˚A Crown Guarantee for USS?

1. Some accounting details (feel free to skip)

The NAO report linked above notes that:


2. Objections

I’ve heard various objections to the idea of a crown guarantee for USS.

https://www.nao.org.uk/wp-content/uploads/2016/06/Evaluating-the-government-balance-sheet-pensions.pdf — p.42

3. Why the government should support a crown guarantee for USS

Here I can be brief. To the hard-headed Conservative politician, I would suggest that the opportunity cost of a government guarantee is negative. It requires only temporary financial support in extreme cases of downside risk. That’s a much lower cost than the cost of ongoing industrial disputes over pensions. The cost of this dispute has already been off the scale. A government guarantee seems a cheap way to get out of it and avoid future disputes.

4. General thoughts on pension schemes

If I’m really honest, I don’t think pension schemes should exist. When everyone tries to save for retirement, you get a Keynesian paradox of thrift effect. One person’s saving reduces another person’s income, so that the overall attempt by everyone to save just reduces the total income from which saving could be drawn. Saving requires investment: if I am to earn more than I spend, someone else must spend more than she earns.



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