MSE News: Private sector pensions 'collapse'

Former_MSE_Helen · 3 January 2012 at 4:26PM

This is the discussion thread for the following MSE News Story:

"Fresh incentives are needed to boost retirement savings as auto-enrolment nears, a report warns today ..."

Read the full story:

Private sector pensions 'collapse'

jamesd · 3 January 2012 at 5:19PM

The report is available at Workplace Pensions: Challenging Times (PDF).

Meeper · 3 January 2012 at 10:42PM

When are the MSE News team going to post any positive stories?

Billions wiped off pensions in August. I don't remember the news articles about billions being added on to pensions in the meantime.

Journalism sucks.

Pincher · 4 January 2012 at 2:31AM

As far as I'm concerned, the pension paradigm is dead.

I assume it was possible to get £13k annuity per £100k around 1992. The last refugee ship must have departed around 2007, maybe £8,000 per £100,000.

The next bailout scandal will be underfunded annuities going bankrupt.
People who live too long means losses for the annuity provider.
Their policies will be swept into a separate book, and moved to company B for a sum insufficient to cover the long term liabilities.
Company B will now run lower and lower on reserves, until it declares bankrupcy, and the government has to bail it out.

As the pensioners are all very old, it is in the interest of the government to stall on compensation while the victims die off.
Compensation will therefore start two years after company B goes under.

Audit fraud will be involved, of course. I expect company B will buy junk bonds (e.g. Greek) that claim to return 10%, some of which then inevitably default. So the auditors sign off, based on best case scenario, which they are not supposed to, but the risk catches up with company B eventually. Not a problem for comany A, which offloaded a long term liability at a discount.

oldvicar · 4 January 2012 at 5:15AM

Bold government action to reinvigorate workplace pensions is being called for by the Association of Consulting Actuaries (ACA), which argues there is a growing gulf between those in the private and public sector.

The government seems to be on course o reduce the 'gulf' - with a bonfire of public sector pensions rather than any bold action to reinvigorate pensions overall.

Old_Slaphead · 4 January 2012 at 10:44AM

oldvicar wrote: »

- with a bonfire of public sector pensions rather than any bold action to reinvigorate pensions overall.

"Bonfire" of public sector pensions - are you having a laugh?

Any suggestions as to what they can do to reinvigorate pensions overall that doesn't involve huge taxpayer subsidy?

AndrewNorthWales · 4 January 2012 at 11:45AM

Im one of the unlucky cases, Currently in the old NHS pension scheme and can retire at 60 with a decent pension.
Once the adjustments are done I will have to retire at 67 possibly 68 as I was born in June 76. Still with a decent pension but 8 years older. To be honest I dont know how I will feel at 60 and I may have decided to stay on anyway for the extra years but it is nice at the moment to know that if I dont want to then I dont need to.
Some of my colleagues have a retirement age of 55 at the moment lucky devils.

I dont think that I will drop out of the NHS pension scheme though like some of my friends have done, as it is still a good deal I think, even if it does take a few more coins from my wallet each month from now on.

Private sector pensions are in a poor state at the moment but I still think it is worth taking one up if you havent already as living on the state pension alone doesnt seem to great a prospect to be honest for any of us.
The problem now is that a great many people are just dumping the pension schemes both public and private which is going to leave us in a grand old mess in the future.

jamesd · 4 January 2012 at 12:19PM

oldvicar, AndrewNorthWales, no sign of a bonfire, the public sector schemes are and are planned to remain just about the best deal going in UK pensions.

Consider page 18 where they report funding levels for these private sector schemes:

Defined benefit: employer 21.4%, employee 6%
Defined contribution trust-based: employer 6.9%, employee 4.5%
Defined contribution group personal pension: employer 5.8%, employee 4.4%

And the defined benefit schemes are mostly not available to new joiners any more in the private sector: on page 9, just 9% are open, 54% are closed to new joiners, 37% are closed for both new and existing employees.

Consider page 32 of this report where it says how risk should be split between employer and employee in the opinion of those running these private sector pensions:

7% say employer should take all investment risk. 12% majority, 37% shared.
8% say employer should take all longevity risk. 11% majority, 31% shared.
7% say employer should take all inflation risk. 11% majority, 35% shared.

And that's from a survey where many of those replying are operating private sector defined benefit (final salary and similar) schemes. Makes even the changed public sector schemes with some sharing look good compared to the private sector provider opinions.

Looking at retirement ages they note on pages 10 and 11 that "in under a decade close to four out of ten expect the typical retirement age to be 67 or later" and that's for these private sector schemes.

AndrewNorthWales, be glad you have as good a deal as you have and if you want to retire earlier, take a look at stocks and shares ISA investing, money available at any time, or personal pension investing, money available with income cap from age 55. Those are how anyone, public or private sector, can look to retire earlier than the basic age of their work scheme(s).

Easy to be unhappy with any particular deal but comparing this report to what's happening in the public sector should give those in the public sector reasons to be glad that they have the pension deals they do.

atush · 4 January 2012 at 12:21PM

You will still be able to 'retire' at 60 on your pension accrued up until the changes take place as past accrued years in previous schemes aren't affected. If you can afford to or not will another thing entirely.

But given we have to work that long, don't expect more than a cuppa from the rest of us?

AndrewNorthWales · 4 January 2012 at 12:59PM

I have had a look through the proposed changes, and they seem fair enough to me really.
I will have to work almost another decade but I will come out with the same money if I do.
I was always resigned to working till 65 anyway it was only with the joining of the NHS and the 60 retirement age that made my eyes light up at the time.

I am not a massive bread head so the money though important to survive isnt the main goal for myself, being young enough to enjoy some freedom was worth more to me.
Its all well and good living longer, but doing that in a care home sitting in a chair with my memories isnt very appealing - Id rather go at 70 after ten years break and still able bodied.

2 years break though mmm - not that great is it.

As for the private sector pensions , they are a disgrace - I would like to see some help offered to people whom are willing to provide for their old age, there are plenty who dont care and will turn up at 67 holding out their bowl after spending their entire working life living it up buying Honda S2000's and Ipads but not saving for their old age.

atush · 4 January 2012 at 1:17PM

People today at 70 are younger and fitter than 55 yr olds were decades ago.

So, given you are in the NHS and know something about health we'll be betting you will still feel young and attractive at 67 ;-) But in the mean time if you save outside your NHS pension (and with the other ones you mentionned on another thread) you may still be able to at least part retire at 60? I have my fingers crossed for you anyway ;-)

MSE News: Private sector pensions 'collapse'

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