Company pension funding comparison

ReportInvestor

It's not just newspaper headline writers that play on ignorance.

The political left & unions will criticise companies who took "pension holidays" while ignoring the legislation that prevented the companies building up pension surpluses (presumably the Treasury wanted its corporation tax).

It's good to see the regulator assessing investment risk differently, depending on a company's own financial strength.

Anyway, a good discussion. Are you happy to get back to compiling the "facts" about the state of different company schemes?

Debt_Free_Chick

ReportInvestor wrote:

Are you happy to get back to compiling the "facts" about the state of different company schemes?

Oops ....

it really should have been a new thread - sorry

ReportInvestor

I spoke too soon :rotfl:

Those pesky broadsheet journalists in the Times are scaring us again

They've been having dangerous conversations with the Pension Regulator and assorted actuaries .

The Regulator, while saying that it was important not to be alarmist, did concede that:

".. The average company assumption [of mortality] is two years below a projection that itself may be an understatement......”

Two years out would be another £48bn-£64bn on the cost of providing these final salary pensions. But what's £48bn-£64bn between friends if you can afford it?

EdInvestor

Since the pension schemes are all using different assumptions, and valuing their liabilities in different ways, it seems unlikely to me that the funding statements are going to make much sense to anyone.

As for restoring public confidence in pensions, forget it.Lost and gone forever, methinks, at least if we mean traditional pensions like final salary and With-profits ones, where smoke and mirrors are the order of the day and only the actuaries really understand what's going on.

From now on, a pension will hopefully just be regarded as a tax wrapper ( like an ISA) containing a set of investments.Trust won't be an issue: investment skills will be the point, transparency will be the norm.

And a good thing too.

It's outrageous that some people have paid for as much as 40 years into f/s pensions and found at the end they will get nothing. This must never happen again. Investors and employees must be able to see what is happening to their retirement savings at regular intervals so they can take action if they feel the need.

ManAtHome

J I Case, 96% funded at 5th April 2005 (think I'm due about a tenner a week eventually..). Claims that the shortfall has ben eliminated by rising asset values since the valuation.

Other bits which may be of interest - this is a closed scheme (no active members, no company contributions). My bit was from David Brown Tractors, taken over by JIC who I think have since waved byebye to the UK. The asset value is around 70% of the estimated "wind up now" value, investment is 50% shares, 25% corporate bonds, 25% govt securities.

ffacoffipawb

From a scheme where I was a member from 1990 to 1993 and deferred pension was circa £1,200pa at that time, probably revalued to about £2,000pa now (payable in 20 years time) .........

Windsor Pension and Life Assurance Scheme
(Life Assurance Holding Corporation Limited)

As at 01/01/2004 (!!)

Assets £59.7m
Liabilities £73.7m
Deficit £14.0m
Funding Level 81%

States position deteriorated as at 31/12/2005, but valuation not completed so no figures given.

Wind-Up basis funding level is 48% as at 01/01/2004, approximate position at 31/12/2005 is 40%.

Parent company is Swiss Re, so wind up unlikely and Swiss Re worth £15bn according to the correspondence.

Investments : 50% Equities (of which 82% UK, 18% Overseas) and 50% Fixed Interest.

Cook_County

I am more gloomy:

My largest pension is a final salary scheme with Ernst & Young - closed to existing employees some 3 or 4 years ago. I can't say I understand all of these figures:

Company: Ernst & Young
MFR value of liabilities as at 1 October 2004 = £462.3m
Fund's assets = £396.8m
Defecit = £65.5m
MFR funding level = 84%

HOWEVER the statement says that these figures ignore increases in life expectancy that the trustees now feel appropriate. Therefore the shortfall as at 1 October 2004 stood at £127.8 million, bringing the funding level down to 68%!

By 1 October 2005 (a time when stock markets rallied) the defecit had grown to £140.7million!

The notes go on to say that on widing up at 1 October 2004 the liabilities stood at £1,070.4m; assets were £396.8m, so that shortfall on winding up is an astonishing £673.6million!

Now - Ernst & Young is a partnership, so I don't suppose the partners in - say - 10 years time would want to pay into a pension scheme to benefit employees like me who by then would have left them long before. I cannot imagine they will, and so I expect the plan to be wound up long before I can draw any of the money in just under 19 years time.

So seeing that Ernst & Young has a £674m defecit - and this has grown since - what would an IFA do today? I could transfer the money to a stakeholder plan but then it is unlikely I would be unable to generate sufficient investment return to create the inflation proofed final salary (with widows benefits) that I was promised. The only attraction I can think is that I could take a lump-sum at age 55, plus of course I would lose the worry over the security of the fund. Advice gratefully received!