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The Great Pension Scandal

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

  1. The_Abyss

    Capodecina

    Joined: May 15, 2007

    Posts: 11,071

    Location: Ipswich / Bodham

    Some very good news leaking out of the DWP over the weekend: https://www.ftadviser.com/pensions/2018/03/19/government-to-make-risking-employee-pensions-a-crime/

    Criminalising the risking of pensions is, broadly, a positive step. On the one hand, it will doubtless drive more defined benefit schemes to be closed. On the other, closed or open, it will focus the minds of the employer in terms of doing the right thing for the funding of the defined benefit schemes they offer. However, granting the new powers is just one side of the coin - the other is that the powers need to be exercised, and The Pensions Regulator has been accused of being too slow to act on a number using the considerable powers they already have on a number of occasions.

    As a side thought, the Government is the employer for a significant number of pension schemes that have enormous deficits. Will they be subject to the same enforcement? I suspect not...
     
  2. platypus

    Caporegime

    Joined: Jul 25, 2003

    Posts: 38,850

    Location: Rhône-Alpes+Cambridge

    It's positive overall though. And ultimately whilst it might lead to the complete shut down of DB schemes, as has been proven we largely can't afford them, so perhaps it isn't a terrible thing after all.
     
  3. The_Abyss

    Capodecina

    Joined: May 15, 2007

    Posts: 11,071

    Location: Ipswich / Bodham

    https://www.ftadviser.com/pensions/2018/03/21/regulator-threatened-action-on-carillion-seven-times/

    I guess this accurately reflects the point I was making about it being all well and good having the right legislation and power, but it is worthless if they are not used appropriately.

    The Pensions Regulator considered it adequate action to warn Carillion seven times about the level of pension contributions, but they turned out to be nothing more than hollow threats. Furthermore, the regulator has only initiated using these powers three times, and only actually followed this through once.

    Once the current legislation passes, I imagine that the regulator will fully flex these powers and make some early examples of what it is capable of, to provide a deterrent for other employers. All these actions will lead to further closures of defined benefit schemes, but will hopefully ensure that these closed schemes have a better chance of adequate funding.
     
  4. platypus

    Caporegime

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    Location: Rhône-Alpes+Cambridge

    Is there a single regulator with teeth to follow their threats? Why should pensions be any different :p.
     
  5. antijoke

    Caporegime

    Joined: Jan 28, 2003

    Posts: 37,497

    Location: Stratford-Upon-Avon

    Can someone answer a question for me:

    Are my pension contributions today paying the pension of today’s pensioners?

    Rightly or wrongly it’s something I’ve always believed, am I wrong?
     
  6. do_ron_ron

    Sgarrista

    Joined: Oct 23, 2002

    Posts: 8,481

    Your money goes into general Govt coffers from which pensioners get the pension. It is not a strict relationship, it is not ring fenced. You could just as easily claim your pension money is paying for todays NHS or MOD.
     
  7. antijoke

    Caporegime

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    Posts: 37,497

    Location: Stratford-Upon-Avon

    OK, got it.

    Pretty funny then that the Govt mandate everyone has to have one now with their company to bump the coffers up
     
  8. do_ron_ron

    Sgarrista

    Joined: Oct 23, 2002

    Posts: 8,481

    The penny dropped with the Tories a few years ago that a large section of the population was not making any provision for pensions and would rely solely on the state in future years. This section of the population was the people on Minimum Wage or there about. Govt therefore had to force employees to get a pension but started it at 1% so it did not seem a lot. It has now gone up to 3% and will increase further next year. Some smaller companies are exempt

    https://www.unbiased.co.uk/news/financial-planning/a-guide-to-auto-enrolment-for-smes
     
  9. Dolph

    Man of Honour

    Joined: Oct 17, 2002

    Posts: 46,401

    Location: Plymouth

    Just remember, only the state is allowed to run a ponzi scheme and be defended.
     
