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ITV Big Pension Prog
MSE_Martin
Posts: 8,272 Money Saving Expert
Thought you may be interested in this (its a press release, not by me, but I thought pension MoneySavers would find it useful.)
Martin
Where’s My Pension Gone?
Transmits January 25 at 9pm on ITV1
Critics say we have a pensions crisis - hundreds of billions of pounds saved by members of employee schemes have vanished without a trace. It has left thousands of workers with little or no pension and millions more facing hardship in old age because of slashed benefits.
In a revealing documentary for ITV1 business journalist Jeff Randall investigates how the British public has been failed so massively by the company pensions system, and tries to find out exactly why our pensions have disappeared.
In recent years two thirds of big British companieshave closed their traditional pension
schemes - some to new recruits, some to all staff. The list includes Boots, Barclays, WH Smith and ITV.
The documentary features interviews with the bosses of Sainsburys and the Royal Mail about their huge company pension deficits, and how they are trying to cope.
In the ‘fat cat’ years of the 80s and 90s company pensions were brimming with cash and those who retired were rewarded with a healthy pension which could be up to two thirds of their salary a year. Many company bosses saw the enormous surpluses in their pension schemes as a chance to take significant contribution holidays. This had a major impact years later, as the funds ran out of cash.
Gradually the surplus vanished and benefits for staff were gone as more money was being withdrawn by those already retired than put in by members and the companies themselves. Soon firms faced enormous pension deficits and in some cases even the threat of insolvency.
Justin King, chief executive of J Sainsburys plc, is one of many company bosses dealing with the pension crisis.
“Our scheme had gone into significant deficit, the largest figure we ever had was approximately £650 million and at the time we were reporting profits of £250 million. The size of the deficit was very significant in terms of the size of our profit,” he says.
King has been in the job less than three years, but believes he knows why his predecessors reduced payments into the company’s pension fund.He believes one of the reasons companies like Sainsburys took contributions holidays was because the money was deemed better spent elsewhere.
“I think you must remember that this is real money being paid into the pensions funds, so I think these decisions were being made in context of real, precious money and valuable resources for the company. The pension fund looked as if it was in good shape and the company had demands for that money in its future success,” he said.
As an example of this enormous shift in fortune Jeff Randall estimates that current Sainsburys checkout staff with a company pension for 20 years would could receive just £1500 a year when they retired.
The Royal Mail was also hit incredibly hard by the decision to stop making contributions to its pension fund. It had prided itself on being able to offer generous pension packages. But with over 300,000 existing and future pensioners the deficit reached £5.5 billion and became an enormous financial burden.
Chairman Alan Leighton took over the role six years ago and faced the daunting task of turning the company around.
“One of the things that happened when I turned up was I realised we didn’t have any cash which is quite an alarming thing not to have! The Royal Mail was on the verge of going bust,” he says.
Across the country payments offered by businesses were reduced, benefits stopped and employees lost all confidence in their pensions. But why didn’t the pensions professionals foresee that this crisis was going to occur?
City-based actuaries were responsible for advising large companies on their pension schemes, predicting trends and analysing how much they needed to contribute. Stephen Yeo, actuary for Watson Wyatt, explains that an aging population has also affected traditional pension schemes. The cost of providing pensions has risen because people are living longer.
To add to the misery the city investors also lost huge amounts when the stock market collapsed and took millions invested by pension funds with it. And one of Gordon Brown’s first decisions as Chancellor of the Exchequer in 1997 was to remove a key tax break for pension funds, which some estimate has cost them £5bn a year. The Government insists the impact of this change was insignificant compared to increased longevity, stock market volatility and the contribution “holidays” taken in the late 1980s and 1990s.
While millions of people face cuts in pension benefits, over a hundred thousand people have lost their pensions completely. When their companies collapsed their pensions disappeared too. The Government has setup assistance schemes for some company pensioners who have lost out, but not full compensation.
