Plan to change private pension inflation link

Generali

:A

vivatifosi wrote: »

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.

True. However many private pension schemes will end up as the problem of the taxpayer. Many companies (eg GM) made unrealistic promises to their staff as it's very easy to offer a striking workforce jam tomorrow.

Many of these private pension schemes offering index linking will be promises made by former Governments before companies were privatized although some private sector pensions are index linked (eg many private school schemes).

Generali

chucky wrote: »

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

Very true and there are many on here that post highly partisan stuff, some of whom are clearly employed by one political party or another (eg ninky) or merely cheerleaders (eg Rochdale Pioneer). I picked the Labour ones as they came to mind, the Tories are as bad.

The three largest parties in the UK must share responsibility for the grown mess that is all pension provision in the UK. The chance of people under the age of 40 getting what they have been promised is basically nil. Unfortunately it's not possible to work for 30 years and then retire for 35 in splendor unless you really focus on saving for retirement.

chewmylegoff

quite a lot of people under the age of 40 haven't been promised anything at all, just get a money purchase pot.

A._Badger

You can say he's partisan (he's certainly Right of centre) but Jeff Randall, formerly about the BBC's sole non-socialist pundit, now with the Telegraph, offers a fascinating insight into the BBC's pension scheme here: http://www.telegraph.co.uk/finance/economics/7880312/The-cure-is-painful-work-harder-save-more-and-spend-less.html

vivatifosi

Generali wrote: »

:A

True. However many private pension schemes will end up as the problem of the taxpayer. Many companies (eg GM) made unrealistic promises to their staff as it's very easy to offer a striking workforce jam tomorrow.

That then means that what the big schemes want is what the little schemes will have imposed upon them. There are plenty of well run smaller schemes that don't have such issues and - from the sound of it - this will be totally pushed on them. As a trustee we have had no advance notice, our advisors can't give us a position yet, but at 9am the phones will be ringing off the hook from concerned pensioners. How can that be right?

My position remains the same - accrued benefits are contractual and should be sacrosanct. If companies want to change schemes going forward then they should be able to - that is where their flexibility lies.

This will just lead to a further lack in confidence in pensions and fewer people saving towards their retirement - people who the government will then need to fund through pension credits (or whatever the equivalent is down the line), people who would not have needed such state support in the past. How can that not cost the state more in the long run?

Generali

vivatifosi wrote: »

My position remains the same - accrued benefits are contractual and should be sacrosanct. If companies want to change schemes going forward then they should be able to - that is where their flexibility lies.

I agree in principle. However, then happens if the money simply isn't there to pay?

AIUI (imperfectly I admit) the current system, there is a bailout scheme for pension funds which is paid for by other pension funds. Just as we have seen the solvent dragged down by taking on the debts of the insolvent with the banking sector, it would be easy to envisage a scenario where the same thing happens with pension schemes.

tincans

It's somewhat ironic that after 13 years of bleating about Gordon Browns "tax raid on pensions", that a Conservative government does a one off transfer of between £50bn and £100bn from employees and pensioners to companies, with no discussion or warning.

One of the side effects of quantitative easing is to depress Gilt Yields to a historically low level. This increases the deficit of pension schemes and provides the perfect cover for a massive raid on employee pensions.

Old_Slaphead

tincans wrote: »

It's somewhat ironic that after 13 years of bleating about Gordon Browns "tax raid on pensions", that a Conservative government does a one off transfer of between £50bn and £100bn from employees and pensioners to companies, with no discussion or warning.

One of the side effects of quantitative easing is to depress Gilt Yields to a historically low level. This increases the deficit of pension schemes and provides the perfect cover for a massive raid on employee pensions.

Where do you get the £50bn-£100bn figure from ?

tincans

A._Badger wrote: »

You can say he's partisan (he's certainly Right of centre) but Jeff Randall, formerly about the BBC's sole non-socialist pundit, now with the Telegraph, offers a fascinating insight into the BBC's pension scheme here:

From Jeff Randall's rant.

"Who in government approved these contracts? The culprits, in effect, turned the state from a generous employer into a bankrupt charity"

The redundancy terms were instigated under the Thatcher government.

As if he didn't know.

tincans

Old_Slaphead wrote: »

Where do you get the £50bn-£100bn figure from ?

The Times today (page 41) state one off benefit of £50-100bn.

KPMG reckon £100bn

Actuaries Hyman Robertson estimate £50bn for FTSE 350 companies alone.

The £50bn-£100bn is a one off benefit (effectively reducing pension deficits as soon as the change is made). The cash benefit feeds in over many years.