Direct Benefit Pensions - who paid?

BobQ

agree; but it still smarts that I watch my parents and their friends even now well into the 21st Century still retiring pre-60 on DB schemes! I just figure there ought to be a fairer solution than effectively "backloading" the largest share of the pensions "burden" onto the youngest generations (who are also the ones who have student debt, don't own property/equity, higher proportion out of work etc).

Many people who can afford to retire at 60 have worked since thy were 16 or 18 and can expect to live until they are nearly 80. They have DB schemes because such schemes were available.

Many young people who now want to retire at 60 will not have started work until they were 23 and will live much longer than 80. They have to plan for the pensions that are now available.

Many retiring now took the pensions that were available from the employers they joined and worked for in their like. Those in their 20s now have many more pension options available.

Not everyone retiring now has a DB pension, some chose to work for firms that provided one, some chose to work for firms that did not.

hugheskevi

you must accept that you are at the mercy of market forces as much as I am; which is the key unknown which neither of us can perfectly mitigate against. Indeed, the more I calculate and budget for my retirement the more I get the feeling I would do better stuffing it all in my mattress, then taking it down the casino and sticking it all on red the day before I retire...

Absolutely.

One of the thing which frustrates me is that a common response to detailed planning is along of the lines of "the future is unknown, you can plan all you like but it won't happen as you expect." Which misses the entire point of planning, which is to prepare for as many uncertainties as possible and constantly react to change.

There is a nice sense of satisfaction as I get older and see the things which posed the greatest risks a few years ago receding and becoming manageable. The next big milestone in risk reduction will be when my outstanding mortgage is less than the combined redundancy protection of myself and the wife, which is about a year or so away.

davechas

hugheskevi wrote: »

Absolutely.

One of the thing which frustrates me is that a common response to detailed planning is along of the lines of "the future is unknown, you can plan all you like but it won't happen as you expect." Which misses the entire point of planning, which is to prepare for as many uncertainties as possible and constantly react to change.

There is a nice sense of satisfaction as I get older and see the things which posed the greatest risks a few years ago receding and becoming manageable. The next big milestone in risk reduction will be when my outstanding mortgage is less than the combined redundancy protection of myself and the wife, which is about a year or so away.

That's a great attitude to have You've inspired me to persevere with my own planning, the casino will have to be put on hold.

atush

davechas wrote: »

Atush, you seem to infer a lot about other people when you know nothing about them.

Of course I'm paying into a pension, I'm not finding excuses not to - what a peculiar impression to have of me based on what I have said!

I talk only of annuities to make my case for what atrocious value for money they are, particularly in light of the profitability level of the large pensions providers.

Drawdown would indeed be another option available to me, which as I have already said I haven't looked into much personally but I would welcome any advice you could offer - this would be rather more helpful of you rather than try to make me feel inadequate about my relative lack of knowledge in this regard

Any impressions I have of you are only based on what you have said. How you expect us to read your mind I don't know.

Your posts are anti pension, and anti annuity but you have already admitted you have not investigated your other options. Which would be the thing do do before carrying on your argument.

You seem to think that annuity providers are raking it in, when in fact people have been living longer for some decades so has been eating into any profit margin you have imagined. AS those that die early normally the money is not taken by the company but used to provide for those like my MIL who were retired for 45 years (instead of the 20 her cohort might have expected).

davechas

atush wrote: »

Any impressions I have of you are only based on what you have said. How you expect us to read your mind I don't know.

Your posts are anti pension, and anti annuity but you have already admitted you have not investigated your other options. Which would be the thing do do before carrying on your argument.

You seem to think that annuity providers are raking it in, when in fact people have been living longer for some decades so has been eating into any profit margin you have imagined. AS those that die early normally the money is not taken by the company but used to provide for those like my MIL who were retired for 45 years (instead of the 20 her cohort might have expected).

My posts weren't intended to be anti-pension; anti-annuity perhaps, and anti-intergenerational disparities - but not anti-pension as a whole concept. Although I accept I am not always the best at articulating my thoughts so apologies if they could have been interpreted the way you seem to have done.

