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The Great Pension Scandal

Discussion in 'Speaker's Corner' started by Stretch, Apr 6, 2015.

  1. The_Abyss

    Sgarrista

    Joined: May 15, 2007

    Posts: 7,680

    Location: Ipswich

    This is the direction of travel for all saving - retirement and other - and has been for some time. It de-risks the employer, creating an environment for a more sustainable business and, to some extent, also de-risks the employee. De-risks the employee in terms of ensuring that they are not paying into a scheme where their own benefits are uncertain and where their funding is largely used to pay the benefits of others while they hope that a younger generation will follow them to pay theirs. And de-risks them in that their retirement, longer after they've left work, is not at the mercy of their old employer who may not be in business 10 years down the line.

    That system - defined contribution - does need a lot of ongoing support though. It needs a good level of funding from the employer, and good education of the employee to understand what level of saving they need to make too. It also requires good, affordable, trustworthy pensions, which are pretty much there now unless you choose to go a long way off-piste at your own risk, and good, affordable, trustworthy investment solutions to plug into them, which are getting better driven by increasingly tough regulation.

    Education is absolutely key though. @Faustus spoke about organised mass protest - being charitable I'll assume that those movements were reasonably well-informed. The equivalent today is education and the subsequent demand that will drive market forces to deliver the results required, normally through improved efficiency and economies of scale, innovation and disruption.
     
  2. Faustus

    Mobster

    Joined: Mar 20, 2007

    Posts: 3,287

    It's definitely a fact as I registered with HMRC to get my own state pension quotation which covers the maximum N.I. contributions.
     
  3. Faustus

    Mobster

    Joined: Mar 20, 2007

    Posts: 3,287

    Money purchase schemes are rubbish compared to FFS. We were unionised and got results. Look where education has got you. You keep your charity and I'll keep my pension thank you very much.
     
  4. Vonhelmet

    Caporegime

    Joined: Jun 28, 2005

    Posts: 45,289

    Location: On the hoods

    I'm not disputing it being a fact, more that the presentation of it is likely disingenuous and the truth only partial. The article does a lot of whinging about how you'll lose so much of your state pension but makes only brief mention of the fact that the reason people would have contracted out of the state pension would be to pile money into a final salary or private pension, and that the reduction in payout is an estimate of the extra you'll get from one of those pensions. So, you know, I imagine you and the other folk will be ok if you contracted out given you presumably contracted out to an alternative.

    It may still be bad policy, mind you. It's very broad means testing, essentially, but lazily effected. If you are taking it in from a final salary scheme then no, I'm going to guess you don't "need" the state second pension. That's fine. Where it's not fine is the half arsed approach of applying a flat disallowance to all people. It would make more sense to assess people's state pension entitlement on a case by case basis.
     
  5. Vonhelmet

    Caporegime

    Joined: Jun 28, 2005

    Posts: 45,289

    Location: On the hoods

    Yes, of course they're rubbish by comparison, but only because your FSS are totally unrealistic and unsustainable and the current deficits bear that out. The problem is not that DC is bad, it's that DB is fantastically good, and I mean that in the literally fantastical sense. The numbers don't add up, no matter how lovely the dream may be.
     
  6. Stretch

    Sgarrista

    Joined: Feb 14, 2004

    Posts: 9,282

    Location: Cambridge

    They are only better in as far as it's possible to receive more than your contribution is worth.

    Someone still needs to pay the bill, which of cause is the very thing were debating.

    So all you and your union buddies managed to achieve is a short term gain at the expense of others. Hardly crushing victory for the workers.
     
  7. Faustus

    Mobster

    Joined: Mar 20, 2007

    Posts: 3,287

    Hardly the unions fault. It's this present generation that arrogantly thought they were middle class and no longer needed the unions. Well look where that has got you. All the things that unions spent decades achieving being eroded by employers and government alike who can't believe their luck.

    It's often said the working man is his own worst enemy.
     
  8. Slam62

    Soldato

    Joined: Jan 3, 2006

    Posts: 6,188

    Location: Monaco

    Does that still apply if the final salary scheme is in surplus because of actions the company and the workforce (negotiating through a union) took a few years ago, including reducing benefits and increasing company contributions until the fund was in good shape.

    If you're referring about public sector that is obviously another story and all tax payers are forced to fund them by law. Which seems a tad unfair.
     
  9. Slam62

    Soldato

    Joined: Jan 3, 2006

    Posts: 6,188

    Location: Monaco

    Take a look at the charges on funds for a start, the charges on pension funds in this country are way higher than elsewhere.
    The reason DB schemes are in a mess is because the fund managers put their heads in the sand.
    On the other hand one of the big changes was the way funds are assessed.
    Look up Robert Maxwell and various other accounting scandals around that time. There was also Gordon Brown's raid on pensions around the time he sold our gold.
    They changed the rules and suddenly most pension funds were running deficits overnight. Most have never recovered or been managed into recovery.
    If you sign a contract for work, you are accepting a package of reward of which a pension is part. If you think you deserve a better package, go and get one. Otherwise tough.
     
  10. The_Abyss

    Sgarrista

    Joined: May 15, 2007

    Posts: 7,680

    Location: Ipswich

    You're very selective in the posts you respond to, and are very personal when you do choose to respond. I'm not asking you to give up your pension.

    For a self-professed union person, it is odd that you disagree with the need to have people educated and informed on how to effectively save for their retirement. I understand that much of today's union efforts are focussed on maintaining the status quo rather than move forward though, so that perhaps explains why you don't think educating people on their retirement is a good thing.
     
  11. The_Abyss

    Sgarrista

    Joined: May 15, 2007

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    Location: Ipswich

    Please provide some evidence for this.

