Pension lifeboat set to get swamped

baby_boomer

Guardian

"Britain's 7,411 defined-benefit pension schemes face a net funding shortfall of £242bn – more than 10 times the aggregate deficit recorded a year ago............

................Many pension experts believe the PPF has become a financial and political timebomb. One insolvency expert said it was "logically inevitable" the shrinking number of defined-benefit schemes will eventually not be able to support the funding needs of the PPF.

David Cule, principal at Punter Southall, pointed out the deficit is already "significantly greater than the quantitative easing package" and "on a par with the level of support being put together for the banking system"..."

Kez100

Imagine, in addition, the level of the hidden problem of public sector defined benefit schemes.

Isn't it rubbish because we are in the depths of recession? If we assume it doesn't last forever and we get complete meltdown, what would the deficit be if the FTSE returned slowly to say 6700? For example, I've just been told how lucky I am that I ma buying cheap units now.If companies put in extra now and the funds improve won't the problem be very much less?

baby_boomer

If "units" are so "cheap", why has the Bank of England pension fund - the nearest thing to legalised insider dealing - just gone 70% into index linked gilts?

Scotsman

"....pressure from pension schemes will reduce the dividend-paying powers of some companies and thus lower the attraction of shares and reduce the returns made on such investments. So while helping the scheme of one company, overall this may harm schemes investing in equities as a whole..."

dunstonh

If "units" are so "cheap", why has the Bank of England pension fund - the nearest thing to legalised insider dealing - just gone 70% into index linked gilts?

Probably for the same reasons insurance companies were forced to continue selling equities after the market bottomed out after the last stockmarket crash meaning they missed most of the 5 years that followed where you doubled your money. Financial solvency issues.

jamesd

baby_boomer wrote: »

If "units" are so "cheap", why has the Bank of England pension fund - the nearest thing to legalised insider dealing - just gone 70% into index linked gilts?

"Just" isn't the normal way to say "one to two years ago":

"2007-08 was a year of major structural change for the Fund:

- at the request of the Bank, and after careful consideration, the Trustee made a fundamental change in investment strategy, as a result of which the Fund’s assets are now predominantly invested in gilt-edged securities;"

On 28 Feb 2007 they were 25.6% in gilts. By 29 Feb 2008 they had already switched to 70.7% gilts.