The Treasurers’ report* in Labour’s annual accounts says there has been a “dramatic improvement” in Labour’s pension fund. It has swung from a £6.3m liability in 2005 to a surplus of £1.9m at the end of last year.
Sounds good, for sure. But much of the difference is down to the way in which actuaries use a discount rate for the scheme’s liabilities. In 2005 the rate was 4.7 per cent, in 2007 it was 5.8 per cent.
In simple terms this change means that future liabilities are presumed to be smaller (they have shrunk in the accounts from £42.9m to £38.1m).
That simple fact alone explains £4.8m of the good news.
Nothing fishy in this, I hasten to add. I spoke to a pensions expert yesterday who said that discount rates in general have risen in the last two years. But the point is that the situation has been improved by what is simply an ”actuarial gain”.
Another point to make is that the scheme has £23m of its £40m of assets in the stock market…..which has nosedived since Christmas. For that reason alone, the current state of play in the pension fund – if it was marked to market – is probably not so rosy.
* Incidentally guys (Treasurers Jack Dromey and Chris Lennie), you signed it on 27 June 2008, not “2007″. I’m told this is a ‘typo’.
Jim Pickard
Kiran Stacey
