Revealed: £103m. cost of States pension plan

TAXPAYERS have contributed £100m. to the States final salary pension pot over the last five years.

Pensions generic

TAXPAYERS have contributed £100m. to the States final salary pension pot over the last five years.

The figures, which Treasury and Resources confirmed were accurate, show that the amount paid by the States each year has increased significantly.

As employer to 4,700 public sector pension scheme members, the States contributed more than £16m. in 2007, rising to almost £27.5m. in 2011.

Treasury and Resources confirmed the total level of the employer’s contribution each year into the Consolidated Superannuation Fund.

‘This includes contributions from Guernsey Electricity, Guernsey Post, Guernsey Financial Services Commission, the three colleges (Blanchelande, Elizabeth and Ladies’) and the two libraries (Guille-Alles and Priaulx),’ a spokesman said.

Comments for: "Revealed: £103m. cost of States pension plan"

Scary_Fairy_tales

Sparty, GM - discuss.........

PLP

I think that's what they've been doing for the past month or so!

Spartacus

We have discussed it, do we have to go back to the beginning? :-/

I agree with what the Chairman of the Guernsey Association of Pension providers has said.

The real "news" is hidden on page 2. Employees will need to be compensated with increased salary for any changes to the pensions. I said that would happen months ago and GM robustly disagreed with me.

GM

Spartacus

That article deals with just over 100 senior public sector employees, not to the other 4,600. There is no mention of any extra salary for them in that article is there? Those 100-plus top earning employees were always going to be treated separately. The Bailiff is hardly going to be told "Take it or leave it" is he? Does Mr. Lanning's union represent the Bailiff as well?

Have you worked out whether the proposed extra salary fully compensates the employee for the reduced pension benefit? I strongly suspect that the taxpayer will be better off, at the expense of the employee.

I think I also "robustly" said that the size of the public workforce would need to be cut in order to be able to afford the CARE scheme. I maintain that position re. the remaining 4600 public sector workers. For them it would well be "take it or leave it".

Spartacus

GM

I don't know if that is true but if it is then that is APPALLING. No wonder the Unions are going ballistic.

KEVIN! Where are you? What have you got to say about GMs attitude that normal workers have to take it or leave it whereas high earners deserve to get compensated?

GM

Spartacus

Its obvious - how else can the CARE scheme be funded?

It isn't the Bailiff, the Law Officers and the Chief Officers etc that we can do without. Its the extra "froth" which has been allowed to be employed over the past 10 years, when I would remind you that the population has risen by 5% and the public sector has risen by a conservative 20%. Each and every one of those extra public sector employee has added to the liabilities of the pension scheme and, given the huge number of extra employees involved, that alone will account for a huge chunk of the £380m deficit.

The island simply CANNOT afford such a bloated public sector, and yet we managed with 20% fewer 10 years ago. Wasn't invested in IT mant to reduce the need for so many administrators and clerical workers? What on earth do all these extra 20% of public sector workers do today that wasn't being done 10 years ago?

We need to take a very hard, long look at what size of public sector the island actually needs, as opposed to what is "wanted". We simply cannot afford what is "wanted".

Spartacus

GM

I would remind you that the 20% is a number you pulled out of your backside.

GM

Spartacus

The figures came from the official States of Guernsey statistics.

The 2001 figures showed a public sector employees figure which included all health workers. The 2011 figures showed the island's "health, social and charity workers" separately, without providing a breakdown of the 1,600 or so workers who make up that figure. I have CONSERVATIVELY assumed that of that 1,600 or so figure of "health, social and charity workers", only 1,000 are employed within the public sector. Based on that assumption, the increase in the number of public sector workers had increased by just over 20% between 2001 and 2011.

It is "most unlikely" that there are as many as 600-odd "social and charity workers" in Guernsey, so the number of public sector health workers is likely to be more like 1,300, possibly even more. My 20% figure is therefore more likely to be closer to 25%. At the very least, its around 20%.

But because I don't have an exact number, you want to dismiss the statistics altogether? So what if its between 19% and say 23% - the material fact is that its a massive increase over 10 years when the population had only increased by 5% in the same period. Is that not close enough for you?

Come up with your own statistics and disprove my numbers if you can. The ball's in your court...

Spartacus

GM

"come up with your own statistics and disprove my numbers if you can".

I can't disprove your numbers because I gather there is no accurate data about the staff numbers and population figures.

I won't come up with my own statistics as I don't believe in plucking numbers from thin air to try to win an argument.

GM

Spartacus

The figures came from the States of Guernsey's own official statistics.

Are you seriously suggesting that the States of Guernsey don't know how many employees they are paying salaries to?

There was no consensus in 2011, so are you suggesting that the population rise in fact by more than 20% since 2011 instead of the States' own figure of around 62,500, so that its more like 70,000? There are an extra 7,500 people here? Really? How many new houses have been built? Are they all living in packing sheds and in derelict vineries? Are they all earning cash in hand on the black market and therefore not registered for PAYE?

You have uttered some absolute garbage in recent times but that post is right up there with the classics!

Spartacus

GM

No I'm not suggesting they don't know. I'm explaining that you don't know.

You tend to magic up numbers which seem vaguely plausible to you, then you repeat and repeat them until you believe they are true. It doesn't wash with me.

GM

Spartacus

Well, if you don't believe what's published in official States statistics documents, then that's your perogative. Why would the States of Guernsey deliberately publish incorrect statistics? Or is that you just don't like those numbers because they don't suit your argument?

I don't "magic up" numbers at all. I use common sense though when breakdowns of some total figures are not available, and I make it crystal clear that my figures are based on conservative assumptions.

Just because you wouldn't recognise "common sense" or understand the meaning of "assumption" is of no concern to me.

Spartacus

GM

You are being silly, I can read what is published just as well as you can but unlike you I don't try to guess what the statistics mean and call that common sense. Common nonsense more like.

GM

Spartacus

The evidence strongly suggests otherwise.

Spartacus

In your opinion.

Nick Le P

Where is Martino when some help with stats is needed?

GM

Well, apart from vindicating everything that Neil Forman and I have been saying ad nauseum, and confirming to Spartacus that she was completely out of her depth on a subject that she knew nothing about, it merely highlights the issues so that everyone can hopefully now realise the full extent of the problem. Moreover, it confirms that I was not "scaremongering" at all, as Spartacus would have it.

Key points:

1. Despite such a high level of added taxpayer contributions since 2007, the scheme's liabilities have risen from £128m to £380m between 2007 and 2011. (How big would that deficit be by 2002, 2025 and 2030?). As I have repeatedly said, this scheme will cause Guernsey to go bankrupt unless it ends right now.

2. Taxpayer contributions would need to be MASSIVELY increased just to stop the deficit from rising, let alone to make up the £380m deficit.

3. As Stephen Ainsworth (of scheme actuaries Bacon & Woodrow) states: "...most employers are paying additional deficit contributions into their final salary pension schemes in oder to reduce the deficit faster". Of course they are - if they are able to - because at some point the deficit needs to be funded by the employer, i.e. by us as taxpayers, which is what I have been saying to Spartacus from the outset. However, the fact is that the States of Guernsey does not have a spare £380m, and correct me if I'm wrong, but Guernsey taxpayers seem to have no appetite whatsoever to see GST introduced or their hard-earned taxes going towards funding this £380m deficit, let alone the current £27.5m annual contribution. It could easily be a £600m deficit by 2020 if nothing is done.

In summary, the scheme will bankrupt Guernsey unless something is done immediately to "stem the bleeding", and the unions certainly need to be aware that they will get no sympathy from the public if they try to fight to maintain the current scheme.

I still think that the CARE proposals go nowhere near far enough. The new proposals might not be a "final salary" scheme but its certainly still a defined benefits scheme, and so the risks still sit wholly with the taxpayer when it comes to meeting the new scheme's obligations. Back to the drawing board, I say. Maybe the terms of reference to the working group were not tight enough on the affordability front.

The public sector MUST shrink to enable even the proposed CARE scheme to be remotely affordable.

No doubt dear old Spartacus will still claim that its not unsustainable and that the deficit can be ignored....

Spartacus

FFS

The Press have copied Neil Forman's scaremongering technique not vindicated it!

1. The scheme liabilities rose due to a change in the way the the schemes liabilities are calculated. The changes took place following the 2008/09 crash and were designed to make the accounting more prudent for the protection of members. It was a one off event not an ongoing concern.

2. Absolute poppycock

3. The key word is "faster" it is an alternative option to waiting until the recession ends.

GM

Spartacus

Now now - no need to swear.

Stephen Ainsworth of Bacon & Woodrow, widely regarded as the island's leading pensions expert, has vindicated what Neil and I have been saying. Still you know better?

1. Yes - because the liabilities are now being accounted for in a globally-accepted proper manner, which they weren't previously! It is an ongoing concern - the financial crisis wasn't just a one-off crash in 2008/9 - its a sustained depression - the worst since the 1930s! The fund is not going to grow itself out of a £380m deficit, and even 14.1% annual contributions to it are just a drop in the ocean. Numbers clearly aren't your strong point. Or pensions for that matter. Or investment markets. As I've been saying all along.

2. Please extrapolate after making such an educated response.

3. There is "faster" and there is "faster". On the basis that in a period when despite over £103m of contributions being made, the find's liabilities have risen by £380m, then its clear that the States of Guernsey would now have to be pumping in massive amounts out of our annual budget surplus each year - oh hang about, we have an annual budget deficit of around £20m to £30m AFTER making £27.45m annual contributions - so there is no chance of that happening. As I have been saying along.

I would normally hate to say "I told you so", but in this case I will make an exception.

Spartacus

GM

Stephen Ainsworth most certainly has not vindicated you and Neil at all - read what he has said!

1. So now that the liabilities have been "prudently" uplifted they are proposing to give cash payouts to compensate the employees for losing those artificially enhanced and uplifted amounts - its ludicrous!

2. I have extrapolated til the cows came home. see previous discussions.

3. If SOG want to clear their deficit faster they will need to change their funding target which is the cause of the deficit. They have been trying to create a deficit for the past decade. They have been pumping out the surplus not pumping in.

GM

Spartacus

Grow up and take a "chill pill".

You'll have to explain to me about Stephen Ainsworth's comments. Are you reading the same article?

1. Well - that's where we are. What's your solution then - let it carry on as now I suppose?

2. Not on that point you haven't. Try again.

3. Pardon? They can't change the end target, which has to be to cover all or most of the deficit (even if to 90%), which in turn is based on the ever-increasing liabilities! All they could do now is dramatically increase the contribution levels, and I'm talking two or threefold for the next 5 years at least, but they can't do that either as there is no money to do so, and no there is also no taxpayer to do so either! Have you not noticed that?

Spartacus

GM

Bacon & Woodrow is now BWCI. His company acts for and advises the States on their pension matters and prepares the actuarial valuations so he is hardly going to be endorsing your controversial views.

http://www.bwcigroup.com/our_people/stephen_ainsworth.aspx

GM

Spartacus

I know very well who Stephen Ainsworth is. Undoubtedly the top pensions expert on Guernsey. Yes I should have known that it's now BWCI. I've known them as Bacon and Woodrow for about 30 years, so that's force of habit.

It was their actuarial valuation which stated liabilities of £1.216 billion at 31 December 2010 - liabilities which you claim don't exist.

I stand by my earlier comments entirely.

Spartacus

GM

I was referring to his quote in the press, not included in the article above.

1. There are pros and cons of the pension proposals. They need to be debated properly. It should not be regarded as a desperate measure and therefore a done deal which is what you and other scaremongers are preaching. This kind of publicity simply increases public pressure on States members.

2. Taxpayer contributions were almost doubled in 2010 for reasons I explained in a separate post. The scheme washes its own face. The deficit is not intended to be made up. the deficit is the 10% remainder from the 90% funding target.

3. They could change the funding target of 90% if they wanted to but they have so far decided not to. This means they are aiming to retain the actuarial deficit as it is. If they increased the funding target to 100% they would increase the contribution rate in order to achieve a decrease in the deficit over a long period of time, but they have not decided to do that.

GM

Spartacus

1. The only "done deal" is that the status quo is not going to remain. That much is obvious. I hope it's very much not a "done deal" re the proposed CARE scheme as its still a defined benefits scheme.

2. Don't be stupid - it does not "wash it's face. Put in £103m of contributions over 5 years and the deficit rises by £252 m in the same period!

If the 90% funding target was being met, then with liabilities of £1.216 billion, the assets would stand at £1.095m as at December 2011 instead of at £896.5m, which would still be £200m short of the 90% target! We already know that Maths isn't your strong point, but come on!

3. They haven't decided to maintain the deficit - they merely set a new funding target in 2008 which has proved woefully inadequate! That's not a deliberate strategy - its an error, compounded by the ongoing financial crisis.

Seems more likely to me that they wanted to avoid the hassle of the inevitable conflict with the unions and crossed their fingers and hoped that the investment markets would quickly bounce back. A huge own goal.

Spartacus

GM

1. That's not a done deal at all. You don't know what the States will decide. I hope a compromise will be reached as the new proposals are sound but the ordinary workers should agree to the changes and that should involve fair compensation. The alternative is to keep the scheme as it is and defer any changes until the global financial crisis is over.

2. Contributions exceed benefit payments year on year. If you don't understand that is what I meant by "wash its face" you are being obtuse.

3. You are still confusing FRS17 basis with the actuarial figures the states use as their benchmark. How many times do I have to repeat myself before the penny will drop? The funding target has been consistent and approved, there is a funding surplus and the actuary recommended a REDUCTION in contributions. I suppose you think the actuary made an error too.

GM

Spartacus

1. Wrong. The answer is not to "wait until the global financial crisis is over". That's probably 5-10 years time, by when the deficit would probably be well over £1 billion and we would be bankrupted even quicker. The deficit has already risen by hundreds of millions in 5 years despite increased contributions.

There's more chance of you endorsing the 11-plus than there is of the current scheme remaining as it is.

2. Unfortunately, you fail to include investment losses. So contributions of around £29m fund pensions out of around £27m, yet we then see a £36m loss in investments. Net deficit £33.5m for the year. Not what I call "washing its face".

3. No - I'm not confused at all. You don't know need to explain your rationale to me - I know what you are saying. But you are WRONG to apply your method of valuation instead of FRS 17, which is far more realistic. Yes - I believe the actuary is wrong, no doubt after taking instructions from their client, the States of Guernsey, to apply a projected level of future investment returns which is 58.5% higher than FRS17 says is realistically achievable for the appropriate risks. As I said earlier, if you had bothered to read it, they could just as easily have projected annual investment returns of 5% per anum and that would probably show no deficit at all under FRS17, but to do so when 2.05% is the appropriate benchmark return, would be utterly irresponsible.

What you fail to realise is that any current rosy picture can be painted just by applying a favourable projected rate of return, so that everybody can pretent that its all hunky dory, yet in 25 years time the sh*t will hit the fan and people would be scratching their head wondering how the island went bankrupt, and how thousands of civil servants will not be getting anything like their expected level of pension. Why on earth would any sensible government today want to do that?

Spartacus

GM

1. a) I did not say it was the answer and b) you don't have the answer. It is an option. FACT whether or not you agree with the idea in principle. Perhaps you have a crystal ball, that would make sense as I'm pretty sure you have a broomstick.

2. You are referring to the actuarial loss in 2011 which partly offset the huge actuarial GAIN of £101,425M in 2010. You are trying Neil Forman's trick of cherry picking the numbers you refer to.

3. I AM NOT APPLYING THE WRONG METHOD OF VALUATION I AM EXPLAINING TO YOU THAT THE STATES OF GUERNSEY IS APPLYING THAT METHOD INSTEAD OF FRS17.

Ah so you believe the actuary, BWCI is wrong, yesterday you said "Stephen Ainsworth is undoubtedly the top pensions expert on Guernsey" and today you say his company is wrong and you imply their investment advice is "utterly irresponsible". You are seriously misguided.

So you are insisting that your crystal ball gives you the authority to be the foreteller of doom whereas BWCI, headed by the top pensions expert on Guernsey, using well established meticulous calculation methods, is portraying a misleading rosy picture.

GM

Spartacus

1(a) You were suggesting it as an alternative. Theoretically is might be, but to any sane person it clearly isn't.

(b) I have several answers but in the absence of seeing comparative projections it is impossible to do anything other than rule out any continuation of the status quo.

2. No I am most certainly not. I am referring to the figures stated in the 2011 audited States of Guernsey accounts.

3. I know exactly what you are referring to. I know that you are relying on the fact that the actuarial valuation doesn't apply FRS 17 whereas the States accounts do. I am saying, ad nauseum, ad nauseum, ad nauseum, ad nauseum, that the FRS17 method is the more reliable one. You just don't like that because of its implications, but you fail to grasp WHY its the most appropriate one.

You once again demonstrate your lack of understanding of how an actuary works. I am in no way criticising Stephen Ainsworth or BWCI.

If their client, the States of Guernsey, asks them to apply a 3.25% projected rate of return into the actuarial projections, then they will do just that, and the resulting figures will be spewed out. Its NOT saying that a 3.25% projected rate of return is impossible, but FRS17 is saying that the correct, prudent, global accounting standards method of evaluating the liabilities is to use the AA Corporate Bond returns of 2.05%.

It is the States of Guernsey who adopt the final decisions re the actuarial projections. The actuary can only advise them what rates to apply. Its rather like going to a lawyer for advice. The lawyer can advise you, but ultimately its your call, as the client. But then you would know that.

The States of Guernsey in my opinion are fundamentally wrong NOT to insist on applying FRS17 to the actuarial valuation, especially as they DO apply it to their audited accounts. Why not be consistent? Being inconsistent can only breed confusions. For a start, you and I and others on this blog would not be having such a debate. Moreover, decisions to change the public sector scheme would then have beem made much earlier, saving the taxpayer tens of millions, indeed possibly hundreds of millions, in the process.

So yes - BWCI are presenting a materially over-rosy picture of the health of the pension scheme, but only because of the investment projections provided to them by their client, the States of Guernsey.

I will speculate that since 2010/2011 this spectre has been looming, and the politicians were simply unwilling to confront it, preferring to kick the can down the street until after the 2012 election, for reasons which would seem obvious. As ever with cans which kicked down the street, you eventually reach a dead end when the can has to be picked up. Which is now.

Spartacus

GM

1. We will have to agree to disagree that it is an option to retain the pension fund in current form. I refer to Gavin St Pier's comments in the press back in May when he said timing was key to reforms.

Note that the State of California has not yet approved the pension reforms and Guernsey has not yet approved the panel's recommendations either.

The recommendations of California seem similar to ours from what I can glean but California's scheme is unfunded and ours is funded which is why their chickens will come home to roost.

2. Yes you most certainly are cherry picking. I am referring to the 2011 audited accounts too. Look again at the figures. Note 22 page 34.

2011 your figure £33.5M - LOSS.

2010 my figure £101,425M - GAIN.

http://www.gov.gg/CHttpHandler.ashx?id=75207&p=0

3. The states accounts DO NOT apply FRS17 in full. See the above link to the 2011 accounts again, same page 34, same note 22:

point c) "A full actuarial valuation of the Fund as at 31 December 2010 was carried out. The results of this valuation were reported to the States in November 2011(Billet d'État XIX, 2011) and it was agreed that the base employer rate (including teachers) would remain at 14.1% with effect from 1 January 2012."

This is an EXTRACT from the accounts which I have been saying Ad Nauseum. If you don't like it don't tell me tell the States.

If you are not criticising Stephen Ainsworth or BWCI I'm not sure who you are trying to blame for what you think are errors in judgement. They are the experts who advise the States on all matters relating to investments and pensions. BWCI, by way of an umbrella investment service, provide the investment projections themselves. So it is them that are painting the "rosy" picture as you put it.

I know full well how these relationships work thank you very much FFS. I am VERY experienced in such matters. If I pay a lawyer thousands of pounds to advise me to do X I am hardly going to proceed to do Y. You are being ridiculous.

The States of Guernsey are being consistent, you just can't see it. They don't apply FRS17 they just include the figures as a reference point in the notes for information however that is clearly causing you a great deal of confusion.

GM

Spartacus

1. Call it what you like, but the current scheme will not survive. You appear oblivious to the sheer weight of public opinion growing rapidly against it.

2. Of course there is considerable volatility, but a conservative low risk investment strategy should not be experiencing volatility. However, DESPITE that year of big capital gains, the deficit still rose by £380m over 5 years!

3. Your comment makes no sense. The accounts clearly state the scheme liabilities based on FRS17.

I have already explained BWCI's mandate and responsibilities but you clearly weren't listening. As usual. I blame the States of Guernsey for instructing BWCI to base their projections on an inappropriate target rate of investment return. As I have previously stated. More than once.

