How goverments piled costs onto pensions during the good times

zagfles

jamesd wrote: »

It's not so much the cost. An employer can deal with that by reducing it to 80ths or 100ths or 120ths or by getting current employees to handle current prediction costs for themselves. It's the uncertainty about future costs and the random ups and downs due to interest rate policy and stock markets that are the killers. DC by contrast is 100% predictable and manageable. It's by far the better deal for employers even if they keep today's money funding at exactly the same level as before.

It's probably too late to fix that today. Accounting standards and a regulator dealing with underfunding in ways that dealt thoroughly with ups and downs and didn't treat them as today's profit to be paid to the pension fund could have helped. The transient extra costs probably come during a downturn so it's extra losses that threaten the accounting terms solvency of the business when it's least able to afford them. Even better accounting rules and a regulator with built in delays would still leave longevity risk, though.

Disagree - I think it's primarily about cost since that the thing which has changed. The risks re stock markets, interest rates etc was always there, that hasn't changed, yet company attitudes towards the type of pension provision they offer has. Companies are well used to dealing with interest rate, economy, currency risks etc as their sales and profits will depend on them. Accountancy standards changes may mandate more cautious valuation of liabilities, but that again is cost.

Yes they could have reduced the accrual to 1/120th etc, but that would have probably been seen by employees as even worse than DC schemes. A scheme where you get less than 1% of your salary per year worked, although it may be a reasonable deal, probably wouldn't seem so to most people.

zagfles

cepheus wrote: »

Silly people, it's by Ros Altman, leading independent UK pensions expert.

And what she says is perfectly correct. It's just that there were good reasons for most of the changes - such as providing indexation so deferred pensions didn't become worthless, giving greater protection from fund going bust, stopping tax fiddles, stopping companies using pensions as golden handcuffs etc.

About time you guys stopped reading rubbish. Less of the industry propaganda please we get enough vested interests on here.

About time you actually got a clue. Stick to DT if all you can do is cut and paste articles you don't understand. Here we actually understand the issues. Yes there are vested interests on this board, but they're easy to spot. Like IFAs telling us that using an IFA is the best option. Really?

Most here are DIY investors who understand how pensions work pretty well. Or.....if you've got your tin-foil hat on and like you propaganda in the form of cartoons - we're all part of a big conspiracy led by cigar smoking fat cats to screw over the little people too thick to understand finance.

jamesd

The risks were there but the accounting treatment changed.

It became impossible to just ride through the ups and downs without making negative headlines about major pension deficits or profit warnings due to increased pension obligations just due to temporary things.

zagfles

jamesd wrote: »

The risks were there but the accounting treatment changed.

It became impossible to just ride through the ups and downs without making negative headlines about major pension deficits or profit warnings due to increased pension obligations just due to temporary things.

Companies can ride through them - there are plenty with 10-20 year plans to correct their deficits. Yes they have to admit their liabilities, and so they should, it may make bad headlines but so does changing the pension provision of employees and associated unrest eg strikes.

The risk hasn't changed, the admission of the fact there is a risk may have changed, and the calculation of that risk may have changed, but the biggest change is the cost.

Bootsox

There is one man, and one man only, to blame for trashing the final salary pension and that is Gordon Brown.

http://www.dailymail.co.uk/news/article-1266662/The-man-stole-old-age-How-Gordon-Brown-secretly-imposed-ruinous-tax-wrecked-retirements-millions.html

hugheskevi

There is one man, and one man only, to blame for trashing the final salary pension and that is Gordon Brown.

Brown was so bad that the closure of final salary schemes accelerated in the mid 1990s, presumably in anticipation of Brown taking his Cabinet position in 1997 (the acceleration in decline followed a long period of decline dating back to the late 1960s, which could be related to Gordon Brown graduating at much the same time as the decline started)

Andy_L

Bootsox wrote: »

There is one man, and one man only, to blame for trashing the final salary pension and that is Gordon Brown.

http://www.dailymail.co.uk/news/article-1266662/The-man-stole-old-age-How-Gordon-Brown-secretly-imposed-ruinous-tax-wrecked-retirements-millions.html

However he was, by abolishing ACT, only continuing a policy started by Major & Lamont

taking_stock

Bootsox wrote: »

There is one man, and one man only, to blame for trashing the final salary pension and that is Gordon Brown.

http://www.dailymail.co.uk/news/article-1266662/The-man-stole-old-age-How-Gordon-Brown-secretly-imposed-ruinous-tax-wrecked-retirements-millions.html

that just made me laugh out loud - like an article in the daily mail makes a sensible reference point!!

Thrugelmir

jamesd wrote: »

To put that another way, what Brown did was close a tax dodge that companies had been exploiting.

I along with a huge number of other people at the time weren't companies.

There was no attempt to curtail public sector pensions either.

hugheskevi

There was no attempt to curtail public sector pensions either.

There were a lot of changes around 2006 affecting most schemes. The reforms mostly only affecting new entrants, but they were significant and in much the same way as reform in private sector DB schemes generally starts by soft-closing the scheme followed by hard closing it some years later, can be viewed as laying the foundation for the 2015 reforms.