Ros Altmann, a leading pensions consultant and government critic, has advised employees who have lost their pensions on how to manage their future and the realistic chance that they may not now see a penny of their hard earned company pension.
“We all need to be aware that there is a pensions crisis and there is one now. I would say that about 80% of the country needs to be worried that when they come to the period when they want to retire they simply won’t have enough money, not anything like a decent level,” she says.
Altmann also says of pensions schemes which have collapsed completely: “Whatever happens to the employer the Government said the money would be protected. ‘Put the money in’ they said, ‘it’s the best thing you can do’. People did and now they’ve lost all of it and the Government said ‘it’s nothing to do with us’.”
Jeff Randall says: “Company pensions are meant to represent something solid, safe and secure. Instead they’ve become a byword for scandal. And for many of us, it seems as if all hopes for a long and happy retirement have gone - forever.”
In a revealing documentary for ITV1 business journalist Jeff Randall investigates how the British public has been failed so massively by the company pensions system, and tries to find out exactly why our pensions have disappeared.
In recent years two thirds of big British companieshave closed their traditional pension
schemes - some to new recruits, some to all staff. The list includes Boots, Barclays, WH Smith and ITV.
The documentary features interviews with the bosses of Sainsburys and the Royal Mail about their huge company pension deficits, and how they are trying to cope.
In the ‘fat cat’ years of the 80s and 90s company pensions were brimming with cash and those who retired were rewarded with a healthy pension which could be up to two thirds of their salary a year. Many company bosses saw the enormous surpluses in their pension schemes as a chance to take significant contribution holidays. This had a major impact years later, as the funds ran out of cash.
Gradually the surplus vanished and benefits for staff were gone as more money was being withdrawn by those already retired than put in by members and the companies themselves. Soon firms faced enormous pension deficits and in some cases even the threat of insolvency.
Justin King, chief executive of J Sainsburys plc, is one of many company bosses dealing with the pension crisis.
“Our scheme had gone into significant deficit, the largest figure we ever had was approximately £650 million and at the time we were reporting profits of £250 million. The size of the deficit was very significant in terms of the size of our profit,” he says.
King has been in the job less than three years, but believes he knows why his predecessors reduced payments into the company’s pension fund.He believes one of the reasons companies like Sainsburys took contributions holidays was because the money was deemed better spent elsewhere.
“I think you must remember that this is real money being paid into the pensions funds, so I think these decisions were being made in context of real, precious money and valuable resources for the company. The pension fund looked as if it was in good shape and the company had demands for that money in its future success,” he said.
As an example of this enormous shift in fortune Jeff Randall estimates that current Sainsburys checkout staff with a company pension for 20 years would could receive just £1500 a year when they retired.
The Royal Mail was also hit incredibly hard by the decision to stop making contributions to its pension fund. It had prided itself on being able to offer generous pension packages. But with over 300,000 existing and future pensioners the deficit reached £5.5 billion and became an enormous financial burden.
Chairman Alan Leighton took over the role six years ago and faced the daunting task of turning the company around.
“One of the things that happened when I turned up was I realised we didn’t have any cash which is quite an alarming thing not to have! The Royal Mail was on the verge of going bust,” he says.
Across the country payments offered by businesses were reduced, benefits stopped and employees lost all confidence in their pensions. But why didn’t the pensions professionals foresee that this crisis was going to occur?
City-based actuaries were responsible for advising large companies on their pension schemes, predicting trends and analysing how much they needed to contribute. Stephen Yeo, actuary for Watson Wyatt, explains that an aging population has also affected traditional pension schemes. The cost of providing pensions has risen because people are living longer.
To add to the misery the city investors also lost huge amounts when the stock market collapsed and took millions invested by pension funds with it. And one of Gordon Brown’s first decisions as Chancellor of the Exchequer in 1997 was to remove a key tax break for pension funds, which some estimate has cost them £5bn a year. The Government insists the impact of this change was insignificant compared to increased longevity, stock market volatility and the contribution “holidays” taken in the late 1980s and 1990s.