From your comments you very clearly do NOT understand how these professional relationships work. You just think you do. If a lawyer advises you that following one course of action may have certain implications and another course of action may have other implications then the call is yours, not the lawyer's. Its no different with an accountant or an actuary. The professional advisor will then act accordingly based on their client's decision.

Take it up with the States Chief Accountant as you clearly think she is wrong as well to even dare mention the pension deficit.

Once again, I find myself repeating the same old responses to the same old inaccurate points based on ignorance. Once again, I feel like I'm arguing with a petulant 5-year old who will not accept being proved wrong.

I'm losing the will to live. Nothing you say is going to change my mind as you've not made any new relevant points for days now. I see no point on entering into any further dialogue with you on this topic until and unless you are able to add something new to the debate.

Thankfully the Press Editor is very much on top of the matter, especially in light of the dire situation at Guernsey Electricity revealed today. Its not going to go away as its such a huge issue, but I am extremely confident that the status quo is in its dying days. That's the main thing.

I could have let go of this argument with you days ago but it needed maximum airing. Thank you for your unconscious role in ensuring that the grave consequences of maintaining the scheme have been well and truly rammed home. You have played a major role in sealing its fate, for which all Guernsey taxpayers who are not members of the scheme should be very grateful.

Spartacus

GM

I don't think the chief accountant is wrong at all nor are BWCI, it is you I disagree with. What is BWCI's fee for advising the States to just do what they think is best?

I have nothing new to add to the debate at all I wanted to leave it there 2 days ago. No such luck.

I haven't even looked at the claims about Guernsey Electricity but suspect it is more spin and dogma.

scary_Fairy_tales

...sorry, that should read, 'Sparty, explain all the reasons this is ok' and 'GM, explain all the reasons it isn't'.

Thank god I upped my meds before reading this and am therefore suitably chilled......

ooh! Look! A plane...................

Eric

£4,382 per person per year. Doesn't sound wildly out.

This story is a bit of a red herring really, the real news is the liability gap that has been widening for some years and is now absolutely monstrous.

Daisy

Did someone drop this record on the floor? It seems to be stuck.

Ed

Is it viable to have other organisations make contributions? If one ponders over how to raise capital further, there are many more organisations that can be requested- what about the comprehensive schools and Grammar ?

The funds need to do more that suffice the demands for prospective pensions; they must be used to finance other facilities that are likely to be in great demand as a result of an ageing population.

Raising pensions is merely the beginning of the list of what to do when a 'greying population' starts to take hold. These also are prerequisites that the political machine ought to consider- when they eventually raise capital levels:

Convenient household features such as taps that can be pushed with relative ease by elderly people with arthritic conditions.

A larger proportion of people will be more inclined to suffer from brain degenerative illnesses such as dementia in their 80s and 90s, rather than perish in their 60s and 70s from cardiovascular disease. Thus, 'special homes' accommodating elderly people suffering from Alzheimer's or senile dementia will be required and so will be doctors or nurses trained who are expert in tha

t field of pathology. However, diseases such as strokes and heart disease will continue to some degree and thus 'normal' nursing/retirement homes will be in demand as will work forces for those places.

Although recruiting experts from abroad may financially be problematic, but, since these individuals are often regarded as members of migrating 'elite' groups, they themselves may be able to relocate in Guernsey with relative

ease a they have the capital to ensure that they are not hindred by potential obstacles such as the expenses that are generated through paying for flights

and accommodation.

Perhaps more public transport will be necessary- though I am fully aware that this is a controversial issue at the moment- as there will inevitably be less mobile people who require bus services so that they can get by with routine aspects of their lives.

That's why seeking further sources of potential capital would be a wise manoeuvre because there are more implications than one would have expected.

Oh Dear

I'm sorry Ed but what you've written is the ramblings of a madman. Veering off topic left right and centre.

As usual putting in your large words for the sake of it. It doesn't make you seem any more intelligent. There is more to the human brain than literacy. Read what you wrote and tell me that the majority of it was relevant to the article.

Oh and please don't point me to the town shop debate, that's an embarrassment of its own accord.

Terry Langlois

Oh Dear, there is no need to apologise.

Ed

Yes, it's not directly related to the article, but the points are pertinent to the current situation- pensions should not be the sole point of focus. Those ideas mentioned are rational and to insinuate that I am deficient of sanity is a sign of shallow thought.

The words mentioned in my post are no larger than those one would encounter in an encyclopaedia.

Rather than drawing upon aspects of my discussion that are inconsequential, try to acknowledge that one is attempting to share ideas that are of significance with concern to the welfare of the to-be aged members of our population.

Your nitpicking skills are best applied when attempting to detect continuity errors in a film.

PLP

"Your nitpicking skills are best applied when attempting to detect continuity errors in a film."

Quote of the week right there, had me laughing out loud.....simply brilliant!!

Ed

Additionally, enusre what you write is rational and not intended to provoke strong reactions as I don't wish to engage in further futile discussions.

Scarlett

In order to achieve your wish, I would suggest you SHUT UP, Ed.

Just a suggestion

Ed is a teenager with evident communication difficulties.

Perhaps people could just communicate with him if they wish and if they can overcome the barriers or just ignore him if they can't be arsed.

If you are interested please inform yourselves about high functioning autism and if not please refrain from responding to Ed as if he is on the autistic spectrum some of the behaviour towards him on this forum would be highly inappropriate.

Sparty

bcb

Thanks for the advice Sparty but i will not be taking it :) i will defend those ignoramuses and ill bred peoples who can`t speak up with all my might hehe.

Apart from that its good fun.

Spartacus

I know what you mean and you have defended them well but just don't come crying to me when he exacts revenge upon you! :-)

Oh Dear

How do you know he is on the Autism spectrum? I will admit there are some classic autistic traits there. But assumptions are all to easily made.

I think it's more likely that he is an extremely bored teen with a very good and keen interest in what goes on. He seems to think that in order to communicate with adults he needs to make his vocabulary seem older than his years.

I think eccentricity and a decent thesauraus are the cause for Ed, not Autism.

Scarlett

....more amateur psychology, Sparty?

I'm quite good at that, too, so be aware that further comments from you may attract my BS 'analysis' of your disposition......!

Spartacus

Scarlett

Yes totally amateur. By the way an Aspie is a person not the condition. Apies are cool but Aspergers is not so cool if you are struggling to communicate with Neurotypicals. Especially if you have no idea you are an Aspie.

Spartacus

Back in November Neil Forman decided to list the pension contribution figures on this forum and the Press have chosen to wait til now, and have copied this misleading scaremongering tactic on their front page. the reason why the contributions have risen significantly is because the RATE was strategically increased with effect from 2010.

2007 £16,027,000 rate = 7.85%

2008 £16,641,000 rate = 7.85%

2009 £17,821,000 rate = 7.85%

2010 £25,910,000 rate = 14.1%

2011 £27,450,000 rate = 14.1%

The previous low rate was to eliminate a substantial funding surplus and this was explained in the billet which incorporated the actuarial report of 2007. The billet is here:

http://www.gov.gg/CHttpHandler.ashx?id=3864&p=0

It says on page 1300 ” Whilst this recommended employer contribution rate is a substantial increase on the current rate, it is similar to the rate paid during the 1980′s and early 1990′s. During the mid 1990s the Superannuation fund had a substantial surplus primarily due to a very strong investment performance and, following the Actuaries advice, the employer contributions were set at a level which eliminated the surplus over a period of time.”

soph

All it needs is a cap on final payouts and pension too

Lets be honest, my electric bill is soaring. So I will be in trouble soon. My heart goes out to low paid Civil Servants, you all do a brill job

GM

Spartacus

The exceptional investment performance of the fund in the 1990s was in days where returns of 10-15% and even 20% were regular. When you got returns like that, the investment supergrowth negated the need to fund the scheme's obligations with contributions. Those sorts of investment returns are now as rare as hens teeth. We've seen falls in investment values of £36.5m in 2011 alone. Looking at the global economy, compound returns of 5%-6% at most looks likely over the past decade. That means that in the absence of supergrowth, the funding of the scheme can only come from taxpayer contributions, which is precisely what I have been saying all along. And in the meantime, the liabilities continue to grow and compound to the extent that the debt obligation swallows Guernsey's finances altogether. Again - exactly as I have been saying all along.

Did you sleep through the financial crisis or something? Do you think its over? The US is bust, most of the EU is bust and the UK's debt levels are only slightly better than parts of Europe. Wake up to the reality that the world's finances are in a mess and you'll soon realise what Guernsey's public sector pension scheme is completely unsustainable.

Exactly as I have been saying to you all along.

Spartacus

GM

The funding of the scheme has been addressed by reinstating the contribution rate to previous levels i.e. the level it was at before they decided to reduce the "substantial surplus".

What part of SUBSTANTIAL SURPLUS did you not understand?

You have no evidence that liabilities continue to grow. But stick to your dogma, you are helping to sell newspapers.

GM

Spartacus

What are you smoking? There is no bit of "substantial surplus" that I don't understand, because there isn't one. There is no "surplus" at all. There hasn't been a "surplus" for many years!

Today's article confirms the deficit as at 2011 is £380m. I must admit that I thought it was "only" £320m, but that's because I was measuring 31/12/11 investment values against the 31/12/10 actuarial valuation. It seems that an interim revaluation as at 31/12/11 may have resulted in an extra deficit of £60m.

How can you say that there is a "substantial surplus" when the audited accounts of the States of Guernsey for 2010 showed scheme assets of £930m and scheme liabilities of £1,216 billion. That's a deficit, not a surplus. I always told you that you didn't understand accounting - what more evidence do you require?

You seem to think that I had some responsibility for the figures in the article. I had none whatsoever. The only evidence that the liabilities and thus the deficit is growing has come from official States audited accounts, and from the official figures from the valuations. That's good enough for me. Clearly not for you though!

Keep clutching at straws. Or maybe just accept that you were utterly wrong all along.

Spartacus

GM

I didn't say you are responsible for the figures in the article. Your dogma in relation to what the figures mean is what is helping the press to sell newspapers.

If you read the full article in the press you can see the numbers have all been presented very factually without any comment on what they mean. They are therefore open to interpretation completely out of context.

Even the comment by Stephen Ainsworth is not about the States Pension Fund it is about "most final salary pension schemes". His comments are therefore also easily taken out of context as the States pension Fund have decided to maintain a deficit rather than have a 100% funded scheme.

I have explained the increase in contributions (yet again) in my post number 6 above.

There is no evidence that the liabilities are growing. Even if they are growing it would not automatically follow that the deficit is growing.

GM

Spartacus

So you'd rather than this whole problem was kept under wraps would you? That the taxpayers of Guernsey are not told about the future ticking timebomb? Thank goodness that this forum and the printed Press have a better attituide than that!

The figures are indeed open to interpretation. Intelligent people can see for themselves and make their own decisions, instead of being blinded by idiots like you who claim that there is "no deficit".

The States of Guernsey decided to maintain a 90% deficit. That's not totally unreasonable if they can maintain it that level. But the deficit is 15% to 20% below that target, so they are failing miserably. What's a couple of hundred million pounds shortfall to an island of 63,000 people with very limited ways of making up any such shortfall? Petty cash? Unbelievable.

Your "explanations" are entirely flawed as they are based on a failure to grasp the implications of FRS17.

But the best is saved till last. "There is no evidence that the liabilities are growing". Its all there, in black and white. It is IMPOSSIBLE to conclude otherwise.

Spartacus

GM

Firstly, this information has never been under wraps. It has always been in the public domain. All that has changed is that it has been taken out of context by you and Neil Forman.

Fortunately the people who matter have always been able to consider and deliberate the figures in a rational and contextual way.

There is no funding deficit. FACT

There IS an accounting deficit which is deliberate. You have not grasped that the States maintain a 90% funding target which therefore means there is a deficit target of 10%.

The deficit is NOT 15% to 20% below that target. You are confused by the FRS17 calculations which the States DO NOT USE as a benchmark for their funding target.

GM

Spartacus

You are right - it has not been kept under wraps. However, it has not been spotted or understood by politicians (hardly a surprise there then!) and it is only since FRS17 has been applied by the States of Guernsey in their own audited accounts that the scale of the problem has been realised. It has got massively worse since 2008 as projected future investment returns have dropped off the cliff.

The "people who matter". Now - that's an interesting one. Who are they? The "people who matter" are the ones who have to pay for the darn thing - us - the taxpayers. Now we know the full extent of the problem we can highlight it.

How can you say that is FACT that there is no funding deficit? Go and tell the States of Guernsey Chief Accountant and Deloittes that as they've obviously misunderstood their responsibilities and obligations to present a set of accounts which represent a "true and fair view". The actuarial valuation is the unreliable figure.

Let the States maintain a 90% funding target. But based on the CORRECT quantum of liabilities, ie based on FRS17. That's how 91.3% becomes 76.3%.

I am not remotely confused by FRS17. I know its the most appropriate accounting method of reasonable projecting the liabilities of the pension scheme. Do I have more faith in global accounting standards than I do of Spartacus' ability to understand the basics of accounting and liabilities? Oh yes.

Spartacus

GM

What are you talking about here? Of course politicians understand the pension fund accounts. You are the one who is struggling with the concepts not them.

The taxpayers (except you and Neil Forman) understand that in economic terms there is no such thing as a free lunch.

So you reckon the actuarial figure is unreliable. Can you tell me why they bother to pay BWCI then?

If the States decided to base their funding target on FRS17 it stands to reason that they would drop the funding target to around 75%.

Guern abroad

I am a tax payer and I know there is no such thing as a free lunch, it is about time other people realised that too and dealt with this pension liability now.

bcb

Sparty.

You say that they would drop the funding target to 75%? why is that? I think what you are saying is that it is only 75% funded under FRS17? if that is the case then GM is correct? if that is not the case please explain why you think there is not a problem with the funding given that FRS17 does in fact seem to be the industry standard from the little research i have done.

I don`t know that much about it to be honest but i do believe GM has this spot on and see`s the picture as it really is.

Also it does seem to be the line of work he is in so i don`t know how you can suggest in a round about way he has got it all so wrong. What is your expertise in this field or did you just recently try to educate yourself on the subject thus maybe thinking you know more than you actually do?

Not trying to be funny just genuine questions.

Spartacus

bcb

The amount of assets they have decided to hold in the fund is the constant feature.

Whether you value those assets under the standard actuarial method or under the FRS17 method makes no difference to the amount of assets they have decided to hold in the fund.

They are aware of the different ways of valuing the fund and they know that one way is conservative and the other is optimistic. Either way they have decided to hold a set amount of assets and they call that the funding target. So valued under FRS17 the amount of assets they have decided to have would be valued much lower than under the actuarial method.

The assets in relation to liabilities can therefore be expressed either as

a) approx 90% under standard actuarial valuation or

b) approx 75% under FRS17

It is exactly the same assets and liabilities either way.

It is incorrect to say the target should be 90% and the value is 75% as you would be mixing a) with b) and that is not what the states have done. If you said the target should be 75% and the value is 90% it would be equally wrong. The states have decided on a target of 90% under the standard actuarial method. This automatically translates to a 75% target under FRS17.

This is not the real issue though, GM and Neil Forman seem to think the fund should be 100% funded. They are getting het up over the deficit and fail to acknowledge that the funding level, and therefore the deficit, has been agreed upon by the states.

To change this policy the states would need to pump in cash to the value of either 10% of the fund or 25% of the fund depending on which way you choose to look at it. Why would they want to do that? The states are smug about the fact that the scheme is highly funded when most public schemes are not funded at all.

As far as the work GM does I would take what he/she says with a pinch of salt. Any manager can say they help run a company and plenty of people have share ownership schemes. It is stretching the truth to suggest this constitutes part ownership of the company but technically it would be true. I have my suspicions about his/her identity.

I would prefer anyone to look into things and verify facts for themselves rather than take sides between me and GM. I'm disappointed the report of the findings of the review panel were not published by policy council and I'm looking forward to the matter being debated in the States. I'm keeping an open mind until then.

Of course it will be beneficial for the States if the proposed changes go through. It would be a drastic reduction in the cost of public sector remuneration. However it is a cut in benefits for the employees and there will be ramifications. It is my view that these changes are desirable rather than necessary and that now is not the ideal time to be making changes. I sympathise with staff who will be effectively getting a pay cut as a result, especially those on the lower end of the pay scales, who are already struggling.

bcb

Thanks for your reply Sparty but you didn`t answer what your expertise is in this area. Obviously you don`t have to answer but i do seem to remember some time back you made a comment expressing that this was not an area you were well versed in? i may be wrong?.

GM

bcb

Don't believe a word of Spartacus' ill-informed explanation. She's already proved that she is incapable of understanding the very basics of either pensions or the actuarial valuations.

She seems to think that a £200m or £300m or £380m deficit is just not something that we should be concerned about. Maybe when its risen to £600m in another 2 or 3 years the penny might have dropped.

She seems to think its fine for the States to have applied projected investment return rates which the actuaries themselves stated as being optimistic. That is totally imprudent and is negligent. The difference between the optimistic annual target return of 3.25% and the standard benchmark rate of 2.04%, which global accounting standards deem to be more appropriate, accounts for the £200m -plus difference between a 90% funding level based on the Spartacus model, and a 90% funding level based on the FRS17 model.

We should then ask ourselves why FRS17 was introduced, and what was its purpose. Very simply, its to provide a more prudent, conservative method of accounting for pension fund liabilities, which is extremely relevant due to the dire mess that final salary schemes have got themselves into. This enables employers to find out whether they are sufficiently funding their schemes. Guernsey is not doing so, hence the deficit.

Spartacus unfortunately has a reading age well beneath her actual age. I must have stated at least 4 times on these threads that a 90% funding target may perhaps be justified. However, when that 90% funding target is only being met to the tune of between 70% and 76%, then that's a major problem. Although not to Spartacus.

Spartacus also thinks that just because we try to fund our scheme whereas many other countries don't bother, we have nothing to worry about. She fails to acknowledge the point that other countries and municipal bodies simply issue bonds or extra notes to cover their liabilities, which we clearly cannot do. We HAVE to fund ours.

Spartacus also seems to think that we could just cover the deficit by pumping in the shortfall as an extra contribution, without even considering for one moment where we would find a spare £200m or £300m laying around doing nothing.

Moreover, Spartacus just seems to think that the State, ie the taxpayer, should just keep spending money we don't have on the public sector and on scroungers. Exactly the same strategy which has caused socialist governments around the world to raise debt levels to well in excess of 100% of GDP. I think her extreme socialist views are influencing her stance, ahead of common sense.

Spartacus clearly doesn't believe my credentials but Spartacus would discredit anybody who dares challenge her views. She's just not used to it. I am not going to reveal my identity but I can categorically assure you that my credentials are exactly what I claim them to be. I am very much more than a minor shareholder in a large business and I've been in the industry for 30 years. I've been around the block many times and have many years experience of international pensions. Not what Spartacus wants to read, firstly because she's an extreme socialist, and secondly because, don't forget, Spartacus is NEVER wrong.

I have no doubt that Spartacus now knows that she has been rumbled as being totally out of her depth, but is now in too deep to climb out. That's what happens when dabbling in matters that one knows nothing about. Which is what I have been saying right from the outset.

Spartacus

GM

You are continuing to labour under a complete misunderstanding of what the scheme funding target actually is. The 90% target is based on the actuarial valuation not FRS17. Unless you get your head around this basic fact you are going to continue to be alarmed and confused about the FRS17 70-76% figures which are incomparable with the target.

I don't think the states have been imprudent or negligent I just think you underestimate the expertise involved with managing the scheme. There is no way you can claim to be a pension professional, you may have some fringe experience due to holding roles in the finance industry but clearly you do not have a clue about pension expertise.

FRS17 was introduced for companies not for the public sector, it was intended to protect the members of the pension scheme.

SOG has a policy not to engage in public borrowing but you are wrong to suggest that is not an option available. Guernsey could do that if it wanted to but it has chosen to have a funded pension scheme instead,

As I have said before there is no need or intention to pump in extra funds. The Pension fund contributions were slashed for more than a decade in order to reduce the surplus, There is no need whatsoever to clear the FRS17 deficit.

GM

Spartacus

You appear to hsve chronic indigestion on top of your extreme dose of verbal diarrhea. You keep repeating yourself and adding nothing new. However, on this occasion there are a few gems in amongst the diarrhea which are worth focusing on.

1. Whether the target is 90% or 70% is fairly limited relevance. There is one number above all others which matters. That's the £380m deficit, amd growing. There's not a cat in hell's chance of me accepting a liability figure basd on a massively over-optimistic annual return projection. You have failed spectacularly to discredit the liabilities figure. It is simply reckless for the States to ignore it either, as all prudent accounting principles point towards it being the appropriate liabilities figure.

The assets to be measured against it are beyond dispute.

