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Plan to change private pension inflation link

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Comments

  • vivatifosi
    vivatifosi Posts: 18,746 Forumite
    Part of the Furniture 10,000 Posts Mortgage-free Glee! PPI Party Pooper
    Surely saving for old age should be encouraged.

    That's my issue.

    From the pension fund's side: yes there's the potential to save money, but it also increases the administrative burden. Government tinkering cost schemes more in terms of administration as it totally changes the valuation of pensions, the scheme valuation etc :mad:. The RPI link came in in 1995 (under the Conservatives) and already we've got schemes with different tiers of benefits in. More work with actuaries, more work for pension administrators.

    From the future pensioner's side: they've saved in over xx years, DB schemes are supposed to be safer, now, with little time to make up a shortfall, they stand to get less money.

    My question is who it benefits? Trustees will be frustrated with more tinkering, those who have saved will worry that their pensions will not leave them as comfortable as projected. Companies may breathe a sigh of relief. But ultimately if, as is currently happening, fewer people save, then more people will need pension credits and we will all have to pay for that. So what will it achieve?
    Please stay safe in the sun and learn the A-E of melanoma: A = asymmetry, B = irregular borders, C= different colours, D= diameter, larger than 6mm, E = evolving, is your mole changing? Most moles are not cancerous, any doubts, please check next time you visit your GP.
  • Malcolm.
    Malcolm. Posts: 1,079 Forumite
    edited 8 July 2010 at 10:59PM
    It is the indexation for payments. So it will reduce payments on all accrued pension provision.

    This govt is bonkers, trust me!

    Are public sector cuts unpopular with the civil service?
  • Malcolm.
    Malcolm. Posts: 1,079 Forumite
    vivatifosi wrote: »
    That's my issue.

    From the pension fund's side: yes there's the potential to save money, but it also increases the administrative burden. Government tinkering cost schemes more in terms of administration as it totally changes the valuation of pensions, the scheme valuation etc :mad:. The RPI link came in in 1995 (under the Conservatives) and already we've got schemes with different tiers of benefits in. More work with actuaries, more work for pension administrators.

    From the future pensioner's side: they've saved in over xx years, DB schemes are supposed to be safer, now, with little time to make up a shortfall, they stand to get less money.

    My question is who it benefits? Trustees will be frustrated with more tinkering, those who have saved will worry that their pensions will not leave them as comfortable as projected. Companies may breathe a sigh of relief. But ultimately if, as is currently happening, fewer people save, then more people will need pension credits and we will all have to pay for that. So what will it achieve?

    There's always NEST. :D Many Final Salary schemes are no-longer linked to final salary, the terms appear to constantly be changing. However, in general, sthey are still better for employees than their defined contribution counterparts.
  • vivatifosi
    vivatifosi Posts: 18,746 Forumite
    Part of the Furniture 10,000 Posts Mortgage-free Glee! PPI Party Pooper
    Malcolm. wrote: »
    There's always NEST. :D Many Final Salary schemes are no-longer linked to final salary, the terms appear to constantly be changing. However, in general, sthey are still better for employees than their defined contribution counterparts.

    My issue with it Malcolm is that the scheme that I'm a trustee of is pretty much closed. What's the point in redefining a scheme that people have already paid into? I don't have a problem with changing future accruals, but those already accrued should be sacrosanct. I just find it a dangerous prescedent, whoever it favours.
    Please stay safe in the sun and learn the A-E of melanoma: A = asymmetry, B = irregular borders, C= different colours, D= diameter, larger than 6mm, E = evolving, is your mole changing? Most moles are not cancerous, any doubts, please check next time you visit your GP.
  • C_Mababejive
    C_Mababejive Posts: 11,668 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    What business is it of HM Government with regard to privately run pension schemes and how they index pension entitlements? If the trustees of a FSPS are comfortable with their funding arrangements then it is for them to ensure security and distribution. The media would have us all believe that most pension schemes are knackered but thats not the case. In addition,workers have PAID their hard earned wages into those schemes for decades and they should not have entitlements STOLEN from them.
    Feudal Britain needs land reform. 70% of the land is "owned" by 1 % of the population and at least 50% is unregistered (inherited by landed gentry). Thats why your slave box costs so much..
  • artha
    artha Posts: 5,254 Forumite
    On a broader theme what's next? Will index linked gilts and NS&I index linked certificates switch to CPI thus making it harder to save to pay for your retirement?
    Awaiting a new sig
  • Malcolm.
    Malcolm. Posts: 1,079 Forumite
    vivatifosi wrote: »
    My issue with it Malcolm is that the scheme that I'm a trustee of is pretty much closed. What's the point in redefining a scheme that people have already paid into? I don't have a problem with changing future accruals, but those already accrued should be sacrosanct. I just find it a dangerous prescedent, whoever it favours.

    I agree, I don't understand why the Government would want to tinker so, plus many of the people it impacts would, I suspect, be Tory voters.

    The people it might favour would be the valuers and perhaps assist some schemes with a shortfall. However as a minimum, it should be upto the trustees to choose CPI or RPI. I can't see a one size fits all retrospective approach being very popular.

    Perhaps some large companies with pension shortfalls have been lobbying the government?
  • Generali
    Generali Posts: 36,411 Forumite
    10,000 Posts Combo Breaker
    http://news.bbc.co.uk/1/hi/business/10557675.stm

    Private pensions to be index linked to CPI, not RPI.



    Public sector pensions were re-linked to CPI in the recent Emergency Budget.

    See how this divide and rule nonsense works now?

    The UK cannot afford the pensions that have been promised and this is just another part of an ongoing default (eg raising the retirement age and breaking the link with earnings). I expect the default to go further as if the money isn't there to pay for something you can't pay for it no matter how high a priority you make it.
  • vivatifosi
    vivatifosi Posts: 18,746 Forumite
    Part of the Furniture 10,000 Posts Mortgage-free Glee! PPI Party Pooper
    Generali wrote: »
    The UK cannot afford the pensions that have been promised

    But these are private schemes Gen, some of which are fully funded. I thought that we were moving to a smaller government, this is unnecessary and unwarranted intervention.
    Please stay safe in the sun and learn the A-E of melanoma: A = asymmetry, B = irregular borders, C= different colours, D= diameter, larger than 6mm, E = evolving, is your mole changing? Most moles are not cancerous, any doubts, please check next time you visit your GP.
  • chucky
    chucky Posts: 15,170 Forumite
    10,000 Posts Combo Breaker
    Generali wrote: »
    The UK cannot afford the pensions that have been promised and this is just another part of an ongoing default (eg raising the retirement age and breaking the link with earnings). I expect the default to go further as if the money isn't there to pay for something you can't pay for it no matter how high a priority you make it.
    that's fair enough and maybe even necessary.

    the irony is that if the previous government had done it they would have got hammered by many, especially on here...

    it's being done, but on the other hand people are saying it's all fine and is required because of the government we have.

    it's not a partisan point at all, it just smacks a bit of double standards
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