While millions of people face cuts in pension benefits, over a hundred thousand people have lost their pensions completely. When their companies collapsed their pensions disappeared too. The Government has setup assistance schemes for some company pensioners who have lost out, but not full compensation.
Ros Altmann, a leading pensions consultant and government critic, has advised employees who have lost their pensions on how to manage their future and the realistic chance that they may not now see a penny of their hard earned company pension.
“We all need to be aware that there is a pensions crisis and there is one now. I would say that about 80% of the country needs to be worried that when they come to the period when they want to retire they simply won’t have enough money, not anything like a decent level,” she says.
Altmann also says of pensions schemes which have collapsed completely: “Whatever happens to the employer the Government said the money would be protected. ‘Put the money in’ they said, ‘it’s the best thing you can do’. People did and now they’ve lost all of it and the Government said ‘it’s nothing to do with us’.”
Jeff Randall says: “Company pensions are meant to represent something solid, safe and secure. Instead they’ve become a byword for scandal. And for many of us, it seems as if all hopes for a long and happy retirement have gone - forever.”
Martin Lewis, Money Saving Expert.
Please note, answers don't constitute financial advice, it is based on generalised journalistic research. Always ensure any decision is made with regards to your own individual circumstance.
Please note, answers don't constitute financial advice, it is based on generalised journalistic research. Always ensure any decision is made with regards to your own individual circumstance.
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Comments
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One thing not mentioned is the fall in annuity rates ( due to a combination of lower interest rates and people living longer).
Ten years ago, a pension fund of 100k would buy you an income of 8 or 9k a year.Now you might get only half that.
So in some cases pension funds have been cut in half by the stockmarket fall (like endowments) and the income the smaller fund can buy is also halved
It's a different ball game.Trying to keep it simple...
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Lets hope the programme isnt sensationalist like some reports have been. In reality, these problems only impact on a minority of the population. However, they way the media has presented the problem over the last 5-7 years has altered the public perception against pensions. Whilst I am not a big fan of the pension product, it has resulted in people not paying as much into pensions but worse is that many are not paying towards an alternative and are doing nothing.Ten years ago, a pension fund of 100k would buy you an income of 8 or 9k a year.Now you might get only half that.
A bit more than 10 years ago. Closer to 20.
So in some cases pension funds have been cut in half by the stockmarket fall (like endowments) and the income the smaller fund can buy is also halved
If you take a bog standard balanced managed fund, say NUs balanced managed, as a benchmark (picked as NU are the biggest in the UK), then it would be 37% up now if all the money had been contributed just before the stockmarket crash and nothing since. I would say most people have their pension invested poorly but hardly anyone would have dropped in half. A decent sector allocated fund spread would be about 60% up now (assuming just sector average returns) and nearly double if you had managed to pick top quartile funds (best to assume average though).
Anyone who has a pension and hasnt had it reviewed in the last 5 years should be getting it reviewed ASAP. There is no excuse for having it badly invested and its easily resolved. Sometimes its just a single form changing the fund spread. Sometimes its transferring to another provider. Even if you end up in a bog standard balanced managed fund, at least you should get better than bank account returns over the long term.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
Ed and dh, I think you're both missing something...
quote - " In a revealing documentary for ITV1 business journalist Jeff Randall investigates how the British public has been failed so massively by the company pensions system, and tries to find out exactly why our pensions have disappeared. "0 -
Pensions are terribly confusing, aren't they?
Although there's much talk of deficits in final salary schemes, scheme closures and benefits getting cut in the long term, very few people have actually lost their pensions and very few are likely to.
What will happen is that the pensions will be less generous in future, and more and more people will be switched over to the money purchase type of pension where the worker takes the risk.
