The pensions minister and marine pensions

ParaHandy

ParaHandy

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well, sort of boaty as one of the shipping company employees almost joined the 80,000 done out of their pension but the cpy were persuaded otherwise ..

However, there was Mr Hutton on the radio this morning warbling on about this and that after the Parliamentary Ombudsman had a go at the gov for misleading thousands over MFR. Now, keeping it simple as most have something better to do on a Wednesday morning, the position is this: after the 95 Pensions Act, the gov brought in the 97 MFR regulations with the very specific intention of making pensions understandable to the population at large. Over 100% on the MFR and you were OK. That was the absolute, unequivocal, stated purpose.

However, in 1997 Brown swiped the tax credit on investment income off pension funds with the consequence that, instantaneously, pension liabilities would rise because they were calculated (discounted in actuary speak) under MFR against the FTSE All Share yield which had dropped net of tax and dropped substantially. A nod being as good as a wink, the gov actuary said to the UK board of actuaries wouldn't it be a good idea if ... and immediately the yield was artificially increased as if nothing had happened. But, liability had risen and, oh shoyte, the markets are taking a nose dive. A year later, the gov actuary, nod being as good as a wink, said that .. hmm .. that git Bill Gates isn't paying any divvies so shouldn't we fix the rate again? Hey presto, and in a flash, the yield got massaged again and everything hunky dory, yes? Well no, assets falls, by now, had wiped out most schemes and, this is where it gets really nasty, the true picture was being hidden.

Now if a pension scheme knowingly and deliberately, with intent (and bolx to all youse lawyers with what intent means) were to misinform and guilty of maladministration to this extent, they would be personally liable .. not the scheme and most definitely not the tax payer. So Mr Brown, how about it?

But then Mr Blair has set the tone (haha!) of this gov right at the beginning with Ecclestone's bung so why should any public servant of the crown whether a lowly plod or a cabinet minister accept responsibility for their errant actions ... this message is being recorded .. this nessage is being recorded ... this etc etc
 
Exactly, the bar stards robbed everybody else's pension fund via a massive tax grab on dividend income. The cost of bailing out the failed funds is probably less than the tax grab, but of course they, and the civil servants, are all right. Paid for by us, protected and index linked. Come the revolution lets take the entire civil service and government pension pot and spend it on something worthwhile, like paying to have hospitals cleaned properly, and see how our "ruling elite" like that.
 
Para, could I just ask...

...if you could kindly spell out a bit clearer how the loss of tax credits affected this as I feel another technical question for my MP coming on.

This will really pi55 him off because he is only concerned about vibration white finger and coal miners chest ailments.

This means he will have to write to Gordon again, as he did when I asked whether it was HMCE or Gordon himself that made the decision to disallow VAT refunds for companies innocently tied up in transactions leading to missing trader fraud (which, as you may know was found to be out of order in the Bond House Tribunal at EUCJ).

So there's another bloody great hole (£300M) in the nations finances - in order to put a finger in the dyke a number of bona fide companies went to the wall as they couldn't sustain the loss of the VAT re-claim - and now it all* (*see below) has to be paid back.

With a degree of irony, when I asked the FD of Bond House Systems whether they had got their £12M back, he replied 'not yet, but we have asked for it.'

Apparently, they have to wait until the revenue have checked if the circumstances of their reclaim meet the criteria of the Bond House Tribunal.

Apparently, 3 years of Court, High Court, Appeals and EU cases a the names claimant was not quite enough to get the money back!
 
. . . and to think in 1997 we had the one of the best private pension funds in the world. Enter Noo Labour, and you're left with a sack of sh**e.

Still, just as long as their pensions are OK eh !!
 
Yes but we have nothing to worry about 'cos HMG can compensate everybody who lost out. All they need to do is bung enough cash to the pension scheme members to make up the shortfall, as per the recommendation this morning.

It's OK it's the other taxpayers who will pay, so that's all right see?
 
I quote.. (short version - go to High Court!).

Can damages be recovered from HMRC?

Since the decision of the ECJ in Francovich, it has been clear that member states (and emanations of member states, such as HMRC) are capable of being held to account in damages for breaches of community law that cause loss to, for example, taxpayers. The ECJ case of Brasserie du Pêcheur sets out the basis on which a state can be liable to pay damages to a taxpayer. In the light of that case, the key factor will be the extent to which HMRC was entitled to rely on the decision of the tribunal in Bond House Systems in enforcing its “non-economic activity” approach, given that there was significant doubt as to the correctness of that decision and that it was known that this approach was causing significant damage to the industry. There is a strong argument that the administrative regime adopted by HMRC for dealing with claims for input tax can itself be shown to have caused loss.

What will making a claim for damages entail?