The deficit exists and is getting bigger, and you are getting absolutely nowhere with your stance that the States should continue to try to kid everybody that their own flawed liabilities figure is a more sensible one to use.

2. Now the real gem. Are you SERIOUSLY suggesting that the States should change their stance towards borrowing in order to go into debt in order to fund the pension deficit? I simply cannot believe that you would say anything so stupid. Even you, and that's saying something.

How on earth would we repay that debt? We are running at a budget deficit for crying out loud. The island's coffers are under massive duress. I can see the logic of us borrowing for a vital capital project, like a school, but to prop up the pension scheme? Are you nuts? We know the answer to that already.

Seems to me that you are determined to follow the New Labour model of Blair and Brown which in a decade has seen the UK's borrowing levels escalate off the graph. Oh yes - keep growing the public sector, keep growing the social welfare system, keep spending money that the UK couldn't afford. Look at the mess the Tories inherited. And remember that Labour funded everything by issuing new gilts and printing more money, which Guernsey cannot do. Basically borrowing by taking out new credit cards.

DEBTS AND DEFICITS NEED TO BE SERVICED AND REPAID AND CANNOT BE SWEPT UNDER THE CARPET. Sorry but I needed to shout that to get it through your thick skull.

Spartacus

GM

FFS

1. That is what I have been saying! It is irrelevant whether the target is 90% or 70% . What matters is that we have a fund of £900Mil! Many public sector schemes don't have any money in them at all just billions of future liabilities! What part of that fact do you not understand?

The deficit has only grown because it has been allowed to grow in order to reach the agreed funding target. There is no evidence that it is still growing. The contribution rate has gone back up (since 1 Jan 2010) so depending on investment performance the deficit figure will now stabilise at the target level.

Again you are actually writing in print that the States (under the guidance of BWCI) are wrong. Well GM I think they know better than you.

2. There is no need whatsoever for the States to go into debt. That is not what I said at all. You made a false claim that "Labour funded everything by issuing new gilts and printing more money, which Guernsey cannot do". They can but they don't need to.

We have plenty of capital funds to build schools etc, it is our income and expenditure which is under duress due to zero ten.

No one needs to prop up the pension fund at all because the contributions cover the scheme benefit payments and there is a HUGE fund of assets to fall back on.

You are having a good old rant about the UK again but Guernsey is in a completely different fiscal position to the UK. You really ought to shut up and let the experts get on with it. They know better than you.

GM

Spartacus

Hold on a moment - what do you mean that's what you've been saying all along? At no time have you accepted the liabilities figure of £1.216billion and the liabilities figure?

I seem remember several times pointing out that a house worth £900k with a mortgage of £1.216m doesn't mean that you have a positive asset of £900k - you have a negative net worth of £321.6! How can you ignore the liability and pretend it doesn't exist?

Yes - Guernsey is in a totally different position to the UK. Guernsey does not have the tools of the UK to raise new debt to service its debts. Thank God.

And yes, the States HAVE got it wrong and I have no hesitation whatsoever in repeating that. Reckless funding decisions and a lack of cajones to deal with the public sector scheme several years ago.

What's makes you think that the States of Guernsey can't have made a mistake? They've made enough of them to more than amply demonstrate their capabilities on those fronts. Let's see - overspends on multiple capital projects, the HSSD budget debacle, losing the £2.6m in the fraud, the Derek Neale affair. No - they never get things wrong, do they?

bcb

Thanks GM for your reply.

Spartacus

GM

Yawn. What I have been saying all along is that the facts are facts.

1. The FRS liabilities are conservatively valued and the figure will change from one year to the next.

2. The actuarial valuation dictates whether the funding level is appropriate in comparison to the target. The FRS values are not used for this purpose.

3. The states of Guernsey reviews the position every year under the advice of the very well paid people who you say are the best pension experts in Guernsey, BWCI.

4. Your analogy about a house with a mortgage bears no resemblance to a 90% funded pension scheme which washes its own face every year.

5. Guernsey could borrow if it wanted to but does not need to as its capital reserves, and its public sector pension scheme are well funded.

GM

Spartacus

Double yawn.

1. Correct.

2. No but they need to be and should have been as they are a more reliable and accepted method of evaluating the liabilities.

3. Yes but it seems that they are ignoring their advice as BWCI consider the 3.25% target rate to be optimistic.

4. Rubbish. Just because the mortgage interest may or may not be serviced (and capital losses on the scheme show that it often would not wash its face), how will the mortgage principal be repaid to the lender when the asset is worth a lot less than the debt? Where is the shortfall being made up from, and by whom if the borrower cannot afford to pay it?

5. Not easily it couldn't. It's capital reserves are being deleted and its annual budget deficit means that it couldn't afford to service the debt and repay the capital without substantially raising taxes, for which there is certainly no appetite from the taxpayer for this purpose. Borrowing money to repay an existing debt is not the same as borrowing money to buy a strategic asset. It's akin to borrowing off a new credit card and simply building the debt which needs to be eventually repaid. The pension scheme is not well funded. It has a deficit of £320m and is £200m short of even the 90% funding target. If the 90% target was actually being met by the fund holding an extra £200m then the scheme could perhaps be deemed to be "adequately" funded. But it isn't.

Spartacus

GM

I am very happy that you at least agree with the facts of points 1, 2 and 3.

Regarding points 4 &5 we will just have to agree to disagree. You are entitled to have your own unique view of things and to state an alternative opinion.

GM

Spartacus

Thank you for agreeing with my conclusions re points 1, 2 and 3.

Re points 4 and 5, in what ways are my views "unique"? I don't see any evidence of anybody else agreeing to your opinion on either point, which seems to suggest that its your views which are "unique".

Spartacus

bcb

I'm not a pensions expert but nor is GM.

You are correct that some time ago I did not want to get drawn into a debate about pensions because at that time I was more concerned with debating education matters which was absorbing my time due to the amount of research I do to back up my arguments.

I have since taken the time to look at the accounts and actuarial valuations to find out more about the public sector pension and I have therefore been able to back up my argument with facts.

I don't hold myself up as an expert (nor does GM) but I will answer any question you throw at me with reference to the information in the public domain.

There is no evidence whatsoever in relation to GM's claim that the current scheme could bankrupt the island or that the deficit is growing and out of control. The deficit was deliberately allowed to grow in order to align the fund back to the funding target.

Naturally the liabilities will grow as they are linked to inflation however the investments will grow too and the actuarial valuation process is designed to monitor and balance the risks. I therefore believe GMs concerns are exaggerated and he is dismissive of the expertise involved in managing the scheme.

The only factor which needs to be taken into account as it is unlikely to change is the fact that people are living longer which increases pension liabilities. That applies to State Pensions, public sector pensions and private pensions alike. There is no escaping it. The States pension age has increased by 2 years to adjust for this and it is sensible that the Public sector pension scheme should follow suit.

There is a misconception by GM and others due to reading about the alarming effects of FRS17 on some companies in the private sector but this does not apply to the public sector as no government is obliged to abide by company law which has caused some companies to be crippled by the very conservative accounting rules of FRS17 and the ramifications of it.

The States of Guernsey trading companies, such as Guernsey post and Guernsey electricity do apply FRS17 however and it therefore concerns them because they are obliged to include their pension liabilities in their accounts even though they do not include their portion of the scheme assets.

I would have thought that separating the trading companies from the main pension scheme could address this problem however I note this is not one of the recommendations.

GM

bcb

I was a director of a FSA-regulated UK pension trustee company for several years. I somehow that Spartacus has even got past the first chapter of either "Pensions for Dummies" or "Investments for Dummies".

Spartacus says that both assets and liabilities will rise. Well - the certainty is that liabilities will rise with each year of service by each employee, with each salary rise and with each new public sector employee taken on. However, there is NO certainty at all that assets will rise in value, as anybody who has even the most basic understanding of what's been going on since 2008 would realise.

That's precisely why the gap between assets held and liabilities owing gets wider and wider every year. In another 10 years the existing gap could easily treble if the returns of the past 5 years continue, which many investment experts predict.

That's why BWCI deem the target of 3.25% per annum to be optimistic. That's why FRS17 would target a far more realistic 2.05%.

That's why the States have got it so badly wrong.

Spartacus

GM

I don't believe you and even if you were a director you must have been a nominee director as no way are you a pension expert.

Are you seriously suggesting the recession is never going to end? It's just going to get worse and worse forever is it? Which industry experts are predicting the long term prophecy of doom? Name one?

BWCI, including Rodney Benjamin and Stephen Ainsworth who you admit are Guernsey's top experts, are wrong according to you. And the States of Guernsey have got it wrong too. You are getting beyond a joke.

GM

Spartacus

Pathetic. You are now getting really desperate.

There is no such thing as a "nominee director" (except as naively claimed by former Sark residents).

Where did I say that the recession would "last for ever"? I said that over the next 5-10 years investment returns are likely to be very poor in historical terms. If the fund's deficit can rise by £380m in 5 years, what will it increase by in the next 5-10 years? Enough to bankrupt Guernsey, that's how much.

Re BWCI, they were quite right to deem the States' targeted return of 3.25% as being "optimistic". The States were wrong to ignore that advice from BWCI. About £200m wrong I would suggest.

Spartacus

GM

Exactly, a nominee director is director in name only. A false director.

Huge investment portfolios such as Government pension schemes are designed to retain value over the long term. During the peaks and troughs it is wholly inappropriate to get over excited or panic.

You just don't get it do you. Even if the pension investments disappeared and there was no money left in the pot at all (which simply aint gonna happen) it would not bankrupt Guernsey it would just put us on a par with other public sector schemes.

That is how ridiculous you are being.

GM

Spartacus

I have no idea what incoherent point you are trying to make re directorships. Try again.

Yes - pension schemes are intended to meet their long-term targets. Which makes it a monumental problem when they fall well short, and when the prognosis is bleak for future returns.

What do you mean "I don't get it"? You think that Guernsey would be fine if the scheme didn't have any of the £900m which is intended to underpin the £1.2b liabilities? Guernsey's balance sheet would be £900m worse off and we would be hurtling towards bankruptcy at 100mph rather than merely cruising towards it.

How many more times do I need to point out that Guernsey cannot issue its own currency and could not service public sector debt to fund this? Where do you think T&R in 2030 would be getting the funds from to pay the pensions due?

Answers on a postcard please.

Spartacus

GM

What long term target is that? When will you know whether it has fallen short? Who is making a prognosis for bleak future returns?

You are stating your flawed opinions as facts again and its all getting very boring.

GM

Spartacus

Wrong. I'm stating my opinion as my opinion.

The long-term target is the one set by the States of Guernsey. It might be to achieve 100% of liabilities. It might be to achieve 90% of liabilities. If the investment returns necessary to achieve that funding target are not able to be achieved in the investment markets without taking extra risk, then the long-term return cannot be achieved via a combination of investment returns and prevailing levels of contributions. That's the point when you know that the scheme is unaffordable. The actuary carries out the calculations periodically to measure the deficit, as they have done here. Their calculations show that the 90% target is not being met. It's around £200m short of that 90% target, and £380m short of being fully funded.

If the actuaries and FRS17 deem that an investment rate of 2.05% is the appropriate realistic assumed low-risk return to target from the £900m fund, then the States need to set the contribution rate accordingly. However by getting their projections wrong and by using a higher rate of target rate (3.25%) which BWCI deemed "optimistic", and by retaining the high benefits on offer for a fast-expanding workforce, they now find themselves £200m short of where they need the assets to be in order to reach the 90% level, based on the £1.216b of liabilities.

They are left with the options of either (a) drastically increasing all future contribution rates from both employer and employee, and this really would be a huge annual increase, probably even double the existing rates, (b) injecting a huge sum (£200m) from government reserves to restore it to the 90% target level, (c) substantially reducing the benefits payable under the scheme to a level which is affordable and sustainable, or (d) doing nothing and risking the bankruptcy of Guernsey.

Option (a) isn't affordable to either employer or employee. Option (b) isn't affordable to the employer. Option (d) cannot possibly be contemplated without borrowing externally, which there will be no appetite for from either the States or from taxpayers, and which in turn increases the risk of going bankrupt anyway as its merely borrowing from a new source to meet other liabilities, and without the island having the ability to repay the extra debt.

Which leaves option (c), and that's precisely where we are today.

That's it - in a nutshell.

Spartacus

GM

I disagree with your opinion in your convoluted rambling post.

The last actuarial valuation (2010) was presented to the States in the Nov 2011 Billet d'Etat by Charles Parkinson on behalf of the Treasury & Resources department. His executive summary which starts on page 2479 clarifies all of your misunderstandings, I suggest you read it in full.

http://www.gov.gg/CHttpHandler.ashx?id=3953&p=0

In particular note the following statements of FACT:-

P2479 "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."

P2480 "An Actuarial Valuation is carried out to compare the value of the Scheme’s assets

(Superannuation Fund) with a funding target which calculates the value of the benefits that will be paid from the scheme in the future using information about the scheme at the valuation date."

P2480 "The findings of the valuation will result in an assessment of the surplus or deficit in the scheme at the valuation date and an estimation of the employer contributions needed to meet the scheme’s funding target in the future."

p2481 "Although it would be possible to slightly reduce the employer’s contribution rate from 14.1% to 13.5% to comply with the funding target, it is recommended that the base level rate of employer contributions to be paid remains 14.1% of Pensionable Pay with additional contributions payable in respect of the special benefit groups (as set out in Appendix 1). This approach is prudent, given the sensitivity of the funding position in relation to changes in any of the underlying assumptions and mindful of the long-

term desirability of returning to a position of fully funding accrued benefits (ie improving the current position of 91.6% funding)

p2485 "There are extensive disclosures required under FRS17 which are intended to be an aid in comparing pension costs and liabilities between companies. FRS17 is prepared for accounting purposes whereas an Actuarial Valuation is carried out to compare the value

of the Scheme’s assets with a funding target which calculates the value of the benefits that will be paid from the scheme in the future using information about the scheme at the valuation date."

p2486 "The General Revenue Accounts are not currently prepared fully in accordance with Accounting Standards and, therefore, the deficit on the Fund calculated using FRS17 assumptions is not included on the Balance Sheet (but this would be required if the

States Accounts are prepared using Generally Accepted Accounting Principles). However, the FRS17 position is calculated and detailed information is disclosed within the notes to the Accounts."

Neil Forman

Spartacus

This does seem to be extracts from my post in November, can TIG confirm or deny this?

I don't see how you can say the press are scaremongering as you stated GM & I were as it clearly says in the article that it has all been confirmed by T&R.

Yes the rate was increased but the deficit is still growing.

Spartacus

Neil Forman

They didn't even give you a mention for it! It's all here.

http://www.thisisguernsey.com/news/2012/11/16/hssd-overspends-budget-by-1-5m/#comment-203465

Treasury and Resources confirmed the figures but that was never in dispute.

I disagree with the assessment of the figures and the insinuation that the costs of 2007 are comparable to 2011. That is simply not true.

You do not know whether the deficit is growing. We will see what the updated figures are in due course. The decision the states of Guernsey made was to maintain the deficit at around 10% and there was a funding surplus at the date of the last actuarial valuation.

This makes for a sensational story and the facts are boring.

GM

Spartacus

As you don't know the definition of a "fact", it is wrong to say that the "facts are boring".

In what way does the last actuarial valuation show a "funding surplus"? It simply does not - it shows a £286m deficit at that time (2010).

Spartacus

GM

You would need to ask someone like Neil Forman to look up the definition of "funding surplus" for you.

Clue : it is defined in the appendices to the actuarial valuations.

Hope you find it before next Christmas as the penny will drop.

Neil Forman

Spartacus

Have a look at this

http://www.gov.gg/CHttpHandler.ashx?id=80053&p=0

January 2013 billet, have a look at the Chairman of Guernsey Post statement on pages 163 & 164.

This kind of echoes what GM & I have been saying.

GM

Neil

Indeed it does, in language which even Spartacus should be able to understand.

Spartacus

I know what a pension "funding surplus" and I know what a "pension liability" is. You very clearly don't.

I really don't know whether its your obvious inability to grasp simple concepts which causes your blindspots, or your stubbornness in refusing to accept that you are wrong, or your committed left wing beliefs, which has caused you to dig this extremely deep hole for yourself, but you really are starting to look very silly indeed,

Spartacus

Neil Forman

It doesn't echo what you and GM have said. You have misunderstood the issue. Guernsey post is wholly owned by the States.

Guernsey Post is a trading company and apply FRS17 and include the FRS17 pension liabilities but not the pension fund assets as these are held separately by States of Guernsey.

Did you find the definition of "funding surplus"?

If you look on the 2010 actuarial valuation (page 2515 of the Nov 11 Billet) you can see that Guernsey Post has a funding surplus of £2,702,000. You won't see that in Guernsey Post's trading accounts.

http://www.gov.gg/CHttpHandler.ashx?id=3953&p=0

As you know the employer rate for Guernsey Post was decreased from 15% to 14.2% with effect from 1st April 2012. Why do you think the States decided to do that?

The funding position of Guernsey Post improved since the previous actuarial valuation by £1,419,000.

GM

Spartacus

And if you look at page 2486 of the same 2010 actuarial valuation, you will see the full impact of adopting FRS17, which the valuation is not based on, but which the States of Guernsey is obliged to adhere to in its own audited accounts.

The impact of adopting FRS17 is to increase the overall deficit on the combined scheme (we are not given the individual breakdown between the various trading companies on page 2486) by £193m, from £77.338m (91.6% funded without FRS17) to £270.642m (75.7% funded based on FRS17).

FRS17 requires the projected investment returns of the scheme to be calculated based on an actual return available in the marketplace, which is specifically a AA-rated Corporate Bond which was then yeilding 2.05% per annum. The actuarial valuation is based on the TARGETED investment returns of 3.25%. Well - the States of Guernsey and the scheme actuaries can set any target they like, but what FRS17 does is force employers to base the fund liabilities on something substantially more ACTUAL than that, so that it is realistic. As any person with even elementary investment knowledge will tell you, chasing higher investment returns results in greater risk, so the projected returns should always be based on the returns available from the appropriate investment, in this case AA-rated Corporate Bonds.

Projecting a 3.25% annual return compared with a more realistically attainable 2.05% annual return is a difference of 58.5% on the annual return. Project that over 30-40 years as a pension scheme must do, and the compound effect is massive. Underfunding now, based on an assumed higher rate of return which is not attainable without taking extra risks, builds up funding deficits which cannot ever be recouped without taking even greater risks going forward, which in turn increases the risk of additional capital losses. These are the very fundamental basics of investment management.

As the States of Guernsey is obliged to adhere to FRS17, and its assets and liabilities are accounted for on that basis, it is perverse to choose to value a huge portion of its liabilities on a different accounting basis. Nobody in their right mind would deem that to be logical.

Your entire flawed argument is that the pension liabilities of the States of Guernsey should be based on a projected rate of investment return which globally accepted international accounting standards deem to be 58.5% higher than is currently attainable.

Spartacus

That's not the reality of the situation GM.

GM

Spartacus

Yes it is - 100%.

And your rationale for making suich an empty statement is what exactly?

Neil Forman

Spartacus

I think you need to read page 164 again;-)

The Chairman clearly states that the last Actuarial valuation indicated that there was a surplus, as you rightly say. He then goes on to say that he believes that this was based on " optimistic assumptions ". As GM and myself have been trying to tell you.

It was recommended that the contribution made by the employer should be lowered but the board decided to continue to contribute at 15%.

Guernsey Post is a trading company and does use FRS17 fully, have a look at page 201.

Spartacus

Neil Forman

What's wrong with optimistic assumptions? That the world will continue to spin could be deemed an optimistic assumption.

Yes the experts recommended that the contribution made by the employer could be lowered - what does that tell you?

Yes Guernsey Post is a trading company but it's owner, the States of Guernsey, is not a trading company. The Pension fund is not held by Guernsey Post.

Neil Forman

Spartacus

The rate strategically increased with effect from 2010

So from 2009, employer contribution was 7.85% which amounted to £17,821,000 with a deficit of £301,897,000

2011, employer contribution was 14.1% which amounted to £27,450,000 with a deficit of £381,526,000.

That is a rise in the deficit of £79,629,000, in two years.

You can bury your head in the sand if you like but I want our children / grandchildren to have a good life, this will be impossible for them if this is not tackled now. Why should they pay for our mistakes.

Spartacus

Neil Forman

You are being selective with the figures you use. Why leave out 2010?

2009 accounting deficit = £301,897,000

2010 accounting deficit = £286,494,000

That's a REDUCTION in the deficit of £15,403,000 in just one year!

What you think is necessary for our children/grandchildren to have a good life is not an educated or informed assessment of the situation and you have admitted that plenty of times. You are not an accountant, nor an actuary, nor an economist, nor a financial expert are you?

GM

Spartacus

Yes - there will be movements in the funding deficit. Its because investment returns/interest rates fluctuate you know. But then again you would know that if you even the faintest idea what you are talking about.

