The Most Important Document You Will Never Read....

gagahouse

RenovationMan wrote: »

As worthless as they calculate pensions deficits.

http://www.ukpensioncalculator.co.uk/news/20120518-3015_pensions-deficit-balloons.html

"A new report by Towers Watson shows how the UK’s pension deficit has increased by £30 billion in the space of just two weeks. The problem has been exacerbated by the recent problems in the eurozone and worries that left of centre governments in France and Greece will extinguish hopes that Europe can pull itself out of a debt crisis.

The actuary said that during May the deficits of the 350 top FTSE companies had risen from £62 billion to £92 billion. UK pensions head at Towers Watson, John Ball, said the problem was not with assets losing their value, but rather with liabilities getting larger."

Yep, deficit calculated using TODAY's depressed stockmarket to calculate a liability 20 years or more hence. If we have a stockmarket boom, they'll be raving about a pensions surplus and letting employers get away with reducing funding. Same employees, same liability, stronger equities, different result.

According to the article, he is not talking about any effect of the stockmarket but rather the effect of a lower discount factor in the NPV calculation of future liabilities.

Interest rates have been pushed down by the problems in the eurozone on gilts and corporate bonds because investors are looking to pump funds into safe havens. As the interest rates continue to fall then pension liabilities will grow.

Corporate bonds are currently at their lowest levels since they were adopted by firms as a key reference point for calculating pension figures. By using yields, companies are able to put a single figure on what they expect to pay out in pensions over a number of decades.

wotsthat

Graham_Devon wrote: »

You can't do that without spending. Which way to go?!

Divert spending from things which won't deliver growth to those that will.

The problem is that this tends to be harsh for unproductive members of society and there is currently no effective way to differentiate between the deserving and undeserving poor. Again, if the government ask me I might be able to help.

Wookster

wotsthat wrote: »

There's waste on an epic scale happening within public finances.

A handful of people from this board and a spare afternoon could bring the public finances into a better position.

Of course there is huge waste. Infact with efficient spending AND a 20% cut from each budget I'd bet that front line services could be improved!!

The fact is that the public sector is far too immune to change to ever become efficient and that is what it needs a complete culture change.

Graham_Devon

Heard a bit about this on the radio, and a "spokesperson" stated they could...

- Bring the retirement age forward now, rather than waiting.
- Remove the winter fuel allowance and implement NI.
- Stop subsidies to domestic fuel companies to offer lower tarrifs, due to their profits.

On the topic of increasig the retirement age, he was asked if this would effect those about to retire....shouldn't this be aimed at those say 15 years away from retiring. The answer was "if you want to sort the problems, it has to be done now, for all".

I'm assuming, as i didn't catch it, he was speaking only about the age related part of the report. He didn't think any of this would be done, only increase the age of retirement for those under 50 currently to 70-72. Governments act in the aim of bettering the immediate future, not the long term future.

CLAPTON

what actually matters in the future is the per capita GDP

all this talk of how we distribute the income is a bit marginal as is the level of inflation

grizzly1911

wotsthat wrote: »

Finding yourself in retirement with only the state pension to live on sounds like a nightmare. Most sensible people should be saving like mad to avoid this living hell rather than worrying about effective taxation rates.

Saving to be taxed even heavier in due course.?

Just how much do you save and where? Annuity rates are poor now what is there to say whether they will improve? Investment returns are on their uppers where is your money going to be safe?

Saving is all well and good but many can't and even those that can still have to live today.

RenovationMan

grizzly1911 wrote: »

Saving to be taxed even heavier in due course.?

Just how much do you save and where? Annuity rates are poor now what is there to say whether they will improve? Investment returns are on their uppers where is your money going to be safe?

Saving is all well and good but many can't and even those that can still have to live today.

I'm a higher rate taxpayer and so any money I put into a pension plan receives tax relief at 40%. When I actually retire, I can take 25% tax free and the remaining 75% will be taxed at basic rate (20%). In a way, I'm saving to be taxed less in due course.

Another alternative is to put money into an ISA. You're taxed on the money you put in, but capital gains are tax free.

Annuity rates are poor now but that impacts people who are about to take their pensions, not people who are building up a pension pot. Also, you don't have to buy an annuity anymore when you retire, provided your pension pot is large enough.

My investment returns are doing really well at the moment, I bought in heavily after the last crash. At the moment the stockmarket is down and it represents a good buying opportunity. You want to buy shares when they are low, not when they are booming.

vivatifosi

RenovationMan wrote: »

As worthless as they calculate pensions deficits.

http://www.ukpensioncalculator.co.uk/news/20120518-3015_pensions-deficit-balloons.html

"A new report by Towers Watson shows how the UK’s pension deficit has increased by £30 billion in the space of just two weeks. The problem has been exacerbated by the recent problems in the eurozone and worries that left of centre governments in France and Greece will extinguish hopes that Europe can pull itself out of a debt crisis.

The actuary said that during May the deficits of the 350 top FTSE companies had risen from £62 billion to £92 billion. UK pensions head at Towers Watson, John Ball, said the problem was not with assets losing their value, but rather with liabilities getting larger."

Yep, deficit calculated using TODAY's depressed stockmarket to calculate a liability 20 years or more hence. If we have a stockmarket boom, they'll be raving about a pensions surplus and letting employers get away with reducing funding. Same employees, same liability, stronger equities, different result.

What's not being said is the price we are paying for QE. It's having a hugely detrimental impact on pensions funds. It's hard enough to get decent returns, without liabilities rising on the back of QE. Pension funds can do everything right, have a virtually fully funded scheme and then wham, a 15% deficit. That's DB schemes of course, the impact on DC schemes is in the cr*p returns.

chucknorris

chewmylegoff wrote: »

i believe that they will continue to increase the basic state pension but at some point in the not too distant future it will start to be means tested.

I don't think that it will be means tested because people have paid into it. But I do think at some point they will stop increasing it in line with inflation, this would be less bitter pill for the public to swallow. This would of course create the need for a benefit top up for those who couldn't manage (which would of course be means tested).

PaulF81

Time to go for a swiss model. I have elderly relatives that have absolutely no quality of life and if in their position, would have wanted the dignitas option years before the state wasted a fortune on me. Money that could be spent on capital investment, education or the NHs. We are simply living too long. The sooner we realise it, the better.