  10. Mercenary Keyboard Warrior

    Sgarrista

    Joined: Aug 4, 2007

    Posts: 8,225

    Location: Wilds of suffolk


    Which pension contributions, it depends, as most are actually ring fenced

    Ni isn't however which is what I believe the posters just above me are referring to
     
  11. The_Abyss

    Capodecina

    Joined: May 15, 2007

    Posts: 11,071

    Location: Ipswich / Bodham

    State Pension: no contributions are made in the traditional sense, as it is a State benefit, but payment of National Insurance validates and increases your entitlement to that benefit.

    Defined contribution pension: your contributions build up your pension fund. Normally held under trust and ring-fenced from the pension administrator's own assets

    Defined benefit contribution (funded pensions): your contributions go into a fund ring-fenced from the employer into which other people also pay and retired members draw out their benefit payments. Your contributions build up entitlement to a future benefit amount.

    Defined benefit contribution (unfunded pensions): your contributions qualify you for entitlement to a future benefit amount, and there is no underlying fund. There's nothing to ring-fence other than a promise that you'll be paid something in the future.

    That's broadly it, in a general sort of way. In all but the second option it is highly likely that your money is being used to fund somebody else's pension, and the hope is that someone else will be funding yours when retirement comes. The State / Government isn't involved in any of them other than the State Pension though, unless they happen to be the employer for one of the other types of pensions (which they certainly would be for the latter).
     
  12. The_Abyss

    Capodecina

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    You're talking about auto-enrolment. Aside from mandating the amounts to be contributed by employer and employee, the Government has no state in the retirement funds of anyone saving into these pensions. The pension savings belong to the individual alone, and are not blended with any other.
     
  13. antijoke

    Caporegime

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    Does it? I thought it goes into a big pot as though to speak.
     
  14. The_Abyss

    Capodecina

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    It will be collectively invested alongside other people's pension funds, but it is clearly identifiable as your own.
     
  15. Meridian

    Man of Honour

    Joined: Oct 18, 2002

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    Location: Vvardenfell

    My understanding is that the auto-enrolment pensions are bog-standard defined contribution private pensions. The employer sets up the scheme, and hands over a monthly contribution, but the scheme is administered by a private company, such as Aviva or Aegon. It's just a way to force people to take out a private pension, so as to reduce the future drain on the public purse.
     
  16. The_Abyss

    Capodecina

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    It is simple to opt out. The intention is to change people’s behaviour so that they understand that it might actually be a good idea to save their own money for their own retirement. It is odd - even post-pension freedoms a majority of people still seem to resent the need to save for themselves, and see it as a cost rather than a benefit.
     
  17. platypus

    Caporegime

    Joined: Jul 25, 2003

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    Location: Rhône-Alpes+Cambridge

    How do you change the mentality though?

    The older generations think they're entitled to everything despite not paying in enough, the younger generations have had access to easy credit and in my opinion - on average - tend to be more profligate and save less. It'll take several decades to change that.
     
  18. Stretch

    Capodecina

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    Most private pensions allow you to manage your own investments. There is a default plan, but the money is yours and you can chose to reinvest in large variety of other funds whenever you want. The fees for each fund are transparent and clear upfront. Any growth goes directly back into your own pot for you to invest as you want.

    You can login to a portal anytime, see how much you pot is worth and change the way it’s invested. Changes Are made nexday in most cases. It’s all tax free.

    It’s a really good way of investing.
     
  19. antijoke

    Caporegime

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    Location: Stratford-Upon-Avon

    So this new scheme from the GOVT is a private one? How do I go about getting the details for it? Ask my employer?
     
  20. Stretch

    Capodecina

    Joined: Feb 14, 2004

    Posts: 11,254

    Location: Cambridge

    My understanding is there isn’t a government scheme as such. All employers are just legally obliged to enroll their employees in a private scheme which the company has arranged, and makes monthly contribution.

    So the scheme people get will be down to the employer.