Pensions Robbery Discussion thread, all viewpoints welcome!

RenovationMan

On a different board someone posted this today:

"TBH if you have 20+ years or so to retirement like myself, it's my belief that it's not worth saving for one [a pension] as you'll be unlikely ever to collect it. Pension schemes are being robbed, downgraded right left and centre, on top of that the next 20 years are likely to be catastrophic for our money based system.

Folk might laugh but they can stick to their plans and I'll live each day like it's my last and when it's over, it's over."

I have heard this sort of statement periodically throughout my working life and I've even seen fellow workers turn down company pension membership due to the ideas above. Two memorable ones were a fellow about 10 years ago who was a high rate tax payer who turned down a Money Purchase pension where the employer put in 10% and the employee contributed 3%. Another person was more recent where he earned almost £60k per year and turned down a 1/60th Final Salary pension stating the same standpoint as above.

I looked at both (and others dotted about during my career) with a look of disbelief on my face as I find it inconceivable to not save for your retirement. However, I'd be interested in what other peoples views were on this sort of statement. I am also hoping that some of the pension professionals would provide details on the likelyhood and occurances of pensions schemes are being 'robbed' and provide details of the various compensations schemes and their levels.

atush

My only contrib will be that you can find stupid people like that all over MSE at times.

And who are confusing personal and occupational pensions with state pensions.

jamesd

RenovationMan wrote: »

"the next 20 years are likely to be catastrophic for our money based system.

That quote is the giveaway. Someone who believes that the world is going to collapse all around them and we'll be down to guns and killing eachother to live. That's simply not going to happen barring some massive earth-changing global disaster of a more serious nature than anything discussed in relation to global warming.

RenovationMan wrote: »

I am also hoping that some of the pension professionals would provide details on the likelyhood and occurances of pensions schemes are being 'robbed' and provide details of the various compensations schemes and their levels.

There aren't really any such examples these days:

1. Defined contribution schemes aren't even owned by the employer, they are held in trust by the trustees of the pension company for the benefit of the employee and they just can't be robbed because the employee has control, except for the need to follow HMRC regulations. The FSCS protects these but the chance of needing protection for money held in trust is vanishingly small because even if the pension company goes bust the money isn't theirs and isn't affected by their bankruptcy.

2. Defined benefit schemes also have trustees and again the money isn't owned by the employer, so the employer can't steal it. These can be underfunded by employers but these days the pensions regulator exists to regulate that and trustees have legal requirements to set up schemes to prevent or recover from underfunding. If that fails for some reason the Pension Protection Scheme pays 100% of the pension payout to those already retired or 90% to those not retired, subject to a cap of about £32,000 for a 65 year old, more if older, less if lower.

The defined benefit changes were due to some unpleasant events a decade or so ago that had left some schemes less well provided for than was acceptable. So the PPF and regulator were arranged to both prevent a repeat and provide protection if that failed.

Those in defined contribution schemes just have to wonder about paying in enough money and how their investments do.

Those in defined benefit schemes should keep an eye on funding levels, particularly if their projected pension is over the PPF threshold. If they think there's a problem they should contact the scheme trustees to ask about the arrangements to catch up on any apparent underfunding.

While contribution levels to pensions can be and are quite often being reduced, that's not a reason to decline to take what's being offered, that's just throwing money from your employer away.

For personal pensions the employer isn't even involved, and in defined contribution schemes you can expect to be able to transfer money from the employer version to your own if you want to. While it doesn't affect the safety of the money it might get you better investment range or lower costs.

dasherman

I've come across numerous 'live for today merchants' over the years who just never seem to grasp the idea that one day they'll get old and their priorities will change. Sooner or later tomorrow will become today and they'll realise that they will have to carry on working until they drop. And they'll get no sympathy from me!

fwor

jamesd wrote: »

Defined benefit schemes also have trustees and again the money isn't owned by the employer, so the employer can't steal it.

It didn't work like that with the older BT pension schemes, did it? Despite having a duty to look after the interests of the scheme's members, the Trustees caved in immediately to BT's choice to move from RPI to CPI indexation, even though the government attempted to make clear that it wasn't mandatory to do so for private schemes.

The money that BT will save through this move will go straight to company profit - what a surprise that BT senior management bonuses depend on profit, and not on whether they treat their pensioners fairly...

atush

Any pensioner with a DB pension is lucky. CPI or RPI. We put in over 25% of salary and wont do as well.

elantan

i can kindve see both sides tbh ... yes it is a great idea to save for your retirement ( and i try ... although right now i cant afford to and have had to freeze my pension) it will help make life easier for you when you retire and lets face it the state pension aint gonna be enough to live on

but at the same time there are a proportion within society that will get some sort of personal pension but it wont be much ( couple of hundred pounds or so a year) but it could be just enough to stop them getting any extra benefits

i think if your going to have a pension make it a really good one ... make it one that will provide you with a comfortable standard of living ... either that or dont have anything and save money via another vehicle ( property, isa's etc) those ( unfortuantley like myself) that dont have great personal pensions are gonna struggle and may possibly be better off if they hadnt bothered

DRS1

Anyone remember Robert Maxwell? That was "robbery" (allegedly). It led to the Pensions Act 1995 and a Pension Compensation Scheme (where fraud was involved). For the last 6 years or so there has been a Pension Protection Fund for where defined benefit pension schemes can't pay the pensions due (and the sponsoring employer goes bust).

fairleads

RenovationMan wrote: »

On a different board someone posted this today:

"TBH if you have 20+ years or so to retirement like myself, it's my belief that it's not worth saving for one [a pension] as you'll be unlikely ever to collect it. Pension schemes are being robbed, downgraded right left and centre, on top of that the next 20 years are likely to be catastrophic for our money based system.

17% drop in annuity rates over the past couple of years is close enough to catastrophic for many recent retirees.

dunstonh

"TBH if you have 20+ years or so to retirement like myself, it's my belief that it's not worth saving for one [a pension] as you'll be unlikely ever to collect it.

If you die, you wont get it. But the same goes for alternatives. You will be dead.

Pension schemes are being robbed, downgraded right left and centre, on top of that the next 20 years are likely to be catastrophic for our money based system.

When someone is speaking like that you know they are opinionated air heads who dont have a clue. "pension" is a word that covers very many different types of schemes. To make such a blanket comment like that shows he/she has no knowledge whatsoever.

I have heard this sort of statement periodically throughout my working life and I've even seen fellow workers turn down company pension membership due to the ideas above. Two memorable ones were a fellow about 10 years ago who was a high rate tax payer who turned down a Money Purchase pension where the employer put in 10% and the employee contributed 3%. Another person was more recent where he earned almost £60k per year and turned down a 1/60th Final Salary pension stating the same standpoint as above.

Yep. Stupid people doing stupid things. Often they are the most vocal in workplaces as well. Putting off others who foolishly follow these bad examples.

atush

17% drop in annuity rates over the past couple of years is close enough to catastrophic for many recent retirees.

Good thing we don't have to buy them any longer.

Two memorable ones were a fellow about 10 years ago who was a high rate tax payer who turned down a Money Purchase pension where the employer put in 10% and the employee contributed 3%. Another person was more recent where he earned almost £60k per year and turned down a 1/60th Final Salary pension stating the same standpoint as above.

How peoplethis stupidmanage to earn that much amazes me.