New Home Owners And Snagging Forum
Investments => Cash ISAs and saving accounts => Topic started by: The Prophet on December 26, 2015, 11:32:56 am
-
If you are living in a world thinking that your final-salary also known as defined benefit pension is safe, think again.
As Merryn Somerset Webb writes in MoneyWeek, "a recent paper from, the Pensions Institute suggests that around 1,000 of the 6,000 UK private sector pension schemes offering defined benefit pensions - the ones that pay you a percentage of your final salary inflation-linked for life – are “highly unlikely” to be able to pay out all they owe in full."
Apparently they have a combined pension deficit of £45bn that they will ever be able to make up. The Pensions Institute says the situation is so bad that radical measures are needed such as pension schemes restricting member’s benefits even after they have started receiving their pension payments.
So how has this happened? Well Gordon Brown’s removal of the pension fund dividend tax credit, reduced the total return on money the funds had invested. Next, when stockmarkets were booming the companies took contribution holidays as their pensions obligations then, looked fully funded. Then there is the life expectancy. This has risen faster than the trustees of pension funds expected. Finally, in a desperate attempt to limit risk, many pension funds got out of equities after the financial crisis and went into bonds, the yield on which has now collapsed. This is the most serious as the yield on bonds is what pension funds use to meet its future obligations. The lower the rates, the bigger pension fund deficits get.
So those who have retired who are now receiving what appeared a generous final salary pension, may get a letter early next year telling them they will be getting less and what they and most “hard working British people” thought was guaranteed for life is nothing of the sort! The blame for this lies with the unelected central bank officials that created the low interest rate monetary policies.
-
The blame should be on the companies that raided the pension pots to boost profits in the good times when projected pensions seemed fully funded. They should never be allowed to raid the fund ever.
-
The blame should be on the companies that raided the pension pots to boost profits in the good times when projected pensions seemed fully funded. They should never be allowed to raid the fund ever.
Companies cannot touch the pension funds, they are held in trust. What they did was stop adding to them when shares were doing well and now its not so good there is a deficit. Gordon Brown should never have stopped dividend tax relief either!