Wednesday, 15 April 2009

Jeff Randall fact check

Just spotted the Alan Sugar mini-me's column on pensions. It contains several of his usual bits of wobbly pen. Just a few I spotted straight away -

Claim: "And then there was Mr Brown's disgraceful tax raid on pension funds' dividends. Most independent advisers agree that this measure, introduced soon after he was given the keys to Number 11, has cost British pensioners at least £100 billion."

Fact: Actually the most commonly quoted figure is that it cost £5bn a year, which would put it at £60bn. The estimate of £100bn comes from an actuary called Terry Arthur who has a political slant (I'm not saying his estimate is wrong, just that I wouldn't consider him 'independent'). The genuinely independent Pension Policy Institute came out with a much lower figure of about £3.5bn a year (PDF), or £42bn to date, though they said it could be lower at £2.5bn a year (£30bn).

Claim: "the final-salary pensions of state workers whose schemes are largely unfunded – ie, their assets are insufficient to meet expected liabilities."

Fact: Not really. Unfunded schemes don't have assets. 'Unfunded' in terms of the type of scheme basically means you don't build up assets in a fund to pay benefits, so it refers to PAYG schemes. He's obviously aware that some public sector pensions are 'funded' because he says 'largely unfunded', but he's misunderstood what this means. The LGPS is a 'funded' scheme, because it has assets, but they currently don't meet its liabilities. Loads of private sector schemes are 'funded' and have the same problem. That means such schemes are underfunded, which is what he thinks he means when he says 'unfunded'. But because he doesn't actually know what the terms means he effectively talks gibberish. This is pretty basic pensions terminology (see page 106 (PDF)).

Claim: "The MPs' scheme is among the most lavish ever devised."

Fact: It's certainly very generous. But it doesn't come close to those provided for directors of the UK's biggest companies.


Tony Pandy said...

So you're saying that Jeff Randall is dead right on all the essentials, although different accountants can't quite agree on the precise amounts Brown has pi**ed up the wall?

By the way, what percentage of the income of your 'consultancy' comes from national and local government departments and agencies?

Tom P said...

Really why bother writing 'so you're saying' when it's quite clear that I'm not saying that at all. It does rather suggest you would rather argue with what you wish I'd written rather than what I've actually written.

The point is that his claims are either exaggerated or wrong. That's his right obviously as a columnist, just as it's my right to point out when he's talking rubbish.

And on the specific point about ACT (his £100bn claim) this is rather important as this issue is used by people to claim that Brown killed final salary schemes, which is fundamentally wrong, in my opinion.

If you want a proper discussion about the impact of the ACT credit abolition I'm willing to have a go, but my feeling is that you've already made your mind up and aren't really interested, but the offer is there.

"what percentage of the income of your 'consultancy' comes from national and local government departments and agencies?"

0% in terms of the groups you mention, though we do work for local authority pension funds. what relevance does that have to this discussion out of interest?