In Part one of this 3 Part column I make the point that the increased NI contributions assume certain things. The challenge is for the Fund to meet these assumptions. For example the Actuarial Review is based on a rate of inflation of 5.9 per cent and declining. Is that realistic? Not so far!
"Inflation rates over the period 2000- 2005 averaged 4.58 percent but are projected at 5.9 percent for 2007 and steadily declining to 3.0 in 2016. Again the long term health of the Fund will be linked to inflation and the extent to which it is realistic to project that inflation will get down to 5.9 percent in 2007 (from currently hovering at 8 to 9 percent) and steadily decline thereafter. Inflation eats up purchasing power but rising inflation is a constant threat to the viability of benefits which are fixed."
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