Did you read the bits like this which I said about pensions as well, though:

In any case, I didn't want my thread to descend into a moan about the woes and pitfalls of the current system. There are also plenty of opportunities I can see out there, which I will probably look
to open a discussion with people in a new thread which is more specific to that topic.

So whilst you may think you are basing your opinion solely on what I have said, I suspect more likely than not what you have actually done is read my comments with a filter of your own pre-conception about my opinions - hence you have only focussed on the comments I have made which did sound more negative, and apparently not noticed the comments which were more positive.

In any case, having read through several of your comments on other posts on MSE, it seems you have some sort of personal fixation on being right - you are very quick to correct others when you interpret that they have disagreed with you it seems.

Based on this evidence, I won't take the tone you appear to be taking with me here too personally - so don't worry!

On a more practical note, do you have any intention of providing me with any advice on drawdown? I have gone out on a limb and specifically requested this from you in my previous post, admitting my shortcomings in knowledge of drawdown options. Do you want me to admit that "you win"? Would that help?

Incidentally, do you not think Pension Providers are raking it in on annuities then? Alistair Gray, Insurance Correspondent for the Financial Times had this to say in his piece from Feb 2014:

"Annuities have been among the biggest money-spinners for Britain’s biggest listed life insurers for years.

These policies – which turn pension savings into an annual retirement income – have become almost a compulsory purchase for anyone whose employer does not offer a salary-based pension scheme. As a result, they now account for around a fifth of UK life insurers’ revenues – and two-thirds of their “new business” profits."

Friends Life makes returns of 13% on annuities, Standard Life it is closer to 15%. Aviva and Prudential apparently refused to disclose their figures. I suspect that will be because they are rather high.

I'm happy to change my mind on my opinion of these providers though, if you have any data to the contrary for me to consider?

atush

Your posts are so very long that I may have missed that one sentence, so yes you are perhaps not anti pension but are anti everything else including your parents generation.

I do disagree with people from time to time, but much more often I agree. I also realise that I am the person to blame if my life and finances don't work out, I certainly dont' blame other generations as well as companies who make a profit- I want companies to make a profit as I invest in companies in pensions and elsewhere. I am not fond of companies that altruistically operate so as to not charge for their services.I feel that if annuities were so very profitable, that other companies would be getting into the market instead of leaving it.


Not being a stalker, I haven't checked your other posts to see how awful you are, I suspect I must now go and do this- apart from the fact your post count is so low that I cannot. Other people do this, which I find strange and it is something I never do. It really it quite creepy.

And I suppose the many who have thanked me in the past must be misinformed or insane?

You are very opinionated and aren't always basing these opinions on facts, such as your intergenerational bias. Every generation is different, and laws and benefits change. This is not something to Blame them for, but to be thankful for the opportunities they got, and the opportunities still available to you. After all, as your parents have they not used these opportunities that helped them in raising you and getting you off to a good start? Ever get anything from the bank of mum and dad?

I have 3 boys at university and it is an expensive business, I don't hear them crying fowl their father went to University for free as was the case back then. They just get on with the business of life now as they know it.

seven-day-weekend

davechas wrote: »

For people who are currently retired on final salary/defined benefits pensions: did they as employees have to contribute towards this during their working lives (eg say 3% deduction from their monthly salary) or did they effectively just get this for free with their employers having to finance the pension schemes?

I appreciate this may vary slightly from employer to employer, but in general what applies to most people?

I paid towards my Local Government Pension. My husband paid towards his Teachers' Pension. Our employers also contributed.

My husband took early retirement ten years ago when he was 55 and drew his pension , permanently reduced by 1/3 as he was taking it five years early. I also retired at that time,but have not yet drawn my LGP. I am doing that in August when I can take it unreduced.

davechas

Your posts are so very long that I may have missed that one sentence

That "one sentence" was actually key because it is where I recognised that I had been delving too far into the negative aspects and that whilst there are pitfalls there are also many opportunities to be earned in pensions. It concerns me that you feel you can make an accurate opinion of someone, which you admit is based solely on what they have written, when you haven't even read all of it!

so yes you are perhaps not anti pension but are anti everything else including your parents generation.