I can categorically state that Neil's understanding of these issues is very extensive.

Anyway, at least you now seem to be accepting the concept of the deficit which you previously denied even existed. That's progress.

Neil Forman

Spartacus

Let's do the last five years then as per this thread.

2007 - £128,702,000

2008 - £141,872,000

2009 - £301,897,000

2010 - £286,494,000

2011 - £381,526,000

That is still a big addition to the deficit in five years, I await this years final accounts.

I have never said I am a financial expert but I took your advice and did some research with friends and family who are.

Spartacus

Neil

You don't even know what those numbers mean. You don't understand what happened to create the increases in 2009 and 2011. You just take it all at face value and jump to conclusions. You also forget that the contribution rate was still suppressed up until 2010.

ah

What people fail to understand is that this pension is going to make us go bust as an island! If you want to keep your pension go ahead as when we run out of cash you won't get your pension!

We need to do whats right and best for the majority (i.e the other 55,000 of us) who correct me if I am wrong employ those 4,600 people.

I fail to understand why we need to pay the fat cats extra. If they don't like it they can leave as i know plenty of other people who would love their jobs even under the new pensions proposal!

We should have a referendum on the whole thing, so its not essentially decided by the people who are members of the scheme.

Ps whoever manages this [ension fund needs to be sacked and the money moved locally instead of paying people off island to do a bad job

kevin

I will correct you, States employees pay income tax (the same as you do) so you don't employ them any more than they employ themselves.This detail has obviously escaped your attention.

The revised plan has been discussed and decided by two or three States representatives who quite possibly are members of the scheme - not a very good representation of 4600-odd States employees is it? To the best of my knowledge none of these thousands of staff had a clue what the final outcome of these negotiations was likely to be.

I'd agree with you that the highest earners should not be paid extra to compensate for the final salary part being dropped - how can that be right or fair when the rest just have to accept what is offered? I would also agree that the whole process has been very badly handled.

islander

The states of guernsey are investing in the public pension scheme rather than investing into our economy.

With all these senior post gaining extras and the states of guernsey say it will be no extra cost to the taxpayer is a false statement.

Ok i am a little thick being and old guern but i have always found butter for my bread and clothed my siblings on what i earned and saved.

Its time the pension scheme was closed and shared amongst all them that put into it.Bank or invest your lump and be like me living on £279pw old age state pension.

We are living longer so tax payers money can then be put to our health service.

This island cannot afford to be like these uk pension companiesto go bust and leave many old pensioners penniless.

The finance sector invest for profit whereby our States of Guernsey invest into overpaid senior servants who waste money left right and centre giving millions away from the airport account,unwanted police transport,etc.

Come on guerns,you know the real setup more than these wasters sitting in offices signing our money away.omg the ave guern wages is only £25.000.is this the real world or just pie in the sky

Dave

This is the most positive bit of media I have seen for a long time, I have been considering my familys future here in Guensey, nice people lovely place its just a pity its not sustainable (at the moment) Neil Forman thank you for doing what our paid deputies / puppets should be doing for us. Please do not be discuraged by the negative comments made by certain people on this site, your energy is better used gethering the facts. You don't have to defend yourself. It's a pity you never got in but I do wonder when the reins would have been pulled on you.

Keep up the good work.

Ed

bcb

So, its gratifying inflicting misery on others just so that you can satisfy your sad ego ? I strongly suggest that you get a life (a decent one !) and heed the advice of somebody that is more wise than you, Spartacus. If not, that confirms my belief that you've got your a sad individual who aims to divert discontent by mocking others- you've definitely got some issues to work out.

I am sure that your a decent human being, but you behave like a complete idiot on this forum. It's true what they say about some adults- they're total hypocrites. They claim that children, and indeed adolescents, need to be taught how to be a decent humans when it is, in fact, they that are the puerile juveniles.

It's an appalling state of affairs that me as a so-called naive, raw youngster has to enlighten an adult to the latter's idiotic behaviour.

bcb

Oh dear Ed i should have known better than to expect you to grasp that little thing called humour and don`t point to Spartacus post as back up because i think you may find she DID see i was trying to be humorous.

God you must be a right bundle of laughs? do you have any mates?.

GM

bcb

I have reached two conclusions in the past 24 hours:

1) That Ed and Spartacus are cut from the same cloth and could easily be related.

2) That Spartacus is indeed, after all the speculation during the Education debate a few months back, Carol Steere. I don't know of anybody else who could possibly refuse to accept defeat when the facts are so irrefutable.

Spartacus

GM

1. I'm no relation to Ed but I have the compassion and intelligence to identify that he has something different about him.

2. I'm not Carol Steere, I just share her ability to separate fact from opinion, an ability which alludes you.

That's just two more things to add to the long list of things you are wrong about.

GM

Spartacus

1. Your definition of "intelligence" is a very odd one.

2. I'm even more convinced now - that seals it!

bcb

Yes GM i do agree that Sparty could well be CS not sure about being related to Ed though but nothing ceases to amaze me so you could be right on both accounts.

And i do know CS doesn`t like reindeer slippers (Ed don`t forget that new word i gave you in another post "humour") so there is another connection there :).

Neil Forman

GM / bcb

I don't think CS is the right one, remember I live in the same road as her and have to pass her house every morning when getting the car and I am still here;-))

I do think " she " is a sitting Deputy though. I may have even been in the same room as " her " on Sunday.

GM

Neil

Are you suggesting that Spartacus is not a "she" at all? I find that hard to believe.

I'm intrigued.

GM

Neil Forman

Are you sure that Spartacus is a current sitting Deputy? I've looked at the manifestos of all the candidates from the last election and I cannot see anybody, either male or female, whose manifesto remotely resembles the extreme left-wing, almost communist beliefs of Spartacus, nor anybody who seems to indicate that they would possess such dogmatic, stubborn, pigheaded traits.

I don't see too many who suggest that they lack the intelligence to read and interpret the written word (although there are a few of those but not of a left-wing lean).

It really worries that if manifestos are that inaccurate, then people may have been totally misled by Spartacus. Oh my god, I may have even voted for Spartacus myself.....I feel quite ill all of a sudden.

Neil Forman

GM

After what happened on New Years Day and comments ' she ' has made in this thread I have my suspicions. I am not going to name yet as I am going to do a bit more fishing. Don't worry, if you live in the West you did not vote for ' her '.

GM

Neil

Phew, that's a relief.

What happened on New Years Day?

Neil Forman

GM

I'm not going to let the cat out of the bag yet, I will say that one Deputies reaction was a bit off at a function I attended. Did not think much of it at the time but a phrase she has used recently just made me remember. As I said, I will do more fishing.

Concerned Nurse

As there ihas been no mention of this anywhere else, are you all aware of the fact that the new HSSD board has already let some of its nurses down by promising them that a ward will be reopened next week, only today they say that actually it wont be open until mid Summer. Another shambles, come on Sandra, what are you doing to help your fellow nurses?

Thanks guys.

The Truth

Last full triennial actuarial valuation of 31st Dec 2010: -

Fund = £930m

Liabilities = £1000m

Therefore 93% funded.

None of this FRS17 pie in the sky accounting assumptions.

Note - some of the employers contributions went down due to sections of the fund being over 100% funded so if the fund was in trouble why make the reductions.

It is common knowledge that the new FRS17 accounting system predicts far lower values to that of a full and proper actuarial valuation, so no more scaremongering; change the record.

GM

The Truth/Spartacus

From the audited accounts of the States of Guernsey for the year ended 31st December 2010 - total scheme liabilities £1.216 billion. But hey, what's an extra mere £216 million - petty cash?

So you are really clutching at straws. You are dismissing FRS17, which is a global accounting standard, on the basis that it doesn't suit your argument? You'd rather pretend that the extra £216m if liabilities didn't exist when FRS17 is globally recognised, except by Spartacus, to be a more accurate method of evaluating a pension scheme's liabilities? Do you really think that ignoring the effect of FRS17 is doing the people of Guernsey any favours at all, just sweeping the issue under the carpet? And you have the nerve to accuse me of scaremongering? What you are advocating is pure recklessness, destined to bankrupt Guernsey in a few years time. Scandalous.

So in effect what you are saying is that global accounting standards, which every major company and government around the world adheres to these days, is flawed? Really?

A desperate, futile attempt when there are no remaining straws to clutch.

Spartacus

GM

Have you been completely oblivious to the controversy over FRS17?

GM

Spartacus

No - but I have heard the arguments and I have no problem with it. The main complaints about it seem to come from people like yourself who don't like its impact on pension schemes.

Until and unless FRS17 ceases to be an accepted international accounting standard, its what we need to go by.

Spartacus

GM

Well evidently, rightly or wrongly, the States of Guernsey disagrees with you.

GM

Spartacus

Do they? I suspect they have now realised the folly of trying to apply an over-aggressive projected investment return, and the knock-on impact on Guernsey PLC's finances.

Forest

The Truth

I'm no expert but if what you are saying is true I am sure that pension providers, investment companies and indeed governments around the world would be tripping over themselves to understand and find out more about how Guernsey's final salary pension scheme is still able to be almost fully funded and profitable while every other final salary scheme on the planet has been deemed unsustainable or was closed years ago. Infact if what you are saying is correct, I would expect to be reading about it in global financial publications and newspapers being heralded as an amazing success story that the world could learn from and of course would demonstrate that there was light at the end of the tunnel in terms of global markets and economic recovery.

You obviously understand these things far better than I do so perhaps you could explain how this scheme has come out so well while pensions values are still falling year on year everywhere else.

Neil Forman

The Truth

As per States Final Accounts 2011

Fund =£896,537,000

Liabilities =£1,278,063,000

If you take liabilities away from the fund you are left with a deficit of £381,526,000.

Which makes the funding figure 70.15%

To be 90% funded you would need a fund of £1,150,256,700

That is a shortfall of £253,719,000

These figures are provided by the actuaries.

The Truth

See last FULL AND PROPER ACTUARIAL VALUATION.

Billet 30th Nov 2011 Vol 2 page 2479.

GM

If you posted the link it would help.

Spartacus

GM

I have pasted the link to the Nov billet about 100 times but you still choose to ignore the standard actuarial calculations and are fixated on FRS17. The States of Guernsey do not currently use the FRS17 valuations as their benchmark against their funding target, Neil Forman take note your figures are the wrong ones to use for this comparison. End of.

GM

Spartacus

Yes - I do ignore the valuation contained in the actuarial report as the more appropriate and more accurate one to use, as per global accounting standards, is FRS17. Strangely enough, that's the one that the States of Guernsey are obliged to use. There's a very good reason for that - its more accurate and more prudent and stops employers falling into the same trap that you seem to want us to fall into.

Spartacus

GM

It is irrelevant what you want to ignore and it is irrelevant what you think I want. It is the States of Guernsey that determine the funding target and what benchmark this is set against. They do not use the FRS17 values as a matter if fact, they use the actuarial valuation.

See my post here explaining.

http://www.thisisguernsey.com/news/2013/01/02/revealed-103m-cost-of-states-pension-plan/#comment-222042

Neil Forman is therefore incorrectly comparing the states funding target of 90% against the FRS17 valuations.

If the States were aiming to benchmark against FRS17 they would have restored the contribution rate back to above 14% a lot sooner than 2010 but they clearly feel a funding target of 90% against the actuarial figures is perfectly adequate.

When you bear in mind that many pubic sector pension schemes have no funding whatsoever you can understand why THEY think this is prudent and therefore OK.

Watcher

It would be useful to take a step back and look at how the fund value and it's liabilities are calculated. It is my understanding, based on my personal experience, that the fund value is calculated at a certain date. Any fund of this size is invested widely so that all the eggs are not in the same basket. The "value" is purely the cumulative value of all those investments, some up on that date and some down. The figure is only really significant if ALL OF THOSE VARIOUS INVESTMENTS, GOOD OR BAD, ARE REALISED ON THAT DAY. In reality the investment managers would never operate like this, they would capitalize on the winners, sell off some losers that showed little chance of improving and keep the remainder until they do show a profit. This is what the managers do constantly as they seek to maximize the value of the fund within certain control parameters. The liabilities are calculated by the actuaries looking at the ages and salaries of all employees who are part of the pension scheme. These are extrapolated out to retirement age but the actuaries can only assume that everybody in the scheme will work until they reach retirement age and draw their pension based on their current salary upgraded by a cost of living figure. Reality is that many people retire early, many contributors move jobs or leave the island and some die in service.

The result being that the figures NEVER come true to the actuarial predictions, neither the fund values nor the liabilities. So stop worrying and leave the matter in the capable hands of the fund managers.

GM

Watcher

Not very accurate at all. Pension schemes tend to be invested primarily in bonds, rather than in equities, and so the issue of "selling off winners and losers" is far less prevalent.

The decision to only fund the scheme to the level of 90% of its liabilities can probably be justified by the factors that you mention. However, that's assuming that the 90% target is met, and that the 90% target itself is based on a prudent rate of investment returns, i.e. following the globally-recognised FRS17 approach rather than the far too ambitious States of Guernsey target, as we've now seen very clearly what the implications of the latter are.

GM

Terry Langlois

You have explained it perfectly. It is exactly a Ponzi scheme. And for Spartacus' benefit, Madoff did have a fund of assets.

Spartacus

You have further proved that you haven't the foggiest idea how a pension scheme works.

You say that the scheme "washes it's face" annually. Let's investigate shall we. In 2011 the contributions exceeded the payment of current pensions by £2m. That leaves just £2m of net contributions to go towards the building of the fund to pay the future benefits of the current members in payment, AS WELL as to help build the fund to meet the future pensions of members who have not yet reached retirement age, AND to help reduce the already large fund deficit. £2 MILLION !!! How far will that go? Do that for the next 5 years and that's another whole £10 MILLION towards the fund, by which time the liabilities will have grown by several tens of millions.

But oh no, it's far worse than that.

Although pensions may have exceeded liabilities by £2million in 2011, the fund investments LOST £36 million. That meant that during the year the fund deficit grew by a net £34 million.

And it's get worse.

In how many of the past 5 years did the investments in the fund make a gain? I don't have access to the figures but I recall it was 3 or 4 years out of 5. The losses on those years far exceeded the gains in the 1 or 2 years of gains. As a result, the scheme "washed its face" to the tune of a NEGATIVE couple of hundred million pounds and more.

So it did NOT wash its face at all Spartacus, did it? By any possible benchmark used by any intelligent, rational, logical human being.

And you are stupid enough to claim that it's "fact" that it "washes its face".

It absolutely is a Ponzi scheme. Money is being "taken" from future beneficiaries to fund current pensions. How else could current pensions be paid when contributions less pensions paid less losses on investments resulted in a net deficit of £34 million for the year? So how does the remaining reduced fund get put to work properly for the benefit of the future pensioners? It isn't - because its no longer in the pot.

I've said it repeatedly. You dont understand how pensions work. You don't understand assets and liabilities. You don't understand how investments work. You are unable to grasp the long term consequences to the island of pointlessly trying to keep the scheme going as it is.

More to the point, you are simply unable to accept that you are wrong despite compelling evidence to the contrary. And as you can see, it's no longer just me who recognises a Ponzi scheme.

Me

Ed you have obviously been minipulated by Sparticus, you need to listen to Neil and GM.

Or just talk to your Cat. Please..

I take it you done well in english at school, how did you get on with maths?

Eds_cat

Miaow, miaow, miaow miaow miaow miaow miaow!!!

(Transl: please, someone, get me out of here!!!)

SaintsBay

Can someone post an opinion.

Will GST be introduced to fund the pension deficit ?

If so - is this morally right ?

GM

Saints Bay

My opinion is that it would be essential to introduce GST if there is no change to the existing scheme. Until we see the projected annual funding costs for the CARE scheme, its not possible to evaluate what effect it will have on the annual States budget.

Generally, if the various States departments continue to make cuts and take that obligation seriously, then we MIGHT get away without introducing GST to balance the books. However, I suspect that apart from cutting the numbers employed by the various departments, there may not be enough other ways left to reduce the departmental costs.

I'd rather see the abolition of the family allowance, a 25% top income tax rate and possibly a 10% "inheritance tax" on inheritances or gifts of Guernsey real estate before GST was to come in. I was previously far more in favour of a GST but I realise that there are better prior options available. Above all, I'd like to see a territorial system come in for corporates to replace zero-10, so that all companies TRADING on the island would pay a proper rate of tax, whether that's 10%, 15% or even 20%, in a way which would not adversely affect the finance sector's global competitiveness.

kevin

GM,

Is the finance company you part own and run with your 120-odd employees trading on the island?

Whilst looking,commenting and endorsing just about every other cost cutting alternative for Guernsey that is suggested on this forum your marked reluctance to look at trying to raise any money from the finance sector suggests to me that it does not.

GM

Kevin

Did you not read what I posted in response to your question a couple of weeks ago? I explained the need for there to be an effective zero-tax corporate structure for the many thousands of offshore investment companies administered here in order to protect the very important fiduciary sector and the thousands of jobs that it provides. I explained to you that if their CLIENT companies became liable to tax here then we would lose that business and the jobs overnight. I also explained to you that because of the EU Code of Conduct, we could not simply exempt such companies. Do you remember now?

Yes - my company is now one of the few that pays Guernsey tax. Fiduciaries have recently been added to those paying tax at 10%. However, as the business is owned by local residents the profits were already taxed at 20% anyway, when distributed, so all it means is that half of the tax bill is paid slightly earlier.

It should be very obvious that businesses like one are exactly the ones which need to be protected as we employ large numbers of islanders and we pay a lot of tax here. If the tax take from businesses like mine is lost then it means that the tax burden on other taxpayers would need to increase to compensate.

Clear enough?

kevin

GM,

Very clear, thanks for your reply and I'm pleased to hear that your company is one of the few that pay tax.

It is, however, a shame that you seem willing to cull many of the 4700 people who run the island and look after the finance sector so well.

A very easy way to make a saving unless you happen to be one of those affected.

GM

Kevin

I'm not happy to cull them at all. But I'm extremely concerned by the fact that the number of them has been able to escalate in such an uncontrolled and excessive manner over the past 10 years.

At the risk of repeating myself, the population rose by around 50% bewteen 2001 and 2011, yet the public sector workforce rose by around 20%. That is totally illogical. What new jobs are being done in 2011 which we simply did without in 2001? Why has appropriate use of sophisticated IT systems not had the effect of made the public sector more efficient when doing clerical tasks? Has the IT function of the States underperformed? There is no logical explanation for such unfettered growth of the public sector. Or if there is, then I have yet to hear it.

Just think - if the public sector workforce had grown only by the same rate as our population since 2001, there would be a much smaller pension scheme deficit and there might have been no reason to review the viability of the pension scheme at all. That growth of the public sector workforce has clearly had a massive impact on the pension scheme.

Just saying....

Michael R

Verbatim quote from GM:-

"At the risk of repeating myself, the population rose by around 50% bewteen 2001 and 2011, yet the public sector workforce rose by around 20%. That is totally illogical."

Somebody is on the happy juice!!

kevin

GM,

I take it you mean 5% population rise between 2001 & 2011?

Do you actually believe that?

I would hazard a guess that a true figure would be nearer 20%.

When was the last time a PROPER census was carried out?

People are still having kids, the elderly are living longer,somebody must be filling the numerous new housing developments that have sprung up in the last 10-12 years?

The only other explanation must be that hundreds (or even a few thousand) have moved off the island because they can't afford to live here - thats a distinct possibility.

I wouldn't mind betting that the population has increased by almost 5% just to fill finance and other specialist posts, for instance what percentage of your workforce are locals?

Spartacus

GM

Why was the contribution level so low up until 2010? If they ever had any intention to reduce the deficit they would have raised it earlier surely? You are not making sense.

Regarding staff levels, the new states need to be taking ownership and control of the size and structure of the public sector but the strategies so far seem to have been sound according to the scrutiny committee.

To me this issue is more important than mucking about with the pension fund.

http://www.gov.gg/controllingpublicsectorstaffnumbers

GM

Spartacus

Heard it all before - you are adding nothing new to the diatribe you have already spouted.

GM

Michael R

A Freudian slip....it should indeed have referred to a 5% population increase between 2001 and 2011. No happy juice I'm afraid, just a good old-fashioned typo. Must admit though that it rather changes the context!

Kevin

Who knows what to believe? We can only go by what the official States of Guernsey tells us, which is that the 2011 population was just under 63,000. The 2011 Census never took place and that's crazy - it's one of the most vital tools for managing and planning the island's future.

A 5% increase since the 2001 Census is still around a net 3,000 increase - that's a sizeable number. The longevity rate has not materially increased in that period. I think the primary school statistics tell us that birth rates have fallen, hence the suggestions of closures. A lot of people have also left the island - or so PB Falla would have us believe, but I'm sure we all know of people who have gone. If even 1500 new homes have been built in that period (which probably isn't too far out), then an average of 2 occupants per house would be an extra 3,000 people.