    You might want to look at my earlier post, and search for more detail on some of the points raised.
     
  12. Faustus

    Mobster

    Joined: Mar 20, 2007

    Posts: 3,287

    What you say is incorrect. Unions spend a lot of time and effort producing literature, training their representatives and discussing with their members all about pension options. I have received plenty of this literature myself and actually recieve pension advice even now I'm retired.
     
  13. The_Abyss

    Sgarrista

    Joined: May 15, 2007

    Posts: 7,680

    Location: Ipswich

    Employers and pension providers themselves also provide a good deal of information and guidance (not advice in the majority of cases). Information is best obtained from a variety of sources so people can form a balanced view and can educate themselves. I've seen (and at times had to review) pension material pumped out by one of the UK's largest unions, and a balanced view is very much required.
     
  14. Mercenary Keyboard Warrior

    Mobster

    Joined: Aug 4, 2007

    Posts: 4,267

    Location: Wilds of suffolk

    Who is picking this up though, most companies aren't exactly dealing with the issue. They are running with the defecits, hoping that one day they will reduce.
    Plus lots of companies didn't pay in when return were high, pension holidays was the term.
    At the end of the day the companies back the schemes, they set them up, they managed them (via trustees of which the company is part).
    If they failed to take account that one day they may need to pay more in then that was poor management. But at the time a decent pension scheme was a way to compete, it was a way to retain, and it was a way to at least see long term workers having a decent standard of living in old age.
    Getting all revisionist on the area isn't going to change the facts that the main issue has been soaring life expectancy, low returns have just multiplied the impact.
     
  15. Mercenary Keyboard Warrior

    Mobster

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    Location: Wilds of suffolk

    Good summary thanks :)
    Too many on here will only post 100 words max, sometimes you just need some detail.
     
  16. Mercenary Keyboard Warrior

    Mobster

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    We are all paying for each others.
    Unless you never eat foods from one of the big brands you are paying for mine, its part of the costs of running the business I work for, so is included in the amount we charge our customers, who it turn will pass it on as one of their costs.
     
  17. Vonhelmet

    Caporegime

    Joined: Jun 28, 2005

    Posts: 45,289

    Location: On the hoods

    Is that true? I work in corporate tax so I see a lot of sets of accounts and a lot of frs 17 / ias 19 notes and the companies with the deficits all seem to be making big deficit contributions. Some of the amounts involved are eye watering. Maybe it's just the accounts that one across my desk, though.

    It does make me wonder whether the shareholders currently suffering reduced dividends on account of current profits going into the pension pot are the same shareholders who enjoyed bumper payouts when the companies were taking their pension holidays. That would seem quite equitable.
     
  18. Faustus

    Mobster

    Joined: Mar 20, 2007

    Posts: 3,287

    Much of what you have written is right on the money. However, what comes across from reading the piece is that no fault can be laid at the door of the employees. I get the fact that seeing the future is nigh impossible. However, it is quite evident that a great many employers acted somewhat irresponsibly by taking the surplus's or enjoying pension holidays when times were good. It's been predicted for as long as I can remember that the workforce of the future would be much smaller due to automation and other global factors.

    It's very much the scenario of old though i.e. employers win when times are good, but it's the employees who lose when times are lean.
     
  19. Mercenary Keyboard Warrior

    Mobster

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    Location: Wilds of suffolk

    Maybe the choice of words on "most" was a bit out, maybe I should have put "many". Eg my current employer made their first extra contribution in years.

    I suspect companies with the serious expectation of being here in many years to come are working to reduce deficits, where as those that are shadows of previous glory, or are on the rocks are just ignoring it.

    Foreign companies have certainly stepped up payments due to the weakening for the £ from what I hear.
     
  20. The_Abyss

    Sgarrista

    Joined: May 15, 2007

    Posts: 7,680

    Location: Ipswich

    I'm not talking about fault, I'm talking about responsibility. As there are two interested parties (three, if you include the regulator) then those responsibilities are shared. The employer has a responsibility to the scheme and the members, working, deferred and retired. If the level of funding required by the pension puts the business, and therefore the scheme, at risk then the members of the scheme - working, deferred and retired have two choices. 1) they disregard what the sponsoring employer is telling them, make no compromises and hope that things can continue. If they don't, then the employer fails, current members lose their jobs and everyone's pensions - current, deferred or retired - get transferred to the PPF and benefits reduced., and no new employees can be hired as the company's failed. This also increases the burden on all other remaining defined benefit schemes, as the PPF is funded by a levy on them. 2) the two parties try and reach a compromise that sees the funding requirement met by one or more measures from increasing employer contributions, increasing employee contributions, increasing retirement age for new, current and deferred members, decreasing benefits for new and current members, closing the scheme to new members etc etc.

    Taking the 'it isn't the employees' fault so we're not comprising' route of option 1 really does risk cutting off the nose to spite the face. The scheme, the employer and the members (new, deferred and retired) are where they are. People can talk about signing a contract decades ago until they're blue in the face, but it does not change the circumstances and the need to collectively compromise. The measure of compromise, or lack of, taken by either party may well be a reflection for how the scheme has been run in the past, or how parlous the state of the employer - lots of different factors.

    Many schemes, employers, members and unions have effectively reached compromise in the past, and continue to do so. Compromise often isn't without pain - by the very nature you're giving something up. But many schemes are now in a place where compromise is vital. Not least, many of our public sector schemes where the employer is the tax payer and so the problem can be kicked further down the road than with a plc. Again, using British Steel / Tata as the most recent, largest example, the problem was not dealt with for so long that it took enormous compromise on all sides to forge the most sustainable path ahead. And even that looks pretty shaky, to be honest, as it is just too little too late from all sides including the regulator.
     


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