Anti-"everything else" is a bit of a stretch. I'm largely in favour of picnics for example.

Being anti-intergenerational disparity in pensions doesn't mean that someone hates their parents. My father passed away from cancer a few years ago, I would give anything to still have him around.

I have a baby daughter, and I suspect I will provide for her throughout her life as much as my parents did for me. Trying to argue about which generation "cares more" about their children is not only a ludicrous debate, but it has utterly nothing to do with pension disparity.

Calling to make sure that each generation contributes a fair share towards the current pensions shortfall is not unreasonable or demonstrating intergenerational bias - if anything, surely mine is the position that is calling for more intergenerational parity - quite the opposite of bias?

I feel that if annuities were so very profitable, that other companies would be getting into the market instead of leaving it.

For serious? Do you have any idea of the scale of "barriers to entry" in the financial sector? There's a reason the only major new entrants to the insurance market in recent years have been the large supermarkets (and don't even get me started on them operating way outside of their sectors).

apart from the fact your post count is so low that I cannot.

That's because I'm brand new to MSE - it says right under my name on each post "be especially nice" to this guy because he's new and might not realise he's being an idiot. I may have paraphrased that last bit.

Other people do this, which I find strange and it is something I never do.

Actually, I was just trying to give you the benefit of the doubt, because it could have just been you reacting to my writing style - as I tend to edge on the sarcastic to try and make a relatively dull topic a bit more exciting. Some people can take this sarcastic tone personally, which I don't normally mean to target at other people specifically - but I do admit in your case after you called into question my ability as a chartered accountant with your second post I may have deliberately been a bit cheeky back to you in kind.

But anyway, having reviewed some of your other posts (only two or three by the way, I haven't been fishing around your dustbins or following you to work) it seems it was just a normal reaction for you.

I want companies to make a profit as I invest in companies in pensions and elsewhere.

Me too! It might surprise you, but I'm pretty right wing and capitalist in my political views. So something must be pretty awry with annuities if even people like me think they're making very large profits, apparently banking on the relative ignorance of their customer base when it comes to pensions options. Seriously, dig out Michael Burke's documentary - he's right on the money for me.

Any tips on drawdown by the way?

kidmugsy

What about inheritance disparity? Very few of the younger generation are going to leave any money to their parents I'll bet.

bigadaj

In terms of drawdown then if we take osbornes changes from next year as read then it makes drawdown more simple for many people than the current capped or flexible drawdown arrangements.

Others here have mentioned that it's no coincidence that accessing an annuity at 55 is occurring at a time when accessing state pension au at 65, so it's fair to assume that access to oension pots may well move in line with state pension age, accessing it being allowed some ten years before.

The flexibility that is anticipated means that life time modelling of finances will become even more useful and pertinent for those with reasonable size pots. There will of course be arguments for life styling, and moving from shares to bonds or cash with age. However given current circumstances then moving into bonds at the moment doesn't necessarily look wise, and cash will just lose money in relation to inflation. Drawdown will have to be considered in timescales of thirty years or more for many people, so maintaining equities almost to the extent you would in the pension pot before drawdown may well be a wise move, ensuring there is sufficient low cash available to ride out market crashes.

What things will be like when I may look to retire in twenty years, or the OP retiring in thirty five years say, we can't say. Projecting back a similar length of time shows how different things may be then.

On the general point about annuities, then they may offer poor value for many, and the baby boomer generation definitely had an advantage on financial terms on a like for like basis, but no one recognised the value of defined benefit pensions for so many years. The mis sales of the nineties involving transfer out of db schemes into dc pensions were instigated by commission and sales incentives, but at teh time were often though to be a good thing as the unsustainable returns from the stockmarket at the time were thought normal and the guarantee with db pensions wasn't valued correctly, or rather the value of the guarantee when compared against risk.