View Full Version : The 2016 Budget, and unfunded public sector pensions.
It's fair to say, more upheaval.
"It is government’s policy is to review the discount rate used to set employer contributions to the unfunded public service pension schemes every 5 years. The discount rate is based on the OBR’s long term projections of GDP growth. Budget 2016 sets out that the recent assessment has resulted in a reduction in the discount rate which will increase the contributions employers pay to the schemes from 2019-20 onward. This will ensure that the costs of providing pension benefits in the future are fairly reflected in the contributions paid by employers, and that the pension promises made today are on a sustainable basis to ensure fairness to future tax payers."
Overall though, so much to be quite happy about. Especially if you own a business, are 'of means' and/or want to decumulation effectively, or 'simply' save for the future.
https://www.gov.uk/government/publications/budget-2016-documents/budget-2016
downsizer
16th Mar 2016, 14:34
And that quote means what in English?:eek:
AFPS is a long-term commitment, funded by the MoD, which has no tangible assets. When you join it, you will probably receive it 40 years in the future, so it's difficult to know how much money to set aside to fund it, now. One method used is to calculate the present value of your future pension by using an appropriate discount rate; eg, if the RAF promises you a payment of £100 in 10 years time, what is the cost of that promise right now to the defence budget?
If we assume that a company decides it needs to cost a future pension commitment, it could invest in government bonds (gilts) and expect that these will give a return of 4% (nominal) a year. The cost to it of providing £100 in 10 year's time is therefore: £100 ÷ 1.0410 = £67.56. Effectively, the discount rate used is 4%, which is equal to the expected return on government bonds. Alternatively, investing in equities, where it may expect a return of say, 8% (nominal! and for the maths) a year, the cost of providing the promise of £100 in 10 years time (using a discount rate of 8 per cent) will then be; £100 ÷ 1.0810 = £46.32
So it may appear as though a 'company', or entity, should invest in equities. This isn't always the case, because as we have seen - (especially this year!) - equities are more volatile and/or risky than government bonds. So if the company invests in equities there is an increased chance that the £46.32 they invest now may be less than £100 in 10 years time and they may need to make up the difference.
The concept of a discount rate becomes more difficult with AFPS as there are no tangible assets to back the pension promise. So, care is vital. What Osborne is saying, is that the discount rate will change (almost certainly, go down) and that therefore, the hypothetical cost of setting aside money now, means that more will have to be ring fenced. This will mean, savings will need to be made elsewhere and/or else how - by reducing benefits further, delaying age when it gets paid etc.
I'm by the pool and have had a nightmare thought, as I kick on with sundowners.
Does tonic water have sugar in it? :(
tmmorris
16th Mar 2016, 18:01
OMG yes it does...
deltahotel
16th Mar 2016, 18:10
More gin, less tonic.
CoffmanStarter
16th Mar 2016, 18:36
But Tonic Water (Fever-Tree ... proper stuff) also contains quinine ... an antimalarial medicine and should be tax free :p
Wander00
16th Mar 2016, 18:38
You three have just reminded me of a "gin and tonic" the lovely Peter ("Six Feet Over") Charles one poured for me. Coughing and spluttering I realised he had poured me a "gin and gin"!
NutLoose
16th Mar 2016, 19:39
Does tonic water have sugar in it?
Another bit of ludicrous legislation that will have squat impact, all it will result in is a raised cost to the consumer to offset the increased taxation.
If they were serious, then they simply needed to legislate to reduce the sugar content in soft drinks sold in the UK.
It's like the failed and flawed bin tax, that little pearl would have resulted in increased fly tipping and people dumping their garbage in other people's bins, it's no good going after the consumer who gets all this packaging foisted upon them, they needed to hit the source and fine the manufacturers for using excess packaging, what is the point of fining consumers and recycling the waste excess paper products when the simple cure is to leave it all growing as a tree in the first place...
Rant over.
CoffmanStarter
16th Mar 2016, 20:03
Barman ... Family Size G&T for Nutty please :)
Onceapilot
16th Mar 2016, 20:22
I'm by the pool and have had a nightmare thought, as I kick on with sundowners.
Does tonic water have sugar in it? :(
Are you somewhere nicely warm Al?:ok:
OAP
Are you somewhere nicely warm Al?:ok:
OAP
Costa Teguise, Lanzarote. Lovely weather this past ten days. The first bit was a bit ropey mind. RTU tomorrow. :(
Onceapilot
16th Mar 2016, 20:35
Ah,ha! A bit like ASI! And, the tonic costs more than the Gin. :D We used to leave the lemon slices in the glass and when it was full of lemon slices, you had had enough! Joining you now! :ok:
OAP
Onceapilot
16th Mar 2016, 20:42
Oh yes! ASI measures were doubles:ok:. Happy days:D
OAP
Ah,ha! A bit like ASI! And, the tonic costs more than the Gin. :D We used to leave the lemon slices in the glass and when it was full of lemon slices, you had had enough! Joining you now! :ok:
OAP
That takes me back. Buy the coke, get Ouzo free. :ok:
Today's Budget accompaniment..
https://twitter.com/raf_ifa/status/710084292928524289
Herod
16th Mar 2016, 20:53
I realised he had poured me a "gin and gin"!
Unscheduled nightstop in Norway (think of the cost of booze!). Senior Captain "liberates" a large bottle of gin from the on board bar. We get back to his room and the hotel had no tonic available. Yep, "gin and gin".
