Pension Wind Ups - a list of broken promises?

dunstonh

I can't even bring myself to like the one's who are as old as me and know nothing else but life, pensions, mortgage and investments advising, let alone the ones's that are here today and gone tomorrow which has been the norm!

I know where you are coming from when looking at that type. The sooner they have all retired or died the better. Many look half dead already.

The old ex- allied crowbar salesman type who wouldnt know the difference between a pension or an endowment but can make the latter sound like the best thing since sliced bread certainly do nothing to enhance confidence in the industry. However, you shouldnt class all of us as that type though.

djohn2002uk

This thread seems to have no value as regards money saving. Seems no more than a one man crusade from someone who likes typing. Where the benefit lies for the rest of us I know not and the sooner it's wound up the better.

djohn2002uk

Pal

OK lets start to get the facts straight about the scale of the problem.  Pal, I am afraid you are guilty of poo-pooing a problem that is far greater than you would have us believe.  See http://www.mailonsunday.co.uk/pages/live/articles/news/news.html?in_article_id=101254&in_page_id=1770

I quote from that article:
That report is nearly three years old and the figures no doubt contained a further time lag.  What are the actual numbers now, I wonder?

Oh no!! Quotes from the Financial Mail!!! Now we really have done downhill. ;D

Many of those 100,000 schemes will have been wound up after they were merged in with other schemes and all of the benefits transferred IN FULL to another pension scheme. It is the empty Trust that is wound up. This is very common following M&A activity.

In practice I have never advised on a scheme that has gone into wind up. Quite a few have closed to new entrants, and some have reduced future benefit accrual for existing members, but none have closed completely and members have never lost accrued benefits. On the other hand I have closed down over 15 pension trusts after securing all of the benefits in another pension arrangement. If my experience is typical then the number of members impacted in that 100,000 schemes can be reduced fairly quickly.

Perhaps more importantly, the vast majority of those 100,000 schemes will have less than 10 members in them, and their winding up will have followed the complete payment of all the benefits, usually to secure an annuity. Again it is the wind up of an empty trust.

The lesson here is not to believe everything printed in papers.

I have no doubt that the 60,000 figure is on the low side if we are considering everyone who has ever lost out from a pension scheme closure ever. But the Government published to 60,000 people figure, and I think it was the number of people affected since about 1988, although my memory might be failing me on that one. Someone else might be able to help on that.

Finally, I do not work for an insurance company.

DavidLaGuardia

I have to ask myself a simple question. If I was an repsonsible employer who wanted to encourage and to assist in the savings of pensions: Would I set up a final salary scheme?
Quite frankly the answer would be no. How could I possibly assess the future liability?
Our "interesting times"have meant facing up to certain realities. I care and recognise the need for an increasing aging population to have proper provision but we need to take a serious look at what is workable in the future. This does not just inlude the way we look at pension but also our working life patterns.

deemy2004

Yep

We have to get realistic, and can't keep harping on to the past, of how good the pension schemes of the past were.

Whats important is that the economy keeps growing so that it can keep pace with the demands of an ageing population, for when it starts to falter in the face of this demand, that is when the situation will be come dire ! for ALL !

We just can't afford final salary schemes anymore, and its a fact of life that unfortunately schemes are being wound up / closed left right and centre becuase they are unsustainable.

Pal

Benefits in full? Don't you mean accrued funds in full? Perhaps you have a list Pal of which ones were true continuing but merged final salary based schemes and which were, er.. something else ?

I meant securing the benefits in other defined benefit schemes, by far the most common solution that is applied when companies merge, although this is obviously becoming less common now that fewer DB schemes are open to new members. By the same token less M&A activity is occuring so this issue arises far less than it did a few years ago.

So is final salary pension contribution freezing, redundancy & ultimate wind up after dividing and conquering what's left, I think.

No, it that isn't very common at all. In fact I have never heard of it happening in a real life situation, only your posts here, and I am willing to bet that I have experience of significantly more company pension schemes than you do.

So the accrued benefits are locked in but the subsequent contributions could perform wildly?

No, as mentioned above. Almost all transfers are to another defined benefit scheme.

Oh did I say "Good" too soon?  Are you splitting hairs now?  You mean you have closed down final salary schemes and recommended transfers into cheaper money purchase schemes that contain no final salary promise within the projected benefits?

No. I mean that I have advised companies on establishing money purchase schemes for new employees who can make their own mind up whether or not to accept an employment offer. Existing employees largely remain unaffected, although some of the more extreme benefit promises are removed, such as fix 5% annual pension increases. But again, this is only for future service being earned. Accrued benefits are not impacted.

"impacted"? Did it harm them?

I have no idea. As I said before, in most cases the benefits would have been secured in full elsewhere prior to the scheme closing down. Some people will have lost out in the way that you claim to have done, but the 100,000 number is just an attempt by the Mail to sensationalise the issue.  

You mean the money has all been transferred out and so "Will the last one out, please turn off the lights"?

Exactly. All the members have received their benefits in full, either through the purchase of an annuity or by securing them in another pension scheme trust, so the empty pension scheme trust is then wound up.