I doubt that the States' figure is too far out, but it sure would be nice to know.

A sizeable proportion of the extra 3,000 would no doubt be licence holders, although fortunately it is short-term rather than long-term licences being mainly issued these days. A good few will also be returning islanders of course, and more and more open market houses seem to new be used for multiple occupation than family homes.

My business? 1 housing licence out of 120 people, and that was issued 11 years ago. Happy?

Spartacus

Regarding Guernsey population figures, we should find out the accurate details soon enough so GM you can stop plucking numbers from thin air.

http://www.bbc.co.uk/news/world-europe-guernsey-20901458

Regarding the public sector staff numbers I agree this should be kept under control but as is obvious in the current HSSD saga, slashing staff can be a disastrous false economy. You need appropriate staffing for the best quality service and to ensure efficiency of costs and management.

The State should only be providing services which are essential, and to those in actual need.

Neil Forman

Spartacus

Have a read of Page 2480 of the Actuarial report, you can find it here.

http://www.gov.gg/CHttpHandler.ashx?id=3953&p=0

Read the part titled 2010 Actuarial Valuation Results. This shows what GM & myself have been trying to tell you about using optimistic assumptions. This is why I prefer to look at the Final Accounts.

The Actuarial figures are unreliable, these are based on very optimistic assumptions at a rate set by the States of Guernsey. They can make the assumptions show a 90% funding level. FRS17 shows a more reliable picture.

The assets of the fund are dropping, the liabilities are growing and the deficit is growing. There is a funding deficit.

The States of Guernsey are obliged to use FRS17 on the balance sheet, they don't use it in FULL because they don't show liabilities which is a requirement. Guernsey post do and they do show assets and liabilities on their balance sheet as is shown in the link I posted earlier.

Yes the contribution rate was raised in 2010 but it has not made a difference.

We have a fund of £896,537,000 but it will not meet its liabilities, it is losing money. More is going out than is coming in. If left it will bankrupt itself.

As for your post 5th January at 3.26pm, are you serious? " if there was no money in the pot at all it would not bankrupt Guernsey ". Yes it will, as of December 2011 we had £627,466,000 in reserves the liabilities as at December 2011 were £1,278,063,000.

GM has listed his credentials, why don't you? I have done my research and have asked people who are highly qualified in these matters and they are agreeing with GM. I know what the numbers mean, you don't. End of:-)

Spartacus

Neil Forman

I have been telling you and GM to read the actuarial valuation (and Charles Parkinson's executive summary) as it clarifies all your misunderstandings.

If you prefer to look at the annual accounts that is up to you but the accounts are not used to compare the liabilities with the funding target. That is a FACT.

So you think the Actuarial figures are unreliable do you? What a joke! They are prepared by experts.

You say "The assets of the fund are dropping, the liabilities are growing and the deficit is growing. There is a funding deficit." but if there was any substance in your opinion, then Charles Parkinson or BWCI might have mentioned it but they have not they say the opposite to you. They say there is a funding SURPLUS!

You say "The States of Guernsey are obliged to use FRS17 on the balance sheet," absolute rubbish! see page 2486

"The General Revenue Accounts are not currently prepared fully in accordance with Accounting Standards and, therefore, the deficit on the Fund calculated using FRS17 assumptions is not included on the Balance Sheet ."

I stand by my opinion that if there was no money in the pot at all the fund would continue to tick along. There would be no risk of bankrupting Guernsey and I therefore disagree with your misinformed opinion.

GM has probably exaggerated his credentials, I have been honest and explained that I do not have any direct pensions qualifications or experience. I am relying entirely on what the experts are saying.

GM

Neil

Thank you. Very well put. No doubt Spartacus will disagree....

Spartacus

GM

Whether I agree or disagree with Neil's opinion is irrelevant. What he has said in his post is a departure from the facts, as set out in the actuarial valuation in his link.

In case you missed my earlier post. I'll repeat all the points I made here for the benefit of Neil too.

The last actuarial valuation (2010) was presented to the States in the Nov 2011 Billet d’Etat by Charles Parkinson on behalf of the Treasury & Resources department. His executive summary which starts on page 2479 clarifies all of your misunderstandings, I suggest you read it in full.

http://www.gov.gg/CHttpHandler.ashx?id=3953&p=0

In particular note the following statements of FACT:-

P2479 “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.”

P2480 “An Actuarial Valuation is carried out to compare the value of the Scheme’s assets

(Superannuation Fund) with a funding target which calculates the value of the benefits that will be paid from the scheme in the future using information about the scheme at the valuation date.”

P2480 “The findings of the valuation will result in an assessment of the surplus or deficit in the scheme at the valuation date and an estimation of the employer contributions needed to meet the scheme’s funding target in the future.”

p2481 “Although it would be possible to slightly reduce the employer’s contribution rate from 14.1% to 13.5% to comply with the funding target, it is recommended that the base level rate of employer contributions to be paid remains 14.1% of Pensionable Pay with additional contributions payable in respect of the special benefit groups (as set out in Appendix 1). This approach is prudent, given the sensitivity of the funding position in relation to changes in any of the underlying assumptions and mindful of the long-

term desirability of returning to a position of fully funding accrued benefits (ie improving the current position of 91.6% funding)

p2485 “There are extensive disclosures required under FRS17 which are intended to be an aid in comparing pension costs and liabilities between companies. FRS17 is prepared for accounting purposes whereas an Actuarial Valuation is carried out to compare the value

of the Scheme’s assets with a funding target which calculates the value of the benefits that will be paid from the scheme in the future using information about the scheme at the valuation date.”

p2486 “The General Revenue Accounts are not currently prepared fully in accordance with Accounting Standards and, therefore, the deficit on the Fund calculated using FRS17 assumptions is not included on the Balance Sheet (but this would be required if the

States Accounts are prepared using Generally Accepted Accounting Principles). However, the FRS17 position is calculated and detailed information is disclosed within the notes to the Accounts.”

GM

Spartacus

I've read it in full. Several times. Absolutely nothing new there. It changes nothing.

GM

Spartacus

Re your 8.25am post addressed to Neil Forman, the whole point is that the audited accounts are supposed to present a "true and fair view" of the financial status of the States of Guernsey. By not fully applying FRS17, they mask the full extent of the liabilities. They are allowed to do that provided that the audited accounts explain the policies used, but WHY?

The actuarial report made express reference to the opinion of BWCI that the States' projections were "optimistic". The figures in the valuation were based on that "optimistic" figure, as BWCI are required to do if their client instructs them accordingly. That "optimistic" view by BWCI has been proved 100% correct. They were correct. T&R were wrong. The effect of that "optimistic" projection is the realisation of the more realistic size of the proper deficit.

My credentials are as stated.

You continue to add nothing new. The difference between the asset value and the liabilities value exists. The deficit exists, regardless of what accounting policy was wrongly used to mask the problem.

What bit of the £1.216 billion liability figure do you think does not exist?

Spartacus

GM

The audited accounts do present a “true and fair view” of the financial status of the States of Guernsey."

Page 2485 states "There are extensive disclosures required under FRS17 which are intended to be an aid in comparing pension costs and liabilities between companies." That purpose is not applicable to Guernsey. I hope that answers your question.

I don't know why you are so obsessed with the deficit.

p2503 states "It was decided at the last valuation that in a government backed scheme, such as the Fund, 100% funding is not necessary as part of members’ pensions could be met by a pay-as-you-go system. "

I don't know why you are so obsessed with the FRS17 liabilities. The £1.216 billion liability figure is a future defined benefit obligation based on assumptions which can vary. The liabilities do not "exist" on the basis that pension liabilities do not meet the usual accounting criteria for classification as a "liability" therefore accounting treatment varies enormously.

What page of the actuarial report made express reference to the opinion of BWCI that the States’ projections were “optimistic”? I could not find that reference anywhere. Are you referring to the investment projections or the benefit obligation projections?

Your only verifiable credential is that being reasonably articulate manages to fool most of the people most of the time ;-)

GM

Spartacus

The audited accounts only represent a "true and fair view" based on the accounting principles adopted, which have to be fully disclosed. The unanswered question is WHY the States choose not to adopt FRS17.

I am "obsessed with the deficit" (a) because the deficit exists and is massive and growing, and (b) because its become so huge that Guernsey will not be remotely able to "pay as you go" in a few years time. You seem incapable of grasping this point so I will repeat it loudly. GUERNSEY WILL NOT BE REMOTELY ABLE TO "PAY AS YOU GO". Have you got it?

The pension liabilities do exist. The actuarial statement refers to them. They are projected using globally adopted pension projection calculations. They are a provision based on prudent assumptions relating to the scheme's obligations. To ignore them is reckless.

The "optimistic" comment was made by BWCI in relation to the projected rate of investment returns, when the States decided to adopt a projected return rate of 3.25% rather than the far more prudent (58.5% lower) rate of 2.05% linked to the AA Corporate bond returns available. This has been explained to you several times.

You are just repeating and re-repeating the same old nonsense. In effect, you are happy for the scheme to continue even though the 90% funding target is nowhere close to being met, amd with the States having no ability to fund the deficit.

You clearly don't care that members of the scheme will be left without a pension when the scheme goes bust and the States are unable to bail it out. You think that the States could just go and out and borrow to solve the problem, which would be impossible.

You clearly cannot grasp the fact that the deficit has risen threefold to £380m in just FIVE years. You think that's all a figment of my imagination even though the States Chief Accountant acknowledges it, the accounts themselves refer to it and the actuarial valuation spells it out.

Just keep pretending the deficit is not there, sweep or under the carpet, it might go away. No it won't go away - it needs to be paid out of non-existent reserves.

it seems that you are determined to live by the attitude of "ignorance is bliss".

The 2012 figures will be interesting.

Spartacus

GM

We will have to agree to disagree about the nature and concern over the deficit. I'll stick with what the experts say.

We'll also have to agree to disagree about whether the accounting treatment of the liabilities represents a reckless act. lol.

Nope still no page number for where BWCI said the States had been optimistic. I'll have to assume you made that up.

We will have to agree to disagree regarding the funding target as I concur with the States of Guernsey's assertion that THEIR funding target is being met.

There is no suggestion from anyone that members of the scheme will be left without a pension or of the scheme going bust. This is your own conjecture.

I never said the States should borrow, I said it is possible for them to do so but it's unnecessary in my opinion and contrary to previous government policy.

Pension funds which are unfunded have deficits which run into billions and yet they are deemed sustainable on a pay as you go basis. We have a well funded scheme.

There is an underlying reason why the deficit rose and I have not yet seen any evidence that it is continuing to rise.

I agree it will be interesting to see what the position is for 2012.

I suspect the pension will see reforms but probably not without compensation and agreement of the employees, without this negotiations will be protracted.

GM

Spartacus

Same old drivel from you - once again you've added nothing. Fascinating that you've repeated your belief that unfunded public sector schemes everywhere else are fine - "don't worry, the State will honour it", without recognising that the States of Guernsey don't have the same tools as other much larger jurisdictions to just create new money. In one ear and out the other. Totally oblivious, or is that just the left-wing beliefs producing the blinkered view?

I will find the reference to the "optimistic" comment by BWCI. I have had far better and more interesting things to do since you asked me to find it.

Spartacus

GM

No I'm not oblivious to your assertion that Guernsey cannot borrow money, nor am I blinkered by political leanings. Guernsey could borrow money if it wanted to and I have no idea why you think it doesn't have the tools. Just because the tools are not in use it doesn't mean the tools aren't available.

We will have to agree to disagree.

JJ Lehto

Spartacus

How would Guernsey ever repay any money borrowed to meet the liabilities of the pension fund? The only way would be to keep rolling over the debt into new debt, and as we are currently at the bottom of the interest rate cycle that tactic could become very expensive.

We can't print our own money, so the only options would be to borrow or raise taxes, both of which have large (negative) impacts on the economy.

Spartacus

JJ Lehto

It would be absurd to borrow money to fund the pension liabilities. I have not suggested that. The current pension payments are met on a pay as you go basis. The future obligations are safe guarded by a whopping £900Mil fund of assets.

Guernsey could borrow money if it ever needed to but clearly we are currently a very wealthy island with a very healthy public sector pension fund and we have no need to borrow any money at all.

JJ Lehto

Spartacus

It is difficult to follow some of these threads due to the mass of replies, so apologies but I thought your posts concerning borrowing were connected to the deficit in the state pension fund?

With regard to "pay as you go", this is obviously unsustainable with a population that is living longer and with investment returns that are low. The various arguments on TIG are all reliant on different analysis of the potential liabilities (which is in any case a "known unknown"). But "pay as you go" has the potential for increasing the cost of salaries for present states employees and the pension costs for past state employees far beyond what the island can afford.

GM

JJ Lehto

Welcome to the debate.

Glad to see that you "get it" re. the folly of the States borrowing money to help keep the pension scheme going. Spartacus harks back to the "whopping £900m of assets" to safeguard the fund, but conveniently ignores the £1.216 billion of liabilities of the scheme.

If I had a house worth £900k and a mortgage of £1.216m I would not be proclaiming that I've got a house worth a "whopping £900k". I'd be reflecying ruefully that I had £316k of negative equity, and I'd be sweating on my ability to keep servicing the mortgage before the bank foreclosed on me. The gross position is irrelevant. Its the net position which counts. Liabilities cannot be ignored.

I am also very concerned about Spartacus' comment that we are a very wealthy island. Are we? We certainly have been in the past, but people like Spartacus need to wke up to reality. We are operating at an annual deficit and our reserves are being eroded quickly, while the prognosis for our core industry is looking less positive than it has for many years. We may struggle to make an operating surplus for several years to come. Belts need to be tightened considerably, not relaxed.

I'm sure Spartacus just thinks that the taxpayer will simply have to cough up a lot more so that the island can carry on spending and even take on reckless debt which would simply accelerate the race to Guernsey's bankruptcy. "Tax and spend" seems to be right up Spartacus' street. Straight from the Gordon Brown School of Economics which has left the UK in such a dreadful mess.

Back to basics - this scheme is unaffordable. The CARE scheme may well also be unaffordable. We really need to see the projections on that before it is adopted as the replacement.

Spartacus

JJLehto

No worries, that's understandable, the ping pong between me and GM goes on a bit.

In a nutshell, we were digressing in relation to borrowing. I said we are lucky to have a funded scheme as a funded scheme is not compulsory, other countries have unfunded schemes. GM said we do need one because otherwise we would have to have national debt which is not possible for Guernsey. I said it would be possible to have debt but not necessary. I was not endorsing state borrowing.

Regarding the matter of living longer, I am in agreement with the proposal to extend the retirement age. This is reasonable and gives the employees options to suit their circumstances.

Regarding investment returns, I believe the focus should always be on the long term view. It is not a short term investment and so it will always experience peaks and troughs as world markets are cyclical. The real return target for the fund is RPI+4%.

Unfortunately the contribution rate was slashed following the boom of the 90s and so since that time the fund has been dipped into to reduce the funding surplus, rather than operate on a pay as you go basis which would have allowed the fund to snowball up. The rate was not restored to previous levels (now 14.1%) until 2010.

So with regard to your concern over “pay as you go”, with the potential that contributions could sky rocket, my solution to that is that they could put a cap on contribution levels but dip into the fund when they need to. This would avoid the undesirable transfer of risk to employees. This would have to work both ways though and so during boom times all profits would be retained within the fund and the contribution rates would ideally be kept stable.

I understand the commonly held view that the scheme is unsustainable however it is QED and I dispute any suggestion that the matter is simple and straightforward.

I would be particularly interested in the findings of the review panel of one of the points in the terms of reference which instructed the panel to review "the role that pension provision plays in the recruitment and retention of employees". Unfortunately the answer to that was not published although the panel will have reported back to the policy council.

I am concerned about the ramifications of forcing through the changes against employee wishes as this could cause all manner of problems, increased costs, diminish staff morale and generally cause chaos, even without the industrial action which has been threatened.

In the longer term it could affect the recruitment and retention of staff which as we have seen from the Mulkerrin review of education and the current HSSD crisis is a constant challenge for Guernsey.

Timing is key, employee agreement is essential and it should by no means be considered a no brainer to press forward with these changes in my humble opinion.

Spartacus

GM

Just a couple of points in relation to your interjection to JJLehto.

1. No one has suggested borrowing to keep the pension scheme going. We have a well funded scheme so there is no need - are you finding that difficult to understand?

2. We are a very wealthy island. We even have substantial reserves! The annual deficit is due to zero ten and is being addressed by FTP. Yes we can and must tighten our belts to prepare for future uncertainties. I can think of lots of ways to do this. Why are we still paying subsidies for private education? Why are we paying for an abattoir to be built? I could go on. I have never ever advocated a “Tax and spend” regime quite the opposite.

The number of public sector staff and the number of services we provide needs to be considered carefully. In advance of this, any mucking about with the pension scheme, which is a key remuneration benefit and harnesses all of Guernsey's most essential workers, deserves very careful thought. That's all I am saying.

GM

Spartacus

Re your response to JJ Lehto, I would highlight two points.

1. I find it staggering that you are now claiming that you weren't endorsing that the States could borrow to fund the deficit. Anybody who has read your recent posts on borrowing could only possibly reach a completely opposite conclusion.

2. I am horrified at your " solution" that the fund could be "dipped into" whenever necessary under "pay as you go". That's a staggeringly naive suggestion. Have you not considered that it would be no different from reducing contributions for that year - it merely adds to the deficit for that year and means that there is less capital being invested to produce returns for the next couple of generations of members. My flabber has been well and truly gasted with that suggestion.

GM

Spartacus

I suggest you re-read your posts over the past week about borrowing and reconsider what you are now denying. We do NOT have a well-funded scheme. We might have had an ADEQUATE one if the 90% target was being met but its a good £200m short of that level, so its not. Therefore alternative ways to fund it are necessary. You are now accepting that borrowing to do so is not what you are suggesting, So now we've got that one out of the way,lets hear your next master plan about how to fund it,

Yes the island has reserves. They are being eroded already. Are you suggesting that this fund is depleted by drawing on it to clear the fund deficit? We can't even find capital to rebuild La Mare de Carteret, so why would we use the reserves to fill the pension deficit? I can't see that being remotely acceptable either to the States or to taxpayers, so that really isn't an option.

Prioritisation is a big issue. You left out scrapping family allowances. That's a must. Subsidising private education? We've been there before. Not many savings there. How do you suggest we pay the much higher university fees that the island is going to be stuck with? Do you think we should stop paying for that and deprive our children of the chance to get to university unless their parents can afford it? Education's budget is going to take a right hammering on that. So we are likely to remain in budget deficit unless there is a huge turnaround in general revenues, which doesn't seem likely,

Taxes are going to have to rise. The prospect of tax rises to help fund the pension deficit though would be one of the most unpopular suggestions ever when it comes to priorities.

Seems to me like that's all the options covered. A scheme with reduced benefits is the only thing left.

Neil Forman

GM / Spartacus

I am going to leave this here until last years final accounts are released around April and this years Actuarial report is published. We just keep going over the same arguments and I don't think Sparty will see the light.

Spartacus

GM

Re your 9.35pm.

1. I think you are just trying to wind me up. I have NEVER endorsed borrowing, no idea why you ever thought that. You have formed an incorrect conclusion which is typical of you.

Guernsey has no need to borrow, for any reason, if there is no money we should do without. That is my philosophy. You were the one that brought up borrowing although it is a topic which is entirely irrelevant to this debate.

2. I have no idea why you are horrified that the fund could be “dipped into” . It is absurd that you find that horrifying. That is precisely what the fund is for. It is a type of self insurance fund.

When the fund is in substantial surplus, as it was in the 90s then dipping in and creating a deficit in any particular year is only going to reduce the overall surplus.

Under pay as you go investment returns are not required for future generations, thats the whole point.

Spartacus

GM

Re your 9.53pm.

I have not made any posts about borrowing, this debate is about the pension fund and borrowing is irrelevant to this debate. I do not endorse borrowing. You seem to think it might be necessary to borrow but I have no idea why you think that. States of Guernsey is a lender not a borrower.

We will have to agree to disagree on whether the pension is a well-funded scheme. Even if you look at the most pessimistic valuation under FRS17 the scheme is still over 70% funded with a whopping £900m assets.

If YOU wanted to make it 100% funded the only sensible way to do this would be to maintain the current contribution level and allow slow accumulation over a long period of time. Your suggestion of finding alternative ways to raise money for this in the short term are absurd in my opinion.

My view in relation to erosion of Guernsey's capital reserves is that until FTP or increased revenue brings the income and expenditure into balance, we should curb capital expenditure, including school rebuilds.

