Elections, pensions and rebellion

SCOTTISH ELECTION TODAY and vote cast yesterday morning in Charlotte Square. Walter came along and waited on the pavement beside the A-boards and canvassers. Nobody minded a wee Scottie dog.  The result's a foregone conclusion – Nicola Sturgeon will be First Minister with an outright SNP majority. Next up is the EU referendum on 23 June. Another trip to the polls with Walter. 


BHS's DEMISE HIGHLIGHTS a macro-economic pension problem. As viewers salivate over the prospect of Sir Phillip Green appearing next month before a Westminster select committee (or two), the BHS employee pension fund is widely reported to be £571 million in ‘deficit’. It’s a good headline because the sum neatly corresponds with estimates of how much Sir Phillip and family have extracted from BHS over the years. But it isn’t really the ‘deficit’: £571 million is the hypothetical cost of an insurance company buying out the pension liabilities, a transaction nobody expects to happen. The last actuarial valuation in 2014 reported the ‘deficit’ as £225 million, still a large number. How accurate is this figure?  Here we enter a world of assumptions and hypotheticals steeped in jargon. But the key issue is how a pension fund’s future liabilities are measured. This is done by discounting them based on current gilt (i.e., government bond) rates. What this means is that when gilt rates collapse (as they have), the lower the discount, the higher the measured liabilities and the bigger the deficit.  Simple.  It is this practice that is generating the deficits.  It's a double whammy too because over the last ten years defined benefit pension funds have roughly halved their investment in equities and doubled their investment in gilts and bonds to match how future liabilities are measured – a form of “financial repression”. This almost certainly lowers returns as well as limiting the funds available for investing in profitable economic activity. Meantime, higher measured liabilities means higher employer contributions, reducing what’s available to pay workforce salaries. This means younger employees bear the cost, through lower earnings, of older and former employees receiving pension benefits of which their younger counterparts can only dream. How big is this problem? Combined scheme deficits calculated in this way are estimated at £800 billion. Does anyone know if this is even half sensible? Not really. That’s why in March this year the UK’s national association of pension funds created a DB taskforce to think about it. It’s due to report in October. Meantime, only a rate rise will ease the scale of the real or apparent problem.


SOMETIMES A STORY IN THE MEDIA can highlight the importance of making a proper will more than an initiative by the Law Society of Scotland could hope to achieve. The ongoing saga over the estate of the late actress and unofficial national treasure Lynda Bellingham is a case in point. For weeks now tabloids and weekly magazines have been covering the increasingly bitter dispute between her widower, Michael Pattemore, and her two adult sons from a previous marriage. Bellingham made a will several months before she died leaving everything to Pattemore, but with the vague understanding that her wishes to provide security for her sons be respected. In an interview this week her son Robbie said his mother was always “very trusting and saw the best in everyone”. The sons claim Pattemore will not even allow them to take sentimental items such as photo albums from the family home. They do not plan to contest the will, although they have been battling with their stepfather to even see it. They believe she left everything to her husband because she thought she was “doing what was right by us” and added they were surprised by the large number of people who have contacted them to say they have had similar experiences following a family bereavement.

A FAMILY DIVIDED is also featured in Rebellion, the five part series made for Irish TV and available on Netflix, depicting the events of the Easter rising in Dublin in 1916 from protagonists on all sides of the political spectrum. As with so many civil war sagas, one brother battles against another, although Rebellion also put female characters at the heart of the action. The series received mixed reviews in Ireland, not least because of arguments about its historical accuracy. One area that historians do agree on is that support for the rebellion only took root amongst the population at large after the British courts martial began to execute the rebels. This was presented in the series through the perspective of a young Belfast lawyer handling some of the prosecution cases. The prisoners were not allowed defence counsel. Through the sympathetic portrayal of this character the series was able to deal with some of the many shades of grey that are still debated one hundred years on. The production also gave a believable depth to the minutiae of the work of those carrying out the administrative tasks that continue to be necessary even as history is being made.


LAST NIGHT REAL MADRID overcome Manchester City 1-0 in the staggeringly impressive Santiago Bernabeu. They will meet Atletico Madrid in the Champions League final in Paris. What a prospect! Why don’t we have stadiums like the Bernabeu in this country? Or like Borussia Dortmund’s Westfalenstadion? Instead new stadiums in the UK tend to be insipid and lack atmosphere. Arsenal’s Emirates is a good example as is the ‘new’ Wembley. Football stadiums should have seating to the edge of the pitch with the stands towering above on all sides, teeming with flags and colour.

— “Writer”

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