No one said one should, especially if the papers are part of your employer's pensions presentations or those of the trustees or the nominated IFA who comes in to present it, or to present the latest proposal to change it to a second rate money purchase scheme perhaps?  On the other hand, the figures I quoted were from Opra, who have lists.  Your assumptions Pal are from?  Oh I forgot, your lists perhaps?

I do not have any such list. Why would I have? What use would it be to me?

I think if you review my previous posts on this site you will find that I am a strong advocate of employees taking matters into their own hands when their employer is reducing their benefit package by changing to another type of pension scheme. It is the same as taking a paycut and employees should treat it as such. I have a great deal of sympathy with the civil service employees who are about to have their benefits reduced. They should be demanding a payrise to compensate. Whether they will get it is another matter of course.

No I will, ... it was probably the 60,000 that has been banded about as an estimate the government gave some time ago of the number of beneficiaries of its proposed £400M pension rescue package for those whose employers went bust with pensions schemes wound up since 1997.  How that number squares with the number affected in one scheme alone - the 40,000 Turner&Newall employees with pensions thought to be at risk - is anyone's guess.(See http://news.bbc.co.uk/1/hi/business/3919199.stm)

Don't get me started on the £400m figure. My company is one of the many who published statements laughing at the Government's publication of that figure, because it is totally inadequate. The question is though, where will the extra money come from to compensate those 60,000 people for the fact that they invested in something that failed? The answer is, of course, other final salary schemes, making them less secure and giving their employers even more reason to want to close them down.

Ah, so you'll be a caveat emptor man then? To be honest Pal, with your fading memory, I really wonder if you are qualified old chap to offer advice on this to anyone other than the directors/trustees of companies feeling heat in the kitchen.  You have been riding with the hounds old boy.   Those days would soon be over if there was a proper solution to this, but you are probably safe because the collective British public consciousness can usually be relied upon to remain virtually comatose through all sorts of crises, can't it?

Perhaps you could leave the personal comments out of this. Given your obvious bias and my previous posts on MSE, I am happy to leave the readers of this site to decide which of us is best qualified to comment on the current pensions situation in the UK.

There is a severe problem with the lack of understanding of pensions by the UK public, which we really should be dealing with. A good start would be including finances within the maths syllabus in schools.

I have received a number of PMs from others stating that they consider this to be a troll thread, something that I am beginning to agree with. So here is a challenge for you: Instead of simply trying to blame every adviser and Trustee in the world for your unfortunately situation, why don't you post your proposed solutions to the current "pensions crisis" so that the site can discuss them?

DavidLaGuardia

Peter in simple terms you are trying to find blame for the failure in many schemes, when many of the current factors could not have been predicted.
Hindsight is a wonderful thing, but not a luxury given in advance.
I recently spoke to an old of mine who is a director in a company whose final salary scheme is on target because they did not take payment holidays when they were en vogue and it was my temptation to blame companies for taking holidays. But the reality is that even his company is not prepared to continue with the blank cheque approach.
Anyone in authority must make the best judgment they can at the time be they advisers, government or trustees. Sometimes there are genuine bad decisions made that need redress, but we are living so much in a blame and claim culture that often people lose a sense of reality.

deemy2004

to be a pension fund trustee ... duh! Oh, and I nearly forgot, Deemy, the last part of the secret of a prosperous and  trouble-free existence is that I must forget it and move on because otherwise I might make others feel uncomfortable ::)

Well what else can you do ?

Apart from trying to claim compensation from the government.

All I see is that these final salary schemes are unsustainable in a climate of low inflation and low interest rates, poor equity performance, with a rising aged population so they are likely do disappear and be replaced with products that are dependant upon market pricing.

The next lot that need to be addressed is the public sector. If they don't sort things out now, then the future looks very BAD !

Rafter

Hindsight, hindsight, hindsight......

If you made a promise that could not be kept what would you do?

That is the situation with public sector pensions. Final salary retirement at 60 is just not affordable with a rapidly ageing population without causing massive civil unrest as tax rates for employed people rocket.

Should we have seen this coming? Should all the pension payment holidays in the 80's and 90's taken place? No.... with hindsight. But at the time it looked to most people like a fair way of ensuring that companies weren't avoiding tax by lining their pension funds and we were all very happy to take the conservative tax cuts that that policy part funded.

I agree that any M&A activity that was basically a way of releasing pension fund surplus is immoral.

I think that companies and employees should be forced to make pension provision.

I think that final salary schemes which have the potential to line the pockets of todays pensioners at the expense of current employees and which risk bankrupting companies are wrong. The equitable life outcome is just wrong. A minority get a huge pension at the expense of a larger minority who all lose as a result of a stupid promise.

We are at risk of creating a wealthly pensioner class who place high demands on the health service and who control the political agenda because they are a growing population. Younger working people won't be able to afford to make pension provision while funding the public sector deficit.

There has to be some balance and some personal accountability.

It is totally unfair on people now nearing retirement that this has come about though and I'm really sorry you have been the victim on a number of occassions.

R.