Comments on: The £1 trillion black hole – public sector pension liabilities http://www.economicpolicycentre.com/2010/04/19/government-pension-liabilities-understated-by-1trillion/ The EPC aims to close the gap between policy and knowledge in new and innovative ways Sun, 11 Sep 2011 09:26:39 +0000 hourly 1 http://wordpress.org/?v= By: mapas de panama http://www.economicpolicycentre.com/2010/04/19/government-pension-liabilities-understated-by-1trillion/comment-page-1/#comment-270 mapas de panama Thu, 29 Jul 2010 04:28:44 +0000 http://www.economicpolicycentre.com/?p=310#comment-270 I hope you would not mind if I placed a part of this site on my univeristy blog? I hope you would not mind if I placed a part of this site on my univeristy blog?

]]> By: J Martin http://www.economicpolicycentre.com/2010/04/19/government-pension-liabilities-understated-by-1trillion/comment-page-1/#comment-249 J Martin Wed, 30 Jun 2010 19:42:46 +0000 http://www.economicpolicycentre.com/?p=310#comment-249 Your reasoning is right that the risk free rate is the right one for this liability of the Government as a business. The USA market based view is also a rational way of attaining the right WACC for this enterprise. However, the pension issue is more complex than the pure economic calculation as it also entails the longevity and there is ample evidence all around us that we are not as healthy as our parents' generation so applying current life expectancy to future liabilities overstates them. However, Government cannot realistically let this genie out of the bottle so has chosen to do it by fixing the figures which as you have so well explained, are at best debatable. Your reasoning is right that the risk free rate is the right one for this liability of the Government as a business. The USA market based view is also a rational way of attaining the right WACC for this enterprise.

However, the pension issue is more complex than the pure economic calculation as it also entails the longevity and there is ample evidence all around us that we are not as healthy as our parents’ generation so applying current life expectancy to future liabilities overstates them. However, Government cannot realistically let this genie out of the bottle so has chosen to do it by fixing the figures which as you have so well explained, are at best debatable.

]]>