Gin with a splash of gin sounds good. My daughter has invited me to the Cambridge Gin Festival (https://www.ginfestival.com/events/gin-festival-cambridge-2016) next month. Dear god, what's that all about.. your daughter inviting you to a gin festival??
Anyway, for anyone who's remotely interested, these (http://www.fiveraday.co.uk/blog/the-2016-budget-an-overview/) are my Budget thoughts. I have paid particular attention to the SCAPE issue which has been largely overlooked in the mainstream media (because it's not sexy and the impact is going to be insidious and many moons hence).
Cows getting bigger
17th Mar 2016, 07:30
Maybe I'm in a mid-life crisis but I've moved-on from G&T to Vodka Martini.
Before anyone asks, Mrs CGB would laugh, very loudly, at any thought of a James Bond link. :)
Tourist
17th Mar 2016, 07:41
Another bit of ludicrous legislation that will have squat impact, all it will result in is a raised cost to the consumer to offset the increased taxation.
If they were serious, then they simply needed to legislate to reduce the sugar content in soft drinks sold in the UK.
It's like the failed and flawed bin tax, that little pearl would have resulted in increased fly tipping and people dumping their garbage in other people's bins, it's no good going after the consumer who gets all this packaging foisted upon them, they needed to hit the source and fine the manufacturers for using excess packaging, what is the point of fining consumers and recycling the waste excess paper products when the simple cure is to leave it all growing as a tree in the first place...
Rant over.
BBC World service had a bit this morning about the sugar tax being very successful in Latvia....
So who knows?
Not convinced that Tonic should count though.
Heathrow Harry
17th Mar 2016, 08:44
the aim with the Sugar tax is to add it to the list of Sin Taxes - so it both raises money and reduces usage - just stopping them adding sugar would help the second aim but not the first and in these troubled times the Chancellor needs every £ he can extort. And of course in the future he can just keep piling the tax on..............
One thinhg that no-one has commented on is the almost total lack of ANY mention about defence spend in the Budget - just something about a commission to look at where ships might be built as far as I can see...............
Dick Allen
17th Mar 2016, 11:05
Gin with a splash of gin sounds good. One's great-Uncle Johnnie, who allegedly ran a whelk stall in the Old Kent Road, also - allegedly - drank a concoction in the early 20th century known as a "Dog's Nose" , which was a gin & beer!
Think G & T, with a decent IPA replacing the T ...... like the G & T, it can be long or short.
One rather likes the martini-esque idea of diluting alcohol with more - albeit weaker - alcohol! :E
It's not as bad as it sounds...........
Voxpop
17th Mar 2016, 11:33
Posted by Al R:
It's fair to say, more upheaval.
"It is government’s policy is to review the discount rate used to set employer contributions to the unfunded public service pension schemes every 5 years. The discount rate is based on the OBR’s long term projections of GDP growth. Budget 2016 sets out that the recent assessment has resulted in a reduction in the discount rate which will increase the contributions employers pay to the schemes from 2019-20 onward. This will ensure that the costs of providing pension benefits in the future are fairly reflected in the contributions paid by employers, and that the pension promises made today are on a sustainable basis to ensure fairness to future tax payers." "
Just a quick word of reassurance from FPS. The MOD have been doing regular reviews of SCAPE for years. SCAPE - or the Superannuation Charge Adjusted for Previous Experience - is the MOD's contribution to the pension scheme and every proposal which is put forward by way of changes to AFPS or AFCS is always considered in the light of what it would do to SCAPE.
The media catches on.
http://www.bbc.co.uk/news/uk-politics-35838493
GOLF_BRAVO_ZULU
19th Mar 2016, 08:59
Transferring the Pension liability to the staff owning Departments will make meeting the 2% NATO "target" easier.
Heathrow Harry
20th Mar 2016, 17:03
2The media catches on."
not a week goes by without a fearless British Journo lifting a story off Pprune........... same with the Economist having their stories nicked
Sandy Parts
21st Mar 2016, 11:34
Related to the budget - what are currently serving guys (inc FTRS) being told about the Scottish 40% tax bracket?
If, as seems likely, the SNP (future) govt won't implement the new threshold (raised to £45k), will MoD staff based in Scotland follow Scottish tax rules or the UK govt rules? On a pensions note - if you pay into your SIPP, someone in HMRC is going to have to take into account that you've paid more 40% tax if living in Scotland than in England...
The Old Fat One
22nd Mar 2016, 07:06
will MoD staff based in Scotland follow Scottish tax rules or the UK govt rules?
Live in Scotland now you have an "S" at the the start of your tax code, specifically for the purposes of identifying you as a Scottish tax payer, subject to Scottish rules. IDK if service folk have this or not (suggest one will be along shortly to tell us), But I got one, and I'm planning on moving my tax domicile daaaawnnn saaafff in a few weeks, so I'll let you know how that goes.
Sandy Parts
22nd Mar 2016, 12:36
Just been confirmed that SNP plan to only raise 40% threshold to £43,387 (up by £387). Rest of UK move to £45k.
So the question now is - will serving personnel 'based' in Scotland be subject to the Scottish or RUK threshold?
And what will 'based' mean? Living in the mess / MQs / own home, for how long etc. etc.
Maybe a 'Scotland Allowance' to compensate as per the London weighting?
Broadly, a similar situation to that which will have to be faced by the MoD soon.
http://www.publicfinance.co.uk/news/2016/04/lgps-employers-face-ps1bn-contribution-hike-analysis-finds
Thomas coupling
4th Apr 2016, 22:50
Government pensions: the greatest "Ponzi" schemes in the world.