The first step is to file a claim at the High Court. In broad outline, the basis of the claim is that HMRC has acted unlawfully with regard to its “business disruption” philosophy and regime of the denying repayments of input VAT and the raising of assessments on innocent traders to recover input tax already paid. HMRC’s approach has affected a significant number of businesses; and because of the number of potential claimants, it is likely that the High Court will require the various claims to be managed by way of a Group Litigation Order (GLO). A GLO is a mechanism that enables the efficient case management of multiple claims that give rise to common or related issues of fact or law. Under a GLO, a test case is taken forward in order to determine all the common issues, and the remaining claims are stayed. Each party to the GLO contributes to the costs incurred by the test claimant in relation to the test claim. Thus, the costs (and risk) are shared by the GLO claimants.

If a business simply waits until resolution of this matter in the GLO, HMRC may try to rely on time limits in order to deny compensation. It is important therefore to ensure that any claim is protected. It is only by making a claim in the High Court that this can be achieved.
 
Re: I quote.. (short version - go to High Court!).

Well, on his bio it says "communications" so maybe, still, it is all interesting, and somewhat lower brow than the lounge where they all seem to be performing declensions in latin!
 
Re: I quote.. (short version - go to High Court!).

"File a claim at the High Court". What a joke, the Government just pick a tame judge to find in their favour. (See Railtrack case for details of how to give a judgement in favour of HMG, in disregard of the facts, and impossible to appeal)
 
Re: Para, could I just ask...

Start here! £100 invested at 5% is worth £265 in 20 years time however to get the same amount in 20 years time you need only invest £40 if invested at 10%.

The present value of a liability of £265 in 20 years time discounted at 5% is £100 whereas the present value of the same liability discounted at 10% is £40. The discount rate has a huge impact on the present value of a pension liability.

The MFR multiplies liabilities by a factor called the Market Value Adjustment which is simply a factor (currently 0.03) divided by the FTSE All Share dividend yield. It is currently 1.0345. Divide the asset value by the MVA adjusted liability gives you the MFR %.

The purpose of the MVA is to smooth out asset value changes. If the market rises and dividends remain unchanged the yield will decrease, the MVA increases and liabilities increase. Conversely, if the market drops, yield will increase, the MVA decreases and liabilities decrease.

The aim was to stop pensions panicking in a falling market. Equally as great collapses as occurred in 2000 have occurred before and, uniquely, the MFR regulations imposed a proscriptive investment regime which favoured equities and had criminal penalties for failing to have a 100% MFR. This was directly against much earlier Trust law which required a more prudent investment attitude. Indeed, one pensions minister told me that he thought pension schemes were in contravention of the 1920 Trust Act, which was not repealed, where this caveat comes from. I went for the [--word removed--] with both barrels.

When in 1997 Brown removed the tax credit, instantaneously the yield reduced and liabilities increased. The gov actuary "suggested" the MVA be reduced which cancelled out the reduction in yield. The gov actuary is an arm of the Treasury.

This was like flinging foo-foo dust on the problem. Liabilities had changed. If you go back to my starter calculation, if you change the yield upon which you invest, you change the liability but what the government were saying, in effect, was that no change in liability had occurred which was criminal.

By 2002, several very large corporations such as Microsoft chose not to pay any dividends but to use the cash saved within the business. They relied on market growth in their share price to compensate investors. Once again, the gov actuary "suggested" a further reduction in the MVA.

The effect of both these changes was to understate liabilities by 25-40%. The first change was to deflect criticism away from Brown. The impact on MFR liabilities was apparently nil. It was spun as proving that Brown had not "raided pension funds". The second change was the gov, quite cynically, keeping the lid on a problem about to explode.
 
Re: Para, could I just ask...

so you seem to be saying that the funding position of a pension schme is less about how much it curently has, or the interest it can earn on that money, and more about the basis of valueing the liabilities and the factors affecting those....?

In which case it's hard to see how saving more can necessarily solve the issue (although it will be better than not saving more....... /forums/images/graemlins/crazy.gif)
 
Re: Para, could I just ask...

yes & no. by this time MFR was such a political mess that the ASB (accounting standards board whose board the gov is on - then Patricia Hewitt) swept in with their ideas which discounted liabilities against corporate AAA (investment grade) bonds (FRS19). This was, yet another, yield rate but at 4.5% which immediately and substantially increased liabilities. Traditionally and over the last 50 years and more non-pensionable (ie current or active members of a scheme not in receipt of a pension) liabilities had been discounted using much higher (equity) yields which would reduce liabilities very substantially from their current level and this method, whilst not perfect by any manner of means, has worked, coupled with the strictures of the 1920 Trust Act, through far worse financial conditions than that which existed in 2000. Once pensions became "political", organisations such as the uk actuaries board (a slack jawed bunch more interested in cracking deprecating jokes about how uninteresting they are) were no match for westminster but then, they'd carried on doing a job nobody was particularly interested in for a very long time ... Most of the cost of Maxwell's raid on the Mirror Group pension funds was recovered but then obliquity took over and the law of unintended consequences wreaked havoc.
 
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