You have asked if I am suggesting that the reserves are drawn on to clear the pension deficit and my answer to that is categorically no - I am suggesting no such thing. That is absurd.

You have also implied that taxes could rise to fund the pension deficit - again I find your suggestion absurd.

I have no idea why you are saying we can't find the capital for La Mare de Carteret school. That's another completely false statement from you. The funding is there but the question is whether the funds should be used for this purpose.

I'm not going to get drawn into discussion on prioritisation or revenue streams here. Suffice to say that my view is that focus should be on provision and support for the needy rather than perks for the wealthy.

GM

Neil

I am sure you are right.

GM

Spartacus

I am most certianly not trying to wind you up. I have far more productive things to do. I counter your comments for very good reason.

1. I am in no doubt whatsoever that you have been suggesting borrowing as a method of enabling the States to meet its pension obligations. We will have to agree to disagree on that.

2. As for "dipping into the scheme" to meet pensions, that only works if the scheme is in surplus. Indeed it was very common for employers to take a pension contribution holiday in defined benefits schemes when the schemes were in surplus (the good old days). The scheme is there to provide contractual benefits as and when they fall due. If there is no surplus then the fund should not be touched at all. The funding of subsequent benefits for future pensioners who are accruing benefits is crucial, otherwise an even bigger deficit is created in the future.

GM

Spartacus

What on earth do you mean you have not made any posts about borrowing? Are you serious?

You still can't see it. The asset value of £900m on its own is irrelevant. Its the size of the GAP between the assets and liabilities which is relevant. That's the unfunded gap, far in excess of the States' own 90% funding target. £380m and counting. That's the unfunded element.

Maths clearly isn't your strong point. How many years do you think it would take to clear a £380m deficit? Contributions wouldn't only need to be huge to claw that back, but future pensions need to be funded by contributions as well. Funding it "over a longer period" is a stupid suggestion. The pensions become payable when they are due. The timeframe is set by that. The actuarial valuation and the £1.216 billion liabilities already reflect the timing. I cannot believe that you could make such a naive suggestion.

How else other than extra taxes can the States possibly fund the deficit? The answer is that they can't, unless benefits are reduced, resulting in a revised actuarial calculation which closes the gap between the £1.216 billion of liabilities and the £900m of assets. Those are the ONLY options.

Think of it like a household which cannot make ends meet and is in negative equity with a mortgage. Either one has to increase the household income (take a second or event third job, work overtime etc), or cut the household expenditure. That mortgage still needs to be serviced and the debt needs to be repaid, and selling the house isn't the answer as it will crystallise the need to repay the shortfall. The options are extremely limited but the debt will not go away unless drastic action is taken.

Spartacus

GM

You have completely derailed.

Re your 10.41am

1. YOU are the one who suggested that IF the States did not have a pension fund they would need to borrow. I disagreed with you.

My argument has always been that the pension scheme benefits are covered by the contributions and the fund is a just fallback which is what you alluded to in your point number 2.

2. I would agree that ideally dipping into the scheme works best if there is a surplus. The States did indeed take a contribution holiday. The holiday ended in 2010, and because of that you are now panicking. Have you only just woken up?

Spartacus

GM

re your 10.52am

You are forgetting that the funding objective is to bring the assets of each section of the Fund into line with the funding target.

If the targeted funding level was 100% and the funding shortfall revealed was amortised over the average working lifetime of the current active members, an increase of 4.7% of Pensionable Pay would be required resulting in a total Employer contribution rate of 18.6% of Pensionable Pay.

Regarding taxes etc, well GM YOU are the one who wants to make the fund 100% funded so that would be your choice. It is not the current funding objective.

It is nothing like a household which can't make ends meet it is an affluent household, squabbling over whether to save an extra £100 million on top of the £900 million instead of continuing to pay the cleaning lady and gardener their contractual pension rights.

Terry Langlois

Spartacus:

"My argument has always been that the pension scheme benefits are covered by the contributions and the fund is a just fallback which is what you alluded to in your point number 2"

So, you really are suggesting that the pension be run as a ponzi scheme - essentially you are saying that it does not matter what the liabilities are, so long as the current liabilities are met from the current contributions.

But that ignores the fact that as the scheme goes on, with more people joining and living longer, those current liabilities will increase. To meet those increasing current liabilities there will be an ever spiralling cost to be met by the States and new joiners in increasing amounts as time goes on.

It is the classic baby boomer mentality - take the cream now and let the kids worry about how it is going to be paid for.

Madoff got put in prison for 150 years for doing just that...

Spartacus

Terry

The liabilities are covered by the contributions, that's not a cause for concern its just a matter of fact.

No it's not a ponzi scheme that's the whole point! We have a fund, its there for a reason. If we had no fund I would tend to agree with GM's concerns. Madoff did not have a fund that's the obvious difference.

Of course the liabilities will keep growing but that is taken into account in the calculations and monitored to ensure they don't outstrip the growth of the fund. The actuaries get paid a small fortune to to do this, and of course it matters.

I just don't agree with your analysis that costs are spiraling, that's just not the conclusion I have drawn from the information, you are entitled to your own opinion however I'm not sure you have looked at the matter in depth.

GM

Spartacus

You have completely lost the plot. You are just digging a deeper and deeper hole.

No point in even arguing that you advocated borrowing. The evidence is all there.

I have said that I could accept 90% funding of the full liabilities. What terrifies me is being a further £200-odd million short of that 90% figure.

The fact that you are totally ignoring the liabilities is precisely what did for Greece, as others have pointed out. Just like Brown and Blair - ignore the debt and just keep increasing it so that we can pretend its not there.

Stark raving bonkers.

Spartacus

GM

I have been crystal clear on my views about borrowing. You are being ridiculous.

So the fact that the scheme is 70% funded under FRS17 "terrifies" you and you are apparently incensed that I do not share your terror. What do you want - sympathy for your feelings?

You didn't answer my earlier question -

"Why was the contribution level so low up until 2010? If they ever had any intention to reduce the deficit they would have raised it earlier surely?"

Was that too difficult for you to answer?

No one is ignoring the future pension obligations, they are transparent in the accounts and analysed at great depth in the actuarial valuations. Accounting treatment of pension obligations varies enormously because they do not meet the usual accounting criteria to be classed as liabilities in standard accounting terms.

You clearly do not understand the Greek financial crisis either.

GM

Spartacus

Oh yes you've been very clear all right. You just don't realise it.

I don't think you recognise the liabilities at all. Why else do you keep harping bsck to the £900m fund and ignoring the £1.216 billion liabilities? You seem to think it wouldn't even matter if the scheme was unfunded ss it "washes its face" when I've disproved that.

Why did the States resolve to fund it as they did? Who knows, but they very clearly got it seriously wrong. They didn't expect whopping great capital losses from the investment which eroded the fund. Having made those losses, how hard would it hsve been to go back and decide to double or even treble the new contribution rates to ensure that the 90% target was met? The fund deficit has risen from £120m to £380m in 5 years DESPITE higher contributions. Whst bit of that do you struggle to comprehend? The funding of the scheme has failed spectacularly yet you think all is rosy.

What don't I understand about the Greek debt situation?

Spartacus

GM

So that's your answer is it? You reckon the States of Guernsey, under the advice of the best pension experts in Guernsey got it seriously wrong. You think you know better.

In spite of huge investment losses the funding objective is still being met. FACT.

Spartacus

GM

Do you know the difference between a liability and a debt?

GM

Spartacus

Yes the States of Guernsey got it wrong. It's obvious isn't it? Did they actually listen to the advice they were given by their advisors?

And yes, I most certainly do know the difference between a debt and a liability. I also know the difference between current liabilities, long-term liabilities, deferred liabilities, contingent liabilities. That makes one of is. You don't need to teach granny to suck eggs.

I also know the difference between a "fact" and utter bullsh*t. You clearly don't. If I said the world is flat I would be at least as factual as your ridiculous "fact".

Spartacus

GM

Would you care to explain for the benefit of your friends (in terms simple enough for Neil Forman to understand) what the difference is between a debt and a liability?

The scheme's funding objective is being met- that's fact not bull.

The thing you don't like is that the scheme's funding objective is not what you think it should be.

GM

Spartacus

I don't think I need to do that for Neil Forman's benefit. He understands perfectly. But for your benefit, as you very clearly do not, I will try to do so using as few big words as possible.

A "debt" is something which is owed or due. It normally means that it is owed currently.

A "liability" includes a "debt", but also includes financial obligations or responsibilities which exist, even if the amount is stated as a provision based on the appropriate way to evaluate the responsibility or foundation. Financial Reporting Standards (FRS) has standard ways of evaluating and treating the many difefrent forms of liabilities for accounting purposes.

Clear enough for you?

It would therefore be normal for all pensions payable within the next 12 months to be treated as "Current Liabilities", and for all other pension liabilities which are accruing to scheme members under the rules of the scheme to be evaluated by actuaries in accordance with standard actuarial principles, using industry-standard financial projections and assumptions. The accountants should then, based on that actuarial valuation, provide for the appropriate liabilities under FRS17 and show it as long-term liabilities/contingent liabilities to reflect the employer's financial obligations as at the balance sheet date.

The employer does not have to adopt FRS17, but needs to state whether they have or have not adopted FRS17 or indeed any other "standard" in their accounts. They do not have to state why they have made their choice. But you then need to question the reason why.

In this case, the scheme's funding objective of 100% of pre-2007 liabilities and 90% of post-2007 liabilities is not unreasonable. Its the failure to meet the objective which is the issue, because the 90% objective is based on a wholly inappropriate target, resulting in a £200m shortfall.

If the actuaries state that the liabilities are £1.216 billion, why pretend that they are a lot lower? What possible benefit is there to that other than trying to pull the wool over everyone's eyes to (a) hide the extent of the liabilities, (b) avoid having to make massive extra contributions which has a huge knock-on effect on the entire economy, (c) upset the public sector employees? Far easier to cross the fingers and hope that the investment markets claw back the massive losses. That's nothing other than reckless gambling.

Totally irresponsible, and even more irresponsible to let it carry on a single day longer than necessary.

If you cannot grasp that now, then you never will. But hopefully this drawing of attention to the horrific situation will ensure that it remains in the public domain, especially when the House comes to debate the future of the scheme.

I still find it remarkable that those Deputies who usually comment on here are completely silent. I think they must have been gagged. One can only speculate why.

Spartacus

GM

thank you. So we are now clear I hope that a pension obligation is not a debt but in fact a projection and estimated provision for future contingent liabilities. Please let me know if this particular penny has still not yet dropped.

Surely the reason why FRS17 has not been adopted is because it's purpose is to compare the financial positions of companies. Guernsey is not a company.

They have not hidden any liabilities or tried to pull the wool over anyone's eyes it is all completely transparent.

The scheme has succeeded in meeting it's funding objective.

Do you really think putting money into the investment market is reckless gambling?

Neil Forman

Spartacus

Your post at 2.39PM.

See you're back to insulting me again;-))

Spartacus

Saints Bay

The States of deliberation have decided to maintain a funding target of 90% in the pension fund. This means there will always be a deficit unless they decide it should be 100% funded. If the funding level falls above or below 90% they will adjust the contribution level slightly to adjust the position over time. I don't think the funding level has ever fallen below 90%, but someone can correct me if I'm wrong.

The finding level under accounting standard FRS17 is a different way of assessing the values so should not be confused with the calculations the States use to measure the funding level and contribution rate.

They will look at GST but it is an option to solve the problem of the fiscal deficit created by zero ten, nothing to do with the pensions. I would hate to see GST introduced as I believe it is unfair and unnecessary to tax the poor and lower earners. We are an affluent island.

GM

Spartacus

"Adjust the contribution rate slightly to adjust the position over time"?

If you call adjustments to make up £380m "slight" then that's a new meaning for the word!

GM

Spartacus

You say: "I don’t think the funding level has ever fallen below 90%, but someone can correct me if I’m wrong."

Er...yes...that's what I have been telling you for the past month, as per the States of Guernsey audited accounts. Why don't you take it up with Deloitte as auditors as you so obviously think that their audited accounts contain an error?

Spartacus

GM

They don't need to make up £380M because that is not the figure in the benchmark they are using.

The level has never fallen below 90% against the benchmark they are using, Someone sensible can correct me if I'm wrong about that, not you GM.

Gilthead

Lets look at this from a different perspective.

1. Regardless of the assets of the fund it is utter madness for a small island to risk a liability of over 1 billion.

Present market values (bubbles) are inflated by QE and low interest rates. At some point in the non too distant future assets will deflate substantially. This will make the deficit we have now look small. As GM points out this will bankrupt the Island.

2. The Island's current fiscal deficit would be wiped out if the scheme was closed and all employees transferred to a defined contribution scheme - as just about everyone else is.

3. Civil Service staffing numbers need to be looked at urgently. They have increased substantially over the past ten years which has increased (exponentially) the liability to the pension scheme - its obvious and bound to happen.

What we need is someone with the balls to take this on.

GM

Gilthead

Absolutely correct, although re your point 2 I am sure there would be likely to be an unavoidable one-off sizeable hit to close the scheme.

Spartacus

Exactly right for once GM

Gilthead is wrong on all counts and it would be ludicrous to close the scheme.

GM

Spartacus

No Spartacus - your conclusion is completely adrift. No surprise there!

Its like making staff redundant. You take a hit with redundancy payments in the first year and then save the annual cost for many years to come! There is a need to swallow the pill in the first place.

What you don't do is keep building up future growing longtail liabilities just because you don't want to bear the immediate pain.

The pill which we would have to swallow now would be the one which prevents the island from being bankrupted in 25 years time.

Gilthead

Wrong on all counts eh Spratacus?

Only wrong if you live in La La land.

GM - I should have said closed to new contributions and not closed.

As you may know many firms with DB schemes have frozen those plans and transferred employees onto DC schemes.

One company I know well has "closed" it's DB scheme and frozen it's liabilites (to a point) by defining each employees entitlement as of point X. That liability will remain constant and will of course tail off over decades as people die. The benefits accrued under DB are not transferable

What I'm suggesting is something similar for the CS pension scheme. The huge hit is deferred over decades.

I could work this out (a goer or not) but would need access to the actuarial figures.

Spartacus

Gilthead

What has Los Angeles got to do with anything? ;-)

Closing the scheme to new contributions at least now makes sense as an idea.

How many countries do you know that have changed their public sector pensions to DC schemes?

Many private firms have indeed changed to DC schemes but did you miss the article in which industry expert Rodney Benjamin said that "chickens would come home to roost" indicating that it was a poor decision?

Gilthead

Spartacus - I was refering to the state of unconciousness.

But as you raise the spectre of California and chickens you may wish to read this:

http://www.reuters.com/article/2012/08/28/us-california-pensions-idUSBRE87R13B20120828

GM

Gilthead

That makes far more sense. Its the way forward that I was advocating before the CARE scheme proposals were announced, which I maintain do not go anywhere near far enough.

Spartacus

Your question of "how many countries have changed their public sector schemes to DC schemes" is an irrelevant one. About 70% of the world's leading economies are technically bust, with completely unmanageable public sector schemes, which in fact are usually unfunded.

The only way that they can still operate, without "doing a Greece", is because they can still issue their own new government bonds, as well as their own additional currency, to borrow their way out of trouble in meeting their commitments. Guernsey does not have those same options, and so we simply have to cut our cloth accordingly. That's why its not fatal for the UK to be bust, which it technically is by any measurement, but its why it would be Armageddon for Guernsey to go bust. We would lose our independence from the UK immediately if they had to bail us out.

Unfortunately, Rodney Benjamin (who one minute you seem to slate, but in the next minute you give credence to) did not elaborate on his comments. It would have been very helpful if he had. I strongly suspect he just meant that people will not put enough away into their pension schemes to properly fund their retirements, as they will under-estimate the amount that they need to contribute and end up running short. He'd probably be right, but it isn't the job of the State to interfere with that.

GM

Gilthead

A very relevant article indeed. Should be compulsory reading for all Guernsey public sector employees. And Spartacus of course, who may or may not be one of those.

Spartacus

GM

I have NOT ever slated Rodney Benamin! That's absolutely FALSE!

Yes I would agree that funding of any scheme is an important issue which is why Guernsey is proud to have a 90% funded scheme! California's scheme is UNFUNDED (Githead take note).

Yes I agree that he he was partly implying that people will not put enough away into their pension schemes to properly fund their retirements, that is what I was saying months ago but you would not listen. I also think that chickens will come home to roost for the employers who have inadequate funding in their schemes.

If you shift risk to the employee they will not do anything to manage the risk. If the onus is on low paid earners to fund their own pension savings, when times are hard they will spend their money. Who picks up the pieces for old age poverty? The State, and you think they should not interfere.

Phil

GM / Neil

I'm afraid you're wasting your time, people like Spartacus / The Truth are obviously incapable of understanding figures and simply dismiss inconvenient facts such as FRS17 to suit their argument.

What we desperately need is some politicians with some cojones to take this matter in hand and resolve the situation, the taxpayer cannot continue to prop up the fund ad infinitum. I'm afraid I don't share Peter Harwood's view that the current set of deputies will realise the full implications of not dealing with the issue, and it needs to be pointed out in words of one syllable exactly what those implications are.

If the local equivalent of Arthur Scargill wants to threaten strikes etc then so be it, but it has to be realised that there is only so much money available and if that means making redundancies then that's just one of those things, we cannot continue with the current situation. It's a straightforward choice of substantial tax rises (political suicide) or cutting expenditure (far more popular). Surely even the more intellectually challenged of our deputies can understand that?

GM

Phil

You are absolutely correct.

Some deputies may be scared of losing the votes of the public sector at the next election, as this is bound to be very unpopular with the public sector. On the other hand it will be extremely popular with all other taxpayers, so that should more than offset the loss of public sector votes.

Neil Forman

GM

Deputies should be doing what they were elected to do, decisions should not be made on the basis of whether they will lose votes. Any decision will upset somebody but the decision that needs to be made is what is the best for Guernsey.

GM

Neil

I totally agree. But then again you are preaching to the converted!

forest

Phil, GM.

I think our deputies and senior civil servants also need to be reminded that every time they increase or introduce new taxes they are eroding Guernsey ability to remain competitive. It's all very well saying we're a low tax jurisdiction bla bla bla, but if the island becomes too expensive a place to actually live and run a business in/from then it will eventually force businesses and individuals to look elsewhere.

Neil Forman

Phil

With you there.

I find it very strange that Deputies who do read these threads have been strangely quiet. Gavin St Pier normally posts on anything that has anything to do with his department and yet silence.

GM

Neil

I agree. They must all be away on holiday!

Even Matt Fallaize hasn't made an appearance yet....

Forest

I was thinking that too Neil. The silence speaks volumes.

islander

Close the public pension scheme

States electrity are telling us that the reason for higher tariffs is because of less demand.they were not telling us that £70 of our bill was towards the shortfall of their deficit pension fund.

Nick Le P

In the spirit of some posters I have seen recently

"Some people have a final salary pension - get over it"

Other than being jealous that one has and one doesn't I can't see what all the fuss is about. Typically civil servants earn less and have less benefits than similar counterparts, their pension has always been a perk to balance that.

Its always going to be said that the SWD is comparable to other industries but those guys do a fantastic job and I am very happy for them to collect a modest pension based on the work they do - bins, street cleaning cesspit emptying etc.

Before anyone asks I am not a civil servant and my Company provides me with a final salary pension. Recent scheme reviews mean that I now work later in life (65 as opposed to 60), pay 6% contributions (up from 0% when I joined) and increases in pension are capped at 3% regardless of salary increases.

As I have said in other posts on this subject, if you buy goods or services from a Company who pays into a pension scheme for their employees (final salary or not) then your money (from their profit) is propping up their pension scheme.

Who here is going to cancel their mortgage because part of the arrangement fee was profit which found its way into the bank's pension fund? Thought not.

Why not stop shopping at the Co-op because there is a pension scheme for the executives? Thought not.

GM

Nick Le P

And how would your view be altered if you found out that your company could not afford to pay you the final salary scheme which you thought you had built up, and would go bust before you reached retirement age?

Its fine if the employer has been properly funding the scheme to meet its future liabilities but the States of Guernsey has failed to do that and has run out of ways to adequately fund it going forward.

kevin

GM,

You say the States of Guernsey as the employer have not been funding the scheme properly - this is not the fault of the employees so why should they be the ones that will suffer?

It seems that this is acceptable to you as long as everyone outside States employment is ok.

You have not stopped to think that a good proportion of the financial hardship in Guernsey is caused as an indirect result of your chosen profession.

GM

kevin

What a bizarre post.

No - its not the employees' fault that its been under-funded, but are you seriously suggesting that it should therefore all continue as it is just because of that, even though it will bankrupt the island? If its left as it is, they will never receive it anyway because the States wouldn't be able to pay it.

