I don't understand, Retirement plans of millions of Britons at risk

avantra

This is from the Torygraph.

I read it but still feel a bit thick, can some wise owl explain here why pumping new cash is bad for a final pension?

Generali

avantra wrote: »

This is from the Torygraph.

I read it but still feel a bit thick, can some wise owl explain here why pumping new cash is bad for a final pension?

No need to feel thick.

Interest rates on Gilts were to some extent held up by the belief amongst investors that the Government would need to borrow a certain amount of money. If some of that is going to be printed rather than borrowed then Gilt prices can fall (although they'll rise in the longer term IMO).

From the article:

Unfortunately for pension funds, the amount they are compelled to spend on their pensions over the coming years depends on the interest rates on government debt. These have fallen since Thursday by the biggest amount in history.

vivatifosi

I think the article also underplays a couple of points. Its emphasis is on Defined Benefits (Final Salary) schemes, but those who need to purchase an annuity from a rapidly diminishing Defined Contribution pension pot will also be affected. It shows how their current values are affected, but if markets don't pick up in the next few years then so will their future values - that's a lot of pensioners whose pensions won't meet projected values and for whom it will be too late to add to their funds.

In addition I don't see how governments can fail to put off addressing civil service pensions much longer. I don't think it will fall to this government - who, lets face it - have proved to be pretty cr&p on all things pension related, but it will have to be addressed by the next. I think that the current political environment will mean it has to be a manifesto pledge.