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November 29, 2004

Public Sector Pensions.

At last someone is waking up to the way in which public sector pensions are unfunded, are simply a debt that will have to be paid by future generations:

Government debt would soar from the official figure of 33pc of gross domestic product (GDP) to 85pc if promises to pay unfunded public sector pensions are taken into account, the Conservatives claim.

There is a simple solution to this which I will share with you. Calculate the accumulated pension rights of those 8 million public sector employees. Issue Treasury bonds to each individual to that value. Tell them to open a private pension plan with those bonds. There is absolutely no change to the Govt’s nett position, as we are simply making an implicit debt explicit. Problem solved.
We also, by the way, increase the mobility of the workforce, as people no longer have to hang on for their final salary pension to kick in, and (here’s something you probably did not know. A civil servant who really pisses off the bosses can have his pension taken away.) we’ve also increased the freedoms of those very public sector workers.

November 29, 2004 in Taxes | Permalink

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