As to your second paragraph, what on earth are you talking about? Its not a question of whether its acceptable to me if the scheme is stopped - its a case of whether the States can afford it, and it clearly cannot. Every single taxpayer would need a pay a lot more to keep it going as it is - including you!

Re. your last paragraph, I am well aware that some people have been left behind as a result of not being direct beneficiaries of the finance industry. You conveniently overlook that I've suggested a higher rate of tax for high earners. So yes - I have "stopped to think".

Whether your anger is justified or not is one thing, but whether it is or isn't justified, you are aiming it at the wrong target.

Nick Le P

GM - as you would expect I'd be gutted but I think that pensions law prevents this anyway but I'm sure I'll be corrected if I am wrong.

However, that isn't really the point of this debate. Its about people complaining that their taxes are providing a pension for civil servants and they should not have to pay for this "unacceptable" perk.

The fact is even if the pension scheme was amended, closed to new entrants etc etc tax rates would remain the same.

GM

Nick Le P

It would have nothing to do with pensions law. If a company in Guernsey went bust and couldn't fund it's pension obligations then that's it - bad luck. There's no pension compensation scheme here. If there's no money - no pension.

If the current scheme had to stay as it is then its pretty inevitable that tax rates would have to rise considerably. The States couldn't afford to fund the deficit without raising huge extra tax revenues.

kevin

Nick Le P,

I think you are right - the CS pension is part of the employees contract of employment and I'm not sure it can be altered without their agreement.

Given that members are paying the unions then surely they must have an obligation to fight the employees corner if what is proposed is deemed unacceptable?

With the challenges the States would have to face over getting the revised pension through they would be better to go the whole hog and close the scheme altogether.

Nick Le P

GM - I am not being picky here but you did ask me about my pension which as I suspected is protected -

http://www.pensionsadvisoryservice.org.uk/security-of-pensions

We'll have to agree to differ on the need to raise taxes to fund the scheme.

GM

Nick

That's UK pension legislation, not Guernsey legislation. That legislation does not apply here. You didn't say that your pension scheme wasn't a Guernsey one!

SaintsBay

Thanks for the opinions.

My believe is that we are doomed.

Manufacturing / Light Industry will not relocate here in a meaningful way to soak up umemployment.

The finance sector is shrinking despite claims to the contary - two friends were laid off on 31st from their contracts with two different banks and they are aware of a further 14 aquaintances that were in the same position.

Much of the accountancy and booking was being transfered out to Mauritius.

We are all Doomed I tell you.

Someone who gives a..

The facts are the facts, we cannot afford to carry this system. The more taxe / rates / fees or whatever they want to disguise it as, the less money people have to put back into the economy(another problem created) How crude do they want it? If our deputies cannot work this out then they are in the wrong job. I would have hoped they could stand up to their ministers after all they are probably the ones digging their heels in the most on the pension maybe they are the problem here as they approach retirement?

Instead of trying to hide the problem we should start planning for the kick back from the civil sevice. Yes it will get messy but this will pave the way for many generations to come.

Scarlett

OK, I've decided to go for plan B.

Let the public sector have it all it's own way, the rest of the island will be taxed up the *rse to prop it up, and that, plus the effects of the shrinkage of the finance industry and the lack of ability of the likes of St Kev to be able to even conceive a well reasoned alternative to maintain Guernsey's wealthy status quo, along with, perhaps, the States finding themselves with no choice but to tax the rich and the remaining financial institutions just to keep our heads above water, ultimately means we won't need half the public sector we do now as there'll be no b*gger here.

Yep. Plan B, hung by their own petard. Perfect.

...btw, I see food prices are rising yet again. Time to rethink demolishing all those green 'ouses and sacrificing all that lovely land to the concrete god and get planting, me thinks, perhaps we are indeed going to have to 'go back to growing spuds and toms', and not through choice!....:)

Dave

Can anyone tell me, is there a law in guernsey that if enough people vote against the a scheme or decision within the states it could be voted out by the public??

GM

Dave

No there isn't. The elected assembly make all decisions by majority vote. Their decision is final.

Dave

That's unfortunate, I could se the light for a moment. We really do have to trust our deputies then. Maybe a petition handed to them.

Thank you GM

Dave

GM

I am told the Bailiff sits above the deputies?

If this is the case should we be voicing our opinion to him? Surely if he was aware of the overwelming public opinion he would have to kick the deputies into line.

The best solution I have heard on this is from Neil Forman I think, ringfence the current scheme and start a new sustainable scheme. This has got to be the fairest way! he obviously can understand the situation as do you.

Has any one got the Bailiffs email address?? he needs to see this site.

GM

Dave

It doesn't work like that. The Bailiff's role is non-political. The way is to lobby the deputies. They are there to represent those who elected them.

gfyegfy

The proposed changes are still incredibly generous so anyone that rejects them is selfish!

I say just sack(make redundant) everyone and bring them back on market pay (rather than their yearly rpi rises), a self funded pension and make them actually accountable.....see how they like that!

Its a blinking joke why this isn't just done (i know that there has to be consultations and agreements etc).

I'm not sure why the fact people may be paid less than in teh private sector entitles them to a fat pension???? I think people are just annoyed they can't get a last minute promotion before they retire to lock in a crazy high pension

Spartacus

gfyegfy

Do you know anyone who is not selfish?

You know there has to be consultation and agreement. Inconvenient but true.

If they didn't have a fat pension the states would have to pay more in salaries, which is what I suspect will happen if the proposed changes go through.

clcik here

Why would they have to pay more? There aren't the private sector jobs there once were? I think should take a course in economics

This whole thing that the pension is the only way to hire is a complete myth.

And yes i know lots of people who aren't selfish and act for the greater good. e.g. i know people who sacrificed there jobs so people with kids can keep theirs. I know people who took wage freezes so colleagues aren't sacked. Unfortunately it sound like you don't know nice people!

Bungle

So then, lots of chief officers and other top civil servants taking early retirement at the end of 2013 then. Mark my words.

Phil

Personally I am starting to take great comfort from Spartacus's posts.

It now appears that we don't have a deficit in the public sector pension fund, we actually have a £900m surplus that we can use for whatever purpose we see fit. We can then leave the pension fund to be operated effectively as a Ponzi scheme, makes great sense. How can we possibly do good with this unexpected bounty?

I would begin with a significant pay rise for all teachers, together with a reduction in working hours and the removal of any kind of performance monitoring. This should make the job much more attractive to them, and also to more UK imports.

Similar arrangements ought to be made for the rest of the public sector, we may have to employ say 1,000 extra bodies to cope with this policy but that would a) help us with our unemployment problem (we all know that every single unemployed person is desperate to return to work, provided of course that the pay and conditions suit them) and b) enable us to bring over more senior people from the UK to continue their good work in helping us to manage our public sector.

Next, benefits. An across the board 25% for everyone, otherwise they'll lose ground when compared to those who work (in the public sector).

Finally, an extra £5,000 per annum to be spent on every child in all schools (apart from the "private" ones). If that doesn't improve results enough just keeping throwing more and more money at the problem and build state of the art schools that will last for at least 40 years before they need replacing.

By my reckoning the £900m should last at least 10 years and when it runs out we can raise more capital by selling all our public buildings and other assets, then leasing them back at a very attractive cost (for the new owner of course).

When that avenue is exhausted we can start borrowing on the markets (at a high rate of course because any lender in their right mind will correctly conclude that we are an island run by a group of financially inept morons who aren't exactly the best risk).

Anyone else got any ideas of how we ought to spend our new found wealth?

Spartacus

Phil

yes - instead of having an idiotic spending spree we could continue to set aside assets in an insurance fund to safeguard future pension obligations. This will ensure the public sector employees get what they are due without bankrupting the island.

The fact is we DO use the £900m as we see fit. We invest it in the markets and lend it out for a return.

Clearly the penny hasn't dropped for you that we are in a strong position in comparison with other countries who don't have funded pension schemes.

Phil

And clearly the penny hasn't dropped for you in that it DOESN'T MATTER ONE IOTA what position other countries are in, what matters is the position we are in, and by that I mean the absolute position rather than the relative one. If other countries' schemes fail and ours fails to a lesser degree it's still failed hasn't it, and it's moronic to not see that.

If the suggestion that you are a current (or former) deputy turns out to be correct I will be dumbstruck, surely someone with such astounding ignorance, arrogance and downright pigheadedness could never be elected?

JJ Lehto

Phil

I couldnt agree more with your last paragraph.

Spartacus

Phil

There are quite a few deputies who have those traits imho.

Spartacus

Phil

If other countries' schemes are OK and ours is better to an enormous degree its still Ok isn't it. It's moronic not to see that.

GM

Spartacus

Are you insane?

It's the ability to dig oneself out of the hole which is more important than anything else.

The UK could have a £20 billion deficit and take it on its stride by printing more money. We get a £380m deficit and we have no way of funding it.

Spartacus

GM

Why do you want to over fund it? It is not imperative. They were deliberately reducing the surplus up until 2010 and now you want to reverse that strategy.

GM

Spartacus

What on earth are you talking about? When have I suggested "overfunding" it?

The States wanted it to fund it at the 90% level but the fund has fallen to the 70-75% funded level. Its £200m short of the 90% level. I have said on multiple occasions that a 90% funded level is acceptable. In what way can that possibly be "overfunded"?

Spartacus

GM

You said "We get a £380m deficit and we have no way of funding it."

There is no intention of funding the deficit, and no reason to.

You know this and have said the actuaries are hopeless and the States are wrong to follow their advice.

If you wanted to clear the deficit the scheme would be funded in excess of the funding objective (as defined by the actuaries). Therefore you want it to be overfunded.

GM

Spartacus

What on earth are you talking about? There was a commitment from the States of Guernsey to fund the scheme's liabilities as at 2007 to the tune of 90% and all post-2007 liabilities to the 100% level. It's there in black and white in the actuarial valuations and in the States audited accounts.

So your comment that "There is no intention to fund it" is completely untrue.

You then say that there is "no need to fund it". Are you insane? Tell me, why have the States even bothered to build a £900m fund? Why bother to commit to fund it to the above levels? Why bother to even have an actuarial valuation at all? Only an idiot would have made such a statement.

I've already said at least five times, probably more, that I would be ok with a 90% funded scheme. Which one of those words do you not comprehend? I'm worried about the shortfall between the fund and the 90% level - some £200m and growing. Where on earth do you get an "overfunded" scheme from?

Your problem is that you will not accept the part of the actuarial valuation stating the scheme liabilities as £1.216 billion. I am not saying that the actuaries are hopeless, but you are implying that the liabilities figure isn't valid. It's clear that it's you that has the problem with the actuaries.

I repeat that the States got it wrong. Their investment projections were too high and the contributions were not high enough. The losses in the markets didn't help but that is not very impressive performance from the managers of a conservatively managed low risk fund. There is now a massive loss to make up and they can't take added investment risk to do so.

Big hole, needs to be filled, taxpayers will HAVE to fill it.

I'm not saying

Spartacus

GM

Read my post!

This is what I was referring to when I said that in order to defend your position and ego you feel it is necessary to be insulting. It's pathetic behaviour.

Obviously there is no intention to fund the schemes liabilities as at 2007 to 100%. That's why they have decided on 90%.

It is the States who clearly feel there is “no need to fund it”. My opinion is irrelevant.

Where do you think they would get the money from to follow your wish to overfund it to 100%? Can we afford to pump money unnecessarily into the pension fund?

No GM you would only be happy if the scheme was 90% funded under FRS17. Regardless of what you want that is not what States of Guernsey want, evidently. If they had wanted that they would have ended the payment holiday back in the early 2000 era but they did not.

I don't have a problem with the liabilities. I'm fine with them, I'm fine with everything the experts are doing. You are the one who has a problem with the scheme, the way the experts are managing it and the decisions of the States.

There is no intention of filling any hole. FACT. Its not your decision and it not my decision. I'm OK with that you are not. YOUR PROBLEM.

GM

Spartacus

I apologise. I am sorry that you feel that I insulted you. I won't continue to say that you are insane or mad, even though that's what I do think. There's no rule about merely thinking that is there?

You are arguing against yourself. Only today you said that the States had made no commitment to fund the scheme. Now you are trying to dig yourself out of that hole. The States HAVE committed to funding it.

Please read what I have written. I do NOT demand that it is funded to 100%. I have now said SIX times that 90% is OK. Would you like me to use some smaller words? Or perhaps another language as you clearly aren't grasping English. I am NOT saying that it should be overfunded. I have NEVER said that it should be overfunded. We HAVE to pump money into the fund to get remotely close to the States-imposed 90% funding target level. 90% is less than 100%. It is NOT overfunding!

Yes - I want it funded to 90% of the FRS17 figure. That's the projected scheme liabilities figure as stated by the actuaries using standard recognised calculations and assumptions.

How on earth would the States have come up with a funding strategy for 2008-2012 way back in 2000? The fund wasn't in deficit back then! It only had a small deficit in 2007. The deficit has tripled since 2007. Its the funding of the deficit since 2007 which has been the problem. The States made a decision to increase the contribution levels and it has been nowhere near enough. Yes - they got it wrong. Very wrong.

How hard would it have been to go the House now and say that instead of pumping in £29m a year it now needs to be £75m a year? Where would that extra £46m come from? We have a near £30m annual deficit as it is. How hard would have it have been to tell workers that they now had to contribute 30% of their annual salary instead of what they currently contribute? It is obvious that all hell would have broken loose. Instead of facing up, they decided to kick the can down the street, cross their fingers and hope that the investment markets suddenly recovered and the losses were all recouped. That was their obvious Plan B and it also went very wrong and the losses have increased substantially again. Why did they decline to apply FRS17 fully? Isn't it obvious now? But now its time to face the music yet you just want to carry on recklessly just like a Ponzi scheme.

You are NOT fine with what the experts are saying. You are NOT accepting the liabilities figure. You are only prepared to accept the "dressed up" and far less reliable figure, based on excessive investment return projections.

No responsible government should even contemplate continuing with this charade. It is reckless to do so.

It WILL bankrupt Guernsey if it is not urgently addressed. It WILL mean that the pensions of current scheme members will not be able to be met by the States down the line because the scheme will run out of money. Just like a Ponzi scheme.

bcb

I agree Sparty because surely the financial experts cant get it wrong can they? hahahaaaa

Spartacus

GM

I will try to be more clear although I can't guarantee that you will understand.

1) You are just being childish.

2) I am not arguing against myself. The scheme IS funded but there is no commitment to reach the funding levels YOU desire. Clearly.

3. The funding level you desire is at least 90% of the FRS17 calculations. If the funding reached that level it would equate to more than 100% when calculated on the standard actuarial basis.

Anything in excess of the 90% actuarial based funding target could be deemed overfunding.

4. There is a funding surplus (funding in excess of the 90% target).

http://www.gov.gg/CHttpHandler.ashx?id=3953&p=0

Page 2490 says "At the valuation date, the assets exceeded the target funding liabilities by £6,235,000 in respect of the Combined Pool"

and further down the page it says "if the targeted funding level in the Combined Pool was 100% for all accrued benefits there would be a funding shortfall of £77,338,000 corresponding to a funding ratio of 91.6%. "

5. The fund has been in deficit since 2002. The States only increased the contribution levels in 2010. So clearly the deficit was deliberate.

6. Your idea of pumping £75M into the fund is absurd.

Therefore I cannot answer your question. Your idea of telling workers to contribute 30% of their salary is also absurd. I'm not sure if you are back on the Tequila or being serious.

Your assertion that we "HAVE to pump money into the fund" is purely your opinion and desire and NOT what the experts have recommended.

7. Nobody with any authority has commented publicly that the scheme has proved to be unsustainable. Do you even know what a Ponzi scheme is?

8. Yes I'm ok about the "reliable" FRS17 funding level at 70%, I'm fine with the liabilities figure how ever you want to express it and whatever assumptions they use in the calculations. I'm even fine about the investment returns target. You are the one who is terrified and worried about this. How are you in yourself? are you eating? sleeping? tearing your hair out?

I'm not sure whether you are ill or just a right wing alarmist hoping to drum up support for a reduction in public sector pension rights. Suggesting that continuing with the scheme will bankrupt the island is conjecture and scaremongering.

dot Comma

bcb,

Of course the financial experts can get it wrong. I mean, have you actually read GM's posts?

GM

Spartacus

1) How ironic.

2) I will separately post the exact wording from the actuarial report which unequivocally proves you wrong.

3) I am thinking that you are being thick again. If FRS17 is used then the less appropriate calculation is completely academic. The only relevant measurement is against the FRS17 figure, which itself is of course based on the actuarial valuation in which the liabilities of £1.216 billion is clearly stated.

4. What matters is the figures. 90% of £1.216 billion is about £200m more than the fund = huge block hole.

5. Stupid statement. In 2008 the States committed to maintaining the fund at 100% of 2007 liabilities and 90% of post 2008 liabilities. Prior to 2007 is irrelevant as the commitment to fund it to those levels hadn't even been made.

6. The "experts" made their decisions before the fund deficit reached anywhere near its current deficit. It has only recently started receiving the attention it should have got all along. They got it wrong. It needs to be put right. Those figures are the types of increase needed to fill a £380m deficit and fund the future benefits.

7. They will. Many already have their snout in the trough. Do you think more than a handful of deputies will have understood it? You certainly haven't. And yes I know perfectly well what a Ponzi scheme is. I'm looking at one here.

8. I'm not a member of the scheme. I will only lose out once as a taxpayer. Scheme members will get hit firstly as members and secondly as taxpayers. On the other hand, if they have no pension left tgey probably won't be taxpayers. Which means that the rest of us will be paying a lot more tax. I don't fancy 50% tax.

I'm just telling it how it is. I'm saying what needs to be said. I don't believe in sweeping it under the carpet. That's not scaremongering.

Collectively that's an appalling set of comments that you made. Reeks of desperation.

Spartacus

GM

You clearly do not understand.

3. So you are saying only FRS17 matters everything else is a waste of time. Pessimism is essential and any hint of confidence is misplaced in public finances.

Clearly you don't understand what happened in Greece.

4. So you are basically reiterating that YOU would like the funding to be 100%.

5. You are being silly. What they decided in 2008 was to maintain a deficit and every year before that they decided to maintain a deficit, right back prior to 2002.

6. The “experts” made their decisions every year.

It is absurd to suggest the deficit should be filled.

7a). The new deputies don't have their snout in the trough. Gavin St Pier commented in May that timing is important in relation to any proposed changes to the Pension scheme and I agree with him. I gather he has not publicly commented that the scheme is unsustainable. That's one example.

7b) Would you care to explain then (in terms Neil Forman would understand) what a Ponzi scheme is?

8. Or realistically the situation could remain stable.

I’m not desperate, you are the one employing scaremongering tactics.

GM

Phil

Brilliant. It should be published in the printed paper!

Martino

I've followed all this with interest and must say that if Spartacus was to have her way we'd have an economy like Greece. In view of this perhaps she should shorten her name to Sparta from now on?

Spartacus

Martino

I do have it my way. I'm not the one wanting change.

Terry Langlois

so you're proud to be digging your heels in to defend the status quo despite the obvious (to everyone other than you) consequences?

the thought of having an economy like Greece does not frighten you, and you'd rather resist change than seek to avoid that outcome?

staggering

GM

Terry

The problem with Spartacus is that she is NEVER wrong, even when she blatantly is. The concept of admitting she is wrong will not even have entered her mind.

If she is an elected deputy then it's truly frightening.

Spartacus

Terry Langlois

I always state my opinion and challenge doesn't bother me. You call them "everyone" but of course you cant speak for everyone.

There is no evidence that we are exposed to the risks that Greece took on. That is just more scaremongering.

Regarding the status quo, I would like to see a report from the review panel answering the questions in the terms of reference before forming a view on whether the scheme should change for new entrants.

Forcing current employees to accept the change is unwarranted and would cause more trouble than its worth. I don't agree with the high earners getting circa £15K salary increases to compensate them and ordinary employees getting a take it or leave it deal.

Spartacus

GM

My opinion is never wrong. Everyone is entitled to their own opinion and to express it.

If I state incorrect facts I will happily stand corrected.

When you are corrected on facts you get defensive and insult people in order to protect your ego. But I suppose it all adds to the drama here on TIG!

GM

Spartacus

That's simply not true. To say that you will "happily stand corrected" is pure fiction.

Martino

Can I call you Sparta? No change to this crazy, unsustainable situation means we are indeed heading for a Greece style economic crash.

Thespian

Spartacus,

To quote you "but I suppose it all adds to the drama here on TIG"

Sorry, it is not a drama but it is in danger of becoming a farce, a farce that should have the curtain pulled on it asap. TIG, particularly this thread, is becoming the personal soapbox for a very small section of the population, in fact much like Whynotguernsey and we all know what has happened to that. I used to really enjoy the comments/ opinions/misinformation on TIG but I find it has become dominated by a few people who believe everyone hangs on their every word. So for that reason, in the immortal words of the Dragons "I'm out".

