the fact that the accrued benefits are not payable now they are estimated liabilities of the future. As at 2007, the future estimated requirements of the fund were calculated and that figure is set in stone. Calculate 90% of that figure and you will have part of the funding figure. Do the same for the future benefits arising since 2008 on top of those liabilities but calculate 100% of that figure. That gives you the funding target.
The liabilities as calculated in 2007 have mostly not been paid out yet, it is not history these are still future expected demands.
The liabilities have not exactly mushroomed but yes they have increased as you would expect.
see page 1329 of the 2007 actuarial valuation.
see page 2486 here
The losses on investments have no bearing whatsoever on the calculation of liabilities.
5. As I have explained the 2007 figures are not obsolete at all. The 2011 figures should not really be used for this purpose you should use the 2010 actuarial figures as the most up to date calculation. I believe the 2011 figures are prepared under FRS17. In any case the liabilities which create the deficit have not been included n the SOG balance sheet instead the full asset value of the fund has been included as an asset.
6. yes I am saying the balance sheet of SOG ignores the superannuation fund liabilities. See for yourself. The liabilities are estimated future payment demands and therefore it would be absurd to include them on the balance sheet. They do not currently exist, they are a calculation of future survivor expectations.
Utter garbage. You are completely wrong on multiple fronts and I've already explained why ad nauseum so for everyone's benefit I won't repeat it. I will repeat though that you absolutely don't have a clue.
As I stated yesterday, I await the views of an expert, not an "armchair" expert, to independently tell the Guernsey what we all need to know, as opposed to what our politicians are prepared to tell us about the ticking timebomb.
For everybody's sake I hope I am proved wrong, even if it was to mean that you were right, but I really don't believe that will be the case.
So, Gavin St Pier, Charles Parkinson, Lyndon Trott, Graham Parrott - I am quite certain that between you all you enlighten us. Every islander needs to know what are facing down the line.
What I have said is factual and backed up by the accounts and actuarial valuations.
In fairness I was disappointed that there was no full report published following the review. All we had was a set of proposals. Hopefully when it reaches the States the policy council will publish a full report.
It certainly needs a full and extensive report, either to put everyone's minds at rest (except yours as you aren't worried), or to quantify the full extent of what we are facing.
Some very apt anonymous quotations to this whole debate:
"If you can stay calm, while all around you is chaos..then you probably haven't completely understood the seriousness of the situation".
"You can slide further on bullsh*t than you can on concrete".
"Never put off until tomorrow what you can put off altogether".
Well really the actuarial valuation does that.
Nevertheless the terms of reference was in two parts.
1. Review the facts as listed.
2. Make proposals.
There will have been a report to the policy council in relation to point 1. but they have not published that - why not? Surely they would have published it if it helps to justify the proposals. Will all be revealed when it goes to the States for debate? At the moment I just can't see how these changes are going to get off the ground.
Wouldn't it be wonderful if all posts were restricted to a maximum of 200 words, then the rest of us wouldn't need to spend ages reading through the drivle and insults to get to the niti-griti. Common sense!
Your headline is unsurprising misleading, nothing has been agreed with the staff!
Neil Forman
Your post of 11.01am 20/12/12 is very good. I would just add the following.
With regards to the statements made by Billythefish and Spartacus about contributions being more than pensions paid in 2011.
Whilst this statement is true, the returns on investments were -£36,036,000 so the fund actually decreased by £33,442,000
In the years 2007 - 2011 the taxpayer contributions total £103,849,000
The deficit in 2007 was £128,702,000
The deficit in 2011 was £381,526,000
With regards to GST being introduced to fund the pension, I hope not. I cannot see the taxpayer accepting that.
You are doing that thing again listing numbers but clearly don't understand what they mean.
Say you have bought a nice car outright, no loan. You expect to pay say £10,000 in petrol and maintenance costs over a 10 year lifespan. It is imperative you keep this car running. You have savings of £9,000 but you pay all the car expenses easily from your regular income. Would you be worried about finding the £1,000 deficit? Of course not. If your savings rose to £9,150 one year and dropped to £9,100 the next, would you be worried that your car expenses are unsustainable? Of course not. Even if you lost your job you would be able to use your savings to cover the running costs for 9 years. If after 9 years you still have no job and your savings have gone then you might need to think about GST.
And the most important point of all is that when your car is ready for the scrapyard and you still absolutely need a car, and you have no job and no other income so can't borrow money to buy your next car, you have a major problem down the line.
As far as the pension scheme is concerned, instead of being an individual without a car, the island has to do without hospitals or schools, or impose massive taxes on the population to balance the books.
As I have been saying all along, there is no appetite to introduce GST or impose massive extra taxes on islanders just so that the public sector can continue to receive clearly unaffordable defined pension benefits.
Au contraire GM!
In this case the car is an investment not a depreciating asset. It is also kept locked up securely in the garage not to be used. It can be used as collateral to borrow money for hospitals or schools if needed. You don't need a car at all so you could sell the car and spend the money. It is expected to increase in value by RPI+4% and is highly unlikely to be in the scrapyard at any time soon in which case you would perhaps sue the garage owner for failing to take care of it.
