So you thought your pension was safe!

[Al R]

Melch,

I think we both agree in some areas, but I’m referring to a principle, and the possible consequences of getting it wrong for the people who are possibly going to be the most vulnerable in society and the most cherished by society. The g’ment can’t afford to gamble with the modern practice that you advocate, and which could possibly be right for a bog standard small/medium sized company. The methodology used by the Government to calculate its liability is way out of date, and only the g’ment would dispute that.

In the US (and I stand by to be corrected) the amount transferred into this ‘fund’ is a percentage of the serviceman's basic pay. So.. if the RAF was to implement policies that affect the future value of retirement benefits, it would see the ongoing budgetary consequences of that decision immediately, in the form of an increase or decrease in the amount to be transferred to the retirement fund. Public sector pensions are unfunded, completely - there is no separately managed pot of money drawn on to pay them - so the cost to us all is calculated using gilts, which have yields indexed to inflation. And now, that is not only out of date and dangerous practice, but badly fked up as a consequence of the current malaise.

Our pensions (and I get one too) aren’t funded from annual budgets. The military one is rubber stamped by Parliament annually after estimating how much money is going to be needed for the year ahead and adding that amount to the existing budget on a ‘pay-as-you-go’ basis and by using a Prerogative Instrument. This system has worked well as far as paying retirees go, but it does not hold policymakers responsible and/or accountable for decisions made today, or for the money, affecting the size of the future MoD retirement bill. The number of deferred members too, is massive and it won’t be for 15-20 years that our massive (by today) Cold War army wants its money. What then?

If however (and is this what you’re advocating?) the military was compelled to transfer into a fund the amount necessary to pay for future retirement commitments, and invest that, the situation might be better, but it would also expose the military community to factors such as the credit crunch. Then, can you imagine the carnage? You refer to ‘short term balance sheets and political aspirations’ but it isn’t that easy - I referred earlier to the carnage of getting it wrong. It is a no win situation, but by doing nothing, the problems are only going to mount up. Forget 'blame' - thats not the issue anymore.