GM

Thespian

I'm not sure that anybody noticed that you were "in" in the first place!

Its very noticeable that 5 or 6 "new" posters have joined this particular thread in the past 48 hours, which might make it seem rather less like a 2-person debate.

Personally, I make no apologies for maintaining my side of the argument on here. The repercussions for every single Guernsey taxpayer are potentially massive. Its fair to say that the matter is now well and truly out in the open.

jjlehto

Spartacus

Please could you answer the following question:

Do you accept that the liabilities of the pension scheme are going to increase? (Taking into account such factors as increased life expectancy, larger States workforce etc)

Spartacus

jjlehto

The intention is that fund value will increase in line with any increase in liabilities - obviously. Otherwise it would be unsustainable.

Increases in liabilities are mainly due to assumptions such as future wage rises. Increase in fund value are due to assumptions such as future returns on investments which roll up and accumulate.

They have recommended to increase the retirement age by 2 years in line with the State pension to adjust for new information on life expectancy. This is a sensible and justifiable proposal and hopefully the employees will agree to this change.

There is no reason why we should have a larger states workforce, can you explain why you think this will happen? This is not really a concern in relation to pensions it is a concern that total pay liabilities would increase.

GM

Spartacus

Please explain to me how a very conservatively managed low risk pension fund worth £900m can generate a return sufficient to not only make up the current shortfall of £380m and also accumulate to meet the additional liabilities which will accrue?

I'm sure that many islanders will be extremely interested in such an investment. I don't know of any investment managers out there who would currently projecting low-risk returns of more than around 5% per annum compound over the next 5 years.

Spartacus

GM

There is no intention of clearing what you call the shortfall. Continuing to labour under this misunderstanding is futile. Give it up.

There is no intention to use the fund assets to pay pension obligations as these are covered on an annual basis by the employee and employer contributions. Continuing to labour under this misunderstanding is futile. Give it up.

The £900M fund is expected to retain its value and provide a return. The real return target is RPI +4%. QED Is that realistic? QED. The compound returns are the main reason why the fund does not need to be funded 100%. Says so in the actuarial valuation.

GM

Spartacus

Strewth. Total garbage.

"There is no intention of clearing it". No - which means that our children and grandchildren are going to be left to pay for it. Or the future pension members. There is a deficit which is NOT going to be filled, so the fund WILL run out of money. What do you think the purpose of building the £900m fund was in the first place? Doh.

How on earth will the pensions be paid in future when the fund has run out money, which it will?! You are simply not addressing the problem. If the current contributions are used to pay the current pensions then nothing is being put away to fund the future pensions.

Ponzi Scheme. Nothing more, nothing less.

Sheer ignorance.

Spartacus

GM

Sorry I meant to say "the states of Guernsey have shown no intention of clearing it" therefore obviously they do not share your concern that our children and grandchildren will suffer.

The purpose of the fund as I understand it is a type of insurance fund. Payments go in and payments go out and the fund is there and subject to the peaks and troughs of cyclical investment markets which even out and yield growth over the long term due to compound returns reinvested.

Do you have any insurance policies? Do you think they are ponzi schemes?

Th deficit will only be filled if they change their intentions. Not doing so implies they are confident that it is not going to run out of money.

They only need to put away more to fund the future pensions if they are not confident that future contributions can be met. Evidently they are confident.

Are you concerned that the scheme investments will not perform and returns will not materialise? Do you think their is a risk of further investment losses?

clcik here

spartacus. unfortunately your grasps of the economics of a pension scheme are misguided. It is essentially a ponzi scheme. Yes you may view assumptions as incorrect but the fact is they can be worse as well as better. At the end of the day if the scheme was now shut with no top ups the likely hood is it would run out of cash. If its funded so well the states should stop putting my well earned taxes into it

Spartacus

clcik

There is no intention of shutting the scheme.

ugh

Spartacus, that is a pretty weak response to some logical thinking. They weren't suggesting to shut it but illustrating a point

Spartacus

ugh

It's not logical to hypothesise the scheme closing. The funding position is based on the fact the scheme will continue of course.

russm

Spartacus

So when the pension payments exceed the contributions there will be "no intention to use the fund assets to pay pension obligations". That's an incredible statement. So you expect contributions to be put up to cover any shortfall?

Of course the assets are there to pay pension obligations. That comment, I'm afraid, does suggest a lack of understanding.

Spartacus

russm

From the 90s up until 2010 the contributions were slashed in order to reduce the surplus which had built up. So it stands to reason that it should work both ways.

russm

Spartacus

But when the number of pensioners increases and the number of public workers decrease (hopefully), under your proposal the massive shortfall would have to be met by increased taxes rather than using the fund that has been built up for such a purpose over all this time.

Sorry, you don't understand this topic and I'm not sure why GM feels its so important to get you to do so.

Spartacus

russm

raising the pension age addresses the issue of the number of pensioners. I agree with all of the proposals of the pension review panel but clearly employees need to agree to them.

No, the pension contributions were circa 14% before the 90s boom then reduced by half so now have been reinstated to 14.1% - no added taxes.

The alternative option would have been to keep the rate steady, allow the fund to accumulate during growth periods and then dip into the fund during decline periods.

The States opted for the first option and slashed the contribution rate.

Pragmatist

I have been quietly watching this debate which has got fascinating even if some others are bored by it. Spartacus and GM will clearly never reach a meeting of minds on this and their arguments are now very repetitive so hopefully they will either both give up soon or at least grow up!

As far as the debate itself is concerned, my take on it is very much on GM's side. It seems very clear to me that a very real pension deficit exists, and that it would be very foolish for the States to ignore those liabilities and base their future funding needs on the method strongly preferred by Spartacus. The strategy over the past 5 years has gone seriously wrong.

I think GM is absolutely right to be concerned that chasing aggressive capital growth is only going to hugely increase the risks of losing further capital, and it is vital to be putting much bigger amounts into the scheme each year so that it grows in real terms. Otherwise, the fund will be totally inadequate for funding future pensions. I would be genuinely worried about my future pension if I was a member of it now, because I may not ever see it.

I have no idea how it could be funded without making much bigger contributions. I for one would be livid to see my taxes rise just to pay for it. I would go as far as saying that taxes might need to go up to fund extra contributions to cover the deficit even if the fund was closed right now as a DB scheme.

Something needs to be done though and I am not convinced that the December 2012 valuation of the investments will be very positive news either. There is every likelihood that the deficit will be somewhat higher.

GM

Spartacus

I hope you are sitting it down. Here it all is in black and white. I suggest you and everybody else, especially States Members, read it, digest it and accept what I have been saying all along. Spartacus - I have been saying all along that you have been uttering nonsense. It's proven here beyond all doubt (not that I was in any doubt).

It's all in the BCWI actuarial valuation of 2010 which you can find at:

http://www.gov.gg/CHttpHandler.ashx?id=3953&p=0

Turn to page 2503 and look at paragraph 5. I have copied and pasted chunks of text below and added my comments in capitals.

5.2 Rule requirements

Under Rule 2 of the Fund, the States of Guernsey determine the Employer contributions to be paid into the Fund.

The funding objective and the level of contributions payable is therefore determined by the States of Guernsey.

(NOTE - NOT BY THE ACTUARIES BUT BY THE STATES OF GUERNSEY)

5.3 Setting the funding objective

The funding objective is that the Fund should meet its funding target. (NOTE - NOT FALL SHORT OF IT)

The funding target adopted by Treasury and Resources for the Combined Pool at the 2007 actuarial valuation was that benefits accrued to 31 December 2007 should be 90% funded at 31 December 2010. Benefits accrued from 1 January 2008 should be 100% funded. (NOTE - THERE IS A STATED TO FUND IT TO THESE LEVELS).

It was decided at the last valuation that in a government backed scheme, such as the Fund, 100% funding is not necessary as part (NOTE - NOT ALL) of members’ pensions could be met by a pay-as-you-go system. If the assets held in respect of benefits accrued to 31 December 2007 remain at 90% of accrued benefits over time, then broadly 10% of the pension benefits would be payable from general revenue. If the whole of the benefit is paid from the Fund (despite the targeted underfunding) then in the absence of other sources of surplus emerging (such as better than expected investment returns) the funding level will worsen over time. (NOTE - A CLEAR WARNING FROM THE ACTUARY).

The funding target for the Actuarial Accounts is that their liabilities should be 100% funded. (NOTE - HOW MUCH CLEARER CAN THAT BE?!)

5.4 The funding target

The Fund’s assets are currently invested in equities and other return seeking assets. This investment strategy is expected to produce a target real return of 4% pa above UK inflation over the long term. Treasury and Resources have decided to take part of this higher expected return into account in the funding target and to accept the funding risks that this involves. (NOTE - THE STATES DECIDED TO ACCEPT THOSE RISKS WHICH WERE CLEARLY POINTED OUT BY THE ACTUARY). The funding target, assuming 100% funding, is therefore calculated as the present value of the expected payments discounted at the expected rate of UK inflation over the appropriate mean term of the liabilities plus 3.25% pa. In the case of the Combined Pool this value is then reduced to 90% of the calculated value for benefits accrued to 31 December 2007, in accordance with the funding target adopted by Treasury and Resources as described in paragraph 5.3. (NOTE - THERE IT IS AGAIN). It should be noted that if the assumed investment return is not achieved, the funding position could worsen, and additional contributions may be required. (NOTE - ANOTHER CLEAR WARNING)

5.5 Speed of reaching funding target

An adjustment to the contribution rate could be used to eliminate a funding surplus or a funding shortfall relative to the funding target over an agreed period of time. (NOTE - A CLEAR REFERENCE TO THE DESIRE NOT TO HAVE A FUNDING DEFICIT). There are a number of ways in which such an adjustment may be determined. For example the funding surplus or shortfall for each section could be eliminated over the future working lives of the section’s current active membership. (NOTE - ANOTHER CLEAR REFERENCE TO THE DESIRE NOT TO HAVE A FUNDING DEFICIT),. Alternatively the funding surplus or shortfall could be eliminated over a shorter, fixed, period. (NOTE - DITTO). It is proposed that the funding surplus or shortfall is eliminated over the future working lives of the current active membership. (NOTE - THIS IS THE BIG ONE - THE SHORTFALL TO BE EVENTUALLY ELIMINATED - NOT LEFT UNFUNDED!).

5.6 Funding target - method

If each section of the Fund had no funding surplus or funding shortfall and its assets were exactly equal to its funding target, contributions would still be required to cover the cost of benefits expected to accrue to members in the future. (NOTE - FUTURE BENEFITS ARE AT RISK IF NOT PROPERLY FUNDED CURRENTLY, WHICH IS NOT POSSIBLE IF THE FUND DOES NOT HAVE NET GROWTH BECAUSE CONTRIBUTIONS ARE ALWAYS BEING USED TO PAY CURRENT BENEFITS).

Spartacus - how much clearer do you need it to be?

*The States stated a clear funding policy with clear target.

* Those funding targets are not being met.

* The additional risks of the chosen investment strategy adopted by the States were adopted by the States.

* There is a clear warning that contributions would need to increase if the funding targets were not met.

* There is no desire to have a funding deficit and any funding deficit should be eliminated over time, not left unfunded.

* The actuaries warn that future liabilities will not be funded if all contributions are being used to pay current pensions.

AS I HAVE BEEN SAYING ALL ALONG !!!

There is nothing more to be said other than there is a bloody great deficit which needs to be dealt with, and that if it isn't dealt with then ALL Guernsey taxpayers and ALL existing scheme members have every reason to be very concerned indeed. It has turned into a Ponzi scheme because we simply cannot afford to fund it.

Let's hope that States Members now get to grips with this and stop sweeping it under the carpet.

Do I have any confidence that the proposed CARE scheme will change anything? No - it's still a defined benefits scheme which needs to be funded and we simply cannot rely on the States to do that properly.

Apologies for the length of this post but it was essential.

Spartacus

GM

These are sections of the actuarial valuation which I have been referring to repeatedly. Now you have suddenly decided to read them, copied the bits you like and pasted them out of context with your own flawed interpretations in brackets! Nice try.

Spartacus

GM

Just one thing I really MUST ask.

You said "The funding target for the Actuarial Accounts is that their liabilities should be 100% funded. (NOTE – HOW MUCH CLEARER CAN THAT BE?!)"

However can you explain (in terms which Neil Forman could understand) what the Actuarial Accounts are?

We wouldn't want anyone getting confused between the Actuarial accounts, the States of Guernsey accounts or the actuarial valuations which are three different things.

Neil Forman

GM

Excellent post which even Spartacus may understand.

Finally!

GM

Spartacus

I have nothing further to add to the debate. I've said more than should have been necessary to get the message across. I will leave it to others to debate the conclusions of my final summary post on the subject tonight.

Rest assured that if any of these points start to get forgotten by the time that the debate comes around re the future of the scheme, I will resurrect my posts to make sure that the messages remain fresh.

Next time you choose to enter a debate on a topic which you know absolutely nothing about, I suggest that you don't take a spade with you.

Spartacus

GM

Your last "summary post" is so full of rubbish and misinterpretation that I cannot be bothered to pick through it bit by bit and counter all the errors and omissions. Instead I would urge anyone to read through the whole of section 5 on page 2503 in order to see for themselves, in context, what the scheme objectives are and how they are being met.

Obviously the States follow the advice of BWCI whose head people include Rodney Benjamin and Stephen Ainsworth who you have admitted are the best pension experts in Guernsey.

Your ignorant critique and scaremongering is a disservice to the reputation of Guernsey.

GM

Spartacus

Same old. We've been over all that ground already. You can't understand it or simply don't want to understand it. Nothing I can add hasn't already been said.

Others can read and interpret for themselves and make up their own minds.

There doesn't seem to be any other poster on these pension threads who is remotely agreeing with your stance. What does that tell you?

Once again, Spartacus is, of course, NEVER wrong.....

Spartacus

GM

I hope others will read properly and interpret correctly rather than jumping to conclusions.

Those who understood the complexity of the issue commented last year. Insulting people and ridiculing their intelligence is probably an effective tactic if you want to avoid a diverse debate. So well done you!

You want to fill a nonexistent hole by bulking up the pension fund to the tune of £380M, best of luck with that.

Neil Forman

Spartacus

" insulting people and ridiculing their intelligence is probably an effective tactic if you want to avoid a diverse debate"

Pot, kettle, black!

GM

Spartacus

You are only making an even bigger fool of yourself. Unlike you, I care about the future of Guernsey's finances.

Its all there in black and white. It didn't need me to insult your intelligence. You managed that all on your own. I just made sure that everybody else was aware of it.

islander

Is this a real relationship between GM and Spatacus?

Interesting reading. feeding off each others messages.

Each one wants to win over the other but both agree to disagree.

Anyway its better reading then some of EDs confused Ertica dialata comments.

Keep up your comments as one day you might agree to agree with each other.lol

Robert

Will anyone care by then?

Does anyone care now?

I don't. Switched off reading those two bickering weeks ago.

Terry Langlois

I think that we need to bring this debate to an end. In the tradition of all debating and mooting societies, we should put it to a vote to see which combatant has won over the audience.

I'll start, and register my vote for GM.

Please add your votes below.

Phil

Also GM, by the proverbial country mile.

Pragmatist

GM for me too. Not even close.

Martino

It was embarrassing, like Eddie the Eagle mixing it with the pro ski jumpers or one of those terrible mismatches in the boxing ring. GM by a knockout after toying with his opponent for a few rounds and poor Sparty taken to A and E on life support.

GM

I should probably abstain for obvious reasons

Neil Forman

Yes, me too.

JJ Lehto

One person understands pensions, the other thinks a pension fund is an insurance policy.

GM takes the gold medal.

bcb

GM for me and i think he does see the bigger picture as well as the fact it is his line of work. Sorry sparty but i think you have just decided to educate yourself on a subject you admitted you are no expert in and are out of your depth. I doubt sparty has read it wrong? just her interpretation of the whole situation is wrong due to lack of experience in this field?.

I think TL is also in this kind of field? and his support for GM must surely add weight to GM`s take on this.

Good fight though guys :)

JJ

so many experts, im sure with all your expertise you should be far to busy to post on here due to making millions of pounds on investments and not having to worry about pensions.

anyway what i wanted to find out as a non expert and not making millions is this, all this talk of taxpayers money going into the pension pot (scaremongering some call it) if it wasnt tax money then where do you suggest the states as the employer should get the money to fulfil their commitment to the scheme, irrespective of whether the end scheme is wrong where is the money going to come from!

answers on a post card please

please can some of you stop spamming these threads with the same **** all the time tbh getting fed up reading it now, the truth is out there and im fairly certain will eventually find its way to the surface

GM

JJ

That's exactly the point and that's why I'm so concerned. If it isn't taxpayer money going in then the States could not fund it.

JJ

Whats exactly the point! in less than 10 words if possible please :)

GM

JJ

I can't quite manage under 10 words but you asked how else it could be funded if not by the taxpayer. I was agreeing with you. It can ONLY be funded by the taxpayer as there is no other funding source available.

Terry Langlois

Tax revenue funds the liabilities so we must control liabilities.

Best I can do with 10 words.

Spartacus

Terry Langlois

Good concise answer but what has changed? All that has changed is life expectancy. The liabilities are therefore potentially higher but are no less controllable due to this factor.

kevin

GM/Spartacus,

A couple more posts on this and you will have broken the three hundred barrierwith a large proportion being just between the two of you.

Congratulations!

GM

Kevin

And your point is?

kevin

It was supposed to be a joke!

It obviously didn't appeal to your sense of humour - you do have one don't you?

GM

Kevin

Oh yes, I have one all right, but your posts are usually barbed and lack humour so I wasn't expecting any different from you :)

JJ

OK GM thanks clears it up a bit,

so the States have tax money as the only option to pay in their contribution of the scheme, so all these people moaning about the states paying tax money into the fund as though there is another option available need to rethink their arguement and maybe reword their input on here a little.

I guess some of the doom sayers on here will be moaning the states use tax money to pay wages next and how that shouldnt come out their tax contributions, seems certain posters on here are misleading us into believing something which possibly isnt as they describe, are they press employees trying to sensationalise their next big story before it hits print.

I guess we will find out soon one way or another, in the meantime we have the press and hours of reading on here.

:)

GM

JJ

Well - every non-essential job in the public sector costs the taxpayer money, and that means there is less money for other taxpayer-funded services.

I don't think there is anything wrong with having a leaner public sector, cutting waste where necessary, so that core health and education services don't have to suffer, do you?

All taxpayers should want value for money, as then we won't begrudge paying it.

Spartacus

GM

No one would wish for excessive public sector staffing but who is qualified to judge this?

Maybe it is better to look at excessive services for savings.

Many people have private health insurance which is under-utilised because of universal state benefits.

Education could make savings without the costly 11+ system and grant maintained colleges.

GM

Spartacus

An independent time and motion study throughout the public sector would be the best way to assess it, but can you see the union welcoming that?

Not sure what point you are trying to make re private health insurance. Most people who have private health insurance surely claim off that and go private rather than claim from the States. That surely saves the States money, because the person is also paying into the Social Security scheme and not claiming on it, and so is subsidising those who do.

Just like those who pay income tax but who don't educate their children in the States' system, and who are therefore subsiding the States on a net basis. I think we've been there before!

Spartacus

GM

Re healthcare that is not the way it works, sometimes it does but there are flaws in the state policy of providing free secondary care, in some cases insurance is only needed for care which is not already provided by the state.

Deputy Sandra James also mentioned on a radio phone in that when we sign for the grant in the doctor surgery this is claimed from the States even for those who have private insurance.

Same with education, as Capita identified, those who wish to educate their children privately are nevertheless still given an unnecessary grant by taxpayers. (We don't need to go back over this as we have just reiterated and summarised the two different points of view in our debate)

kevin

GM,

You seem to have all the answers on this topic, maybe you can tell us what all the 'non-essential' jobs in the public sector might be?

GM

Kevin

That will be the jobs that we did perfectly well without prior to 10 years ago when the public sector was around 20% smaller. What ARE all those extra jobs for?

Spartacus

GM

The attached report might help answer some of your questions.

Scrutiny committee review of the Staff Number Policy

http://www.gov.gg/CHttpHandler.ashx?id=74627&p=0

Page 15 has some examples in relation to 2008/2009.

"Reasons for new posts varied from increasing staffing to meet additional demand for existing services, the introduction of new services, requirements to implement legislative changes, and management restructuring.

Increased staffing to meet additional demand and requirements to implement legislative changes, both seem valid reasons for staff increases. Introduction of new services always requires justification and I think this is the point you are making and I agree.

I believe critics of the civil service are mostly concerned with increased staffing due to management restructuring.