Except that its not a great investment when it can fall in value by £36m in a year.
And it can't be used as collateral because its going to be needed to pay future pensions. You can't use the same asset twice!
As you should well know, investments can go up as well as down and it is performance over the long term which counts.
It will only be needed to pay pensions if SOG is unable to continue making contributions, which is highly unlikely, lets face it.
This appears to have gone straight over your head....its not a question of whether the States of Guernsey can afford to pay it going forward when the cumulative effect of doing so will be having such a massive impact on government revenues. The issue is whether the taxpayers of Guernsey will accept huge extra tax increases, including inevitably GST, to pay for it.
I would suggest that we already know the answer to that. There is not a cat in hell's chance of the public accepting GST coming in until after defined benefits have been scrapped.
To conclude..
The way I see it pension contributions are simply a form of salary, but instead of paying away the extra cash the states get to keep it and defer the benefit and have therefore built up a fund which is a state asset.
I think the proposals are sensible changes for all new employees and this will save SOG money in the long term but trying to enforce this on existing employees will cause more problems than it solves and it could compound the current recruitment problems we have. A decision will be made early next year surely.
The size and structure of the civil service and public sector together with the total cost of their remuneration is a separate issue but also needs to be addressed.
How SOG are going to continue to meet remuneration costs and all other costs will form part of the tax review next year. I would not expect decisions will be made until 2014. It seems inevitable that some form of tax increases will be recommended however I would hope alternatives can be found rather than considering GST. I wouldn't be surprised if very radical changes result from this.
If pension contributions are just a form of salary, can we have the 26 % tax from every civil servant ( indeed anyone in receipt of an employers contribution ) that gets paid them please ? That would help fill in a bit of the black hole ....
Could be, maybe that will be considered in the review of taxes etc next year. Compared with some of the utter nonsense on this thread, that is what I call a constructive suggestion!
That's very honest of you but don't be too harsh on yourself. About one in ten of your posts did contain some element of logic and common sense.
Is anybody actually following the Spartacus / GM marathon?
Well - Neil Forman is so that's one!
Apologies if you are bored of it, but today's exchanges have got to the crux of the issue. As its over £300m at stake, or about £4,600 per island resident, I hope its deemed worthy of clarification!
Neil Forman
If you work that figure out per employed person, i.e. taxpayer which the facts and figures boolet for 2012 states as 32,109 it works out at £11,882.21 each.
Despite what Spartacus says, this figure will have to be met, I would prefer it is dealt with now. Let's not leave this for our our children and grandchildren to pay.
No,got bored of that one!
I will have reached pension age by the time they finish - oh no, maybe not I almost forgot it might end up at 67.
No. Their pointless, petty squabbling just puts me off reading all the threads they end up hijacking.
I am Ray :) and i will just add that speaking to a chap that i know very well and has investment experience for 40yrs plus and deals with very large sums of money told me that this 4% + RPI (that GM and Sparty were debating)would very much be classed as higher risk and is optimistic. It seems to confirm what GM has been saying in that returns of much less would be more realistic to reduce the risk of loss.
As for the rest of the debate i`m just a spectator :).
Neil Forman
This is serious, this WILL come and bite us on the proverbial.
Like the name change, don't think we will see it this term though. Another empty promise, as Matt says it only takes one member to start this rolling.
Absolutely no doubt that it's serious but I just wish that in this season of good will GM and Sparty could meet up for an hour somewhere ( the new Vazon Cafe would be nice but I suppose somewhere where they could both be checked for hidden weapons would be more appropriate)and then come back and tell us what has been decided between them
After that we can all wait to see what decisions are eventually made by the people who really matter
No chance of that I'm afraid. I wouldn't wish that on the Vazon Cafe so soon after they have opened!
Seriously, no hard feelings to Spartacus. We have both overstepped the personal attacks and it is clear that we both "know" that we are right (!), and neither of us will budge from those respective views.
Re your second paragraph, with respect you are missing the point. This is a massive issue which hugely affects each and every one of us. Call me cynical, but I think the "people who really matter" are the very people who have been desperate to avoid having to actually confront the issue! The longer that people don't talk about it, the better as far as they are concerned, instead of making the very difficult but essential decisions for the sake of our children and grandchildren.
No hard feelings towards you either :)
Sorry but IWV sounds like an STD or worse, please change back.
It doesn't matter who is "right" what is important is to discuss the things. Too few take an active interest.
Switched off
IWV et al,
I for one am thoroughly p#ssed orf with the GM / Spartacus saga, two well-meaning ( I will be charitable as it is Christmas) self opinionated, boring old (?) f#rts who cannot accept that people are entitled to their own opinion. Remember, opinions are like a#se h*les, everyone has one.
Peace and Goodwill to all!
How about we put up social security by a couple of percent.
Then your state pension is weighted by the amount that you pay in to it over the years. Taken as an average of course?