Some of the people who already have this type of pension are really suffering now, particularly the people who invested in With profits funds which have been affected just like those with endowments, ie cut in half in the worst cases.
Here's the evidence for my comment on the collapse of annuity rates, which makes the problem even worse.
Annuity rates chart
Lessons need to be learnt from this.I was pleased to see the Government is planning to offer a free financial information and advice service to try to help people learn about investment.In the past it wasn't necessary with f/s pensions, but it is now.Trying to keep it simple...0 -
CC, this is the point. Those affected by final salary failures is actually a very small number. However, you wouldn't believe that from the coverage it gets.
The closure of final salary schemes to be replaced with money purchase is not necessarily a bad thing. It may not be as good as the old scheme but an employer paying 5% towards your pension if you pay 5% as well is still a pretty good arrangement.
The problem is that it is often presented as a major scandal which has hit everyone. That isn't the case but its given that mindset.I was pleased to see the Government is planning to offer a free financial information and advice service to try to help people learn about investment.In the past it wasn't necessary with f/s pensions, but it is now.
It will fail. Just as the stakeholder basic advice process has failed. Information isn't advice and the stakeholder process (which was flowchart) led to the wrong advice in about 1/4 of all cases.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
dunstonh wrote:CC, this is the point. Those affected by final salary failures is actually a very small number. However, you wouldn't believe that from the coverage it gets.
But it's not a small number at all being affected by the changes to company pensions; that's my point. The program is not, as far as I can make out, exclusively looking at company pension failures, but the closing of company pensions as a whole. TBH, as a shareholder and self-employed person I can only welcome this change but it is not right IMHO to say that the new arrangements will affect only a few people. Surely the moving of investment risk from the company to the employee is a huge change?Edinvestor wrote:I was pleased to see the Government is planning to offer a free financial information and advice service to try to help people learn about investment.In the past it wasn't necessary with f/s pensions, but it is now.
About as much use as a chocolate fireguard.0 -
I don't know why you think free advice and information is useless. :huh:
The CAB appears to be very well regarded for instance.
We provide free information and generic advice on this site.Are we wasting people's time?
I hope not.Trying to keep it simple...0 -
Government-provided " free " advice and information is, by and large, useless. It is never independent; there are always vested interests. Tell me, Ed, who do you think will be providing the generic advice? Will it be the sort of people - the professional investors - who contribute to TMF? Or will it be the financial industry? Are they going to advise people on low pay that it might not, under current circumstances, be worth their while contributing to a pension at all?
Look at the investment information from the FSA, for example. What are the websites it links to? Do you see TMF or MSE there? 'Cos I don't...0 -
Look at the investment information from the FSA, for example. What are the websites it links to? Do you see TMF or MSE there? 'Cos I don't...
I guess you can't really expect the regulator to refer people to unregulated discussion boards - not at this stage anyway.
The FSA certainly has a hard row to hoe, it's highly doubtful that it can really look after the interests of the financial system and consumers simultaneously, as they are so often in conflict.Trying to keep it simple...0 -
The CAB appears to be very well regarded for instance.
CAB uses IFAs. I have been approached by the local CAB in the past to provide free advice.We provide free information and generic advice on this site.Are we wasting people's time?
Sometimes when you look at the answers givenIt is never independent; there are always vested interests.
The previous stakeholder advice process was introduced due to pressure from the banks. Reason was that they wanted a low regulatory sales process that could lead to bulk selling without "Knowing your client" and without regulatory or compliance issues. In other words, no come back from the FOS with mis-selling.
The current "free information" is being researched by Aegon Scottish Equitable. Why just one company? Why choose a company that is not active in all areas of financial services? Why choose a company that does not operate a salesforce and has no experience of giving advice?
Who is going to pay for it? What resources are going to be put in place to give quality advice?
If the Govt wants low income people to have access to financial services advice again then it may as well bring back the conditions of the old insurance man and allow higher charged contracts.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0
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