Final Salary Pension Closing

kidmugsy

One feature of DB pensions is (I suspect) that they are an extravagantly expensive way to do their job of helping with the recruiting and retaining of staff. Part of my evidence for this is the frequency with which people in these forums make clear that they haven't the foggiest idea of how valuable the ruddy things are. You'll have seen the posts, in the style of "I expect to hold my NHS job for just two years so it's not worth joining the pension scheme is it?"

You can call it moronic, you can call it ignorant; I call it revealing.

NotSkint

I really don't think people do realise how expensive DB schemes are and just how valuable their benefits are. The size of pension pot required to buy the same index linked income and death benefits (1/2 rate spouses pension) is considerable.
What also amazes me is how few of my colleagues have even looked at how little their DC scheme is going to deliver with the default contribution level and fund choice that they transferred in on.
You really do have to plan your future, yet some people seem oblivious to it!!

kidmugsy

NotSkint wrote: »

I really don't think people do realise how expensive DB schemes are and just how valuable their benefits are.

Which means that firms would be remiss in their duty to shareholders if they didn't scrap the schemes. There must be cheaper ways to reward the staff which will bring the firm equal benefit.

greenglide

kidmugsy wrote: »

There must be cheaper ways to reward the staff which will bring the firm equal benefit.

But the cost of DB schemes is normally an unknown cost in the future. DC schemes, meanwhile, are all about costs now. Lots of employers do not plan long term, shareholders want to see profits now! Closing schemes to new members (like mine) avoids the cost of closing the scheme for new accruals which could be significant in the short term.

The management are usually in the scheme as well so do have a financial interest as well!

kidmugsy

greenglide wrote: »

But the cost of DB schemes is normally an unknown cost in the future. DC schemes, meanwhile, are all about costs now.

What tosh! Read the thread - DB schemes cost the employer a lot now AND carry enormous risks for the future. None of us as individuals would dream of running our own finances in that way; why should a firm?

Southend1

kidmugsy wrote: »

What tosh! Read the thread - DB schemes cost the employer a lot now AND carry enormous risks for the future. None of us as individuals would dream of running our own finances in that way; why should a firm?

Because in a civilised society they have a duty of care to provide a dignified retirement and a decent standard of living for their employees when they reach a certain age?

NotSkint

Southend1 wrote: »

Because in a civilised society they have a duty of care to provide a dignified retirement and a decent standard of living for their employees when they reach a certain age?

Why do you think that!
You could say that it is the state pension that should provide a dignified retirement and standard of living! But it is woefully short, hence the need for additional pension provision. It isn't up to your employer to provide that, but it is part of most re numeration packages in some form or other.

Southend1

NotSkint wrote: »

Why do you think that!
You could say that it is the state pension that should provide a dignified retirement and standard of living! But it is woefully short, hence the need for additional pension provision. It isn't up to your employer to provide that, but it is part of most re numeration packages in some form or other.

I don't necessarily believe that but it is one persuasive argument in favour of DB workplace pensions

atush

NotSkint wrote: »

Why do you think that!
You could say that it is the state pension that should provide a dignified retirement and standard of living! But it is woefully short, hence the need for additional pension provision. It isn't up to your employer to provide that, but it is part of most re numeration packages in some form or other.

you can check, but I think US soc Sec pensions are higher than UK state pensions (they did a list of the highest/lowest last year sometime in a Broadsheet money pages- prob Sun Times or Telegraph). In fact many countries paid more- but it is hard to compare like for like when some incl Serps/S2p or local equiv and some incl employers contribs as well so more like a combination of DC/SP (Denmark maybe?).

TBF, as you don't have to pay for medical care in the UK that might explain some ot if, apart from pensioners in the US have Medicare which gives them some/a basic level of cover.

kidmugsy

Southend1 wrote: »

Because in a civilised society they have a duty of care to provide a dignified retirement and a decent standard of living for their employees when they reach a certain age?

That's an awfully affected way of saying "Give me your money".