The Real Truth of new 'flat rate' pension (where everybody gets different amounts)

gadgetmind

agarnett wrote: »

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You'll have read that for some private DB schemes, 2015 with low gilt yields could have created a special no brainer window to grab your CETV

CETV? Into a SIPP? Getting out what you put in, or perhaps more than you put in?

No matter what you think of private DB schemes as original perks, membership of them is effectively being retrospectively undermined

Sounds good to me.

Any of your DC pension ever been in with-profits, gadgetmind?

No. I keep things simple and advise others to do the same. Save your own money, in as tax efficient way possible, into low fee investments that you understand. No magic money tree, no complex counter-parties, no deficits, no alphabeti spaghetti of CETI /GMC/whatever, just your own money saved for your own old age.

Yes, things have been a mess in the past, which is why we need to move away from DB and towards simple DC just as fast as we possibly can, perhaps faster.

agarnett

gadgetmind wrote:

CETV? Into a SIPP? Getting out what you put in, or perhaps more than you put in?

me wrote:

No matter what you think of private DB schemes as original perks, membership of them is effectively being retrospectively undermined

Sounds good to me.

Eh ? ...

What's good about DB schemes as original perks being retrospectively undermined? I've seen you allude to them as magic money trees so I appreciate you have some kind of opinion against them as a sensible device for the nation's pensions generally, but are you really saying that those millions of us of us who still have one deserve to have it undermined??

I read you as opining that because you've enjoyed a simple labour-->£reward employment which you have always been able to use some time in understanding fully and in having some hands on influence over when it comes to retirement planning, you are now despising those who were involuntarily in the common alternative more complex arrangements where employees were assured (promised) that their retirement pension would be based on final salary so not to worry about it because the company (or whatever) would take care of it?

Have I got that right?

gadgetmind

agarnett wrote: »

What's good about DB schemes as original perks being retrospectively undermined?

Because they are unaffordable in a wide variety of circumstances. When unfunded (as most are in practice) they are simply kicking the can down the road and expecting future (generous) obligations to be met from future (uncertain) cash flow.

are you really saying that those millions of us of us who still have one deserve to have it undermined??

Renegotiation is difficult but essential. Those on DC pensions are having to cope with market risk, low returns, and constant government meddling, so remember "we're all in it together".

having some hands on influence over when it comes to retirement planning

My major influence is in deciding how much of my own money to put in alongside my employer's contributions. I currently put in 7x what my employer does.

My wife now has a LGPS pension (which won't amount to more than buttons) but the council puts in over 3x what she does. No wonder our council tax bill keeps on rising well ahead of inflation!

you are now despising those who were involuntarily in the common alternative more complex arrangements

I'm not despising anyone.

employees were assured (promised) that their retirement pension would be based on final salary so not to worry about it because the company (or whatever) would take care of it?

The promises should neither have been made nor believed.

As for how to solve the massive problem we now face, well that's difficult. We've made a good start by (mostly) closing these schemes to new members, but things are far harder for existing ones. "I wouldn't start from here" is the sad truth, so it's going to be messy.

agarnett

Unfunded relates to public sector schemes, I grant you, but it is surely not good enough to say promises should not have been made and use that as some justification for reneging on the promise or even part of it, especially when no negotiation has occurred!

When I chose my initial career these "perks" were important.

Broadly I had three main offers as a new graduate starter:

1. A good salary and a non-contributory private sector DB pension, free healthcare cover, a discretionary disability benefit, a subsidised mortgage and company car.
2. A mediocre salary and an unfunded "gilt-edged" public sector pension and some kudos in working for the government in an interesting role
3. A good salary with potential high commission, a better company car and a less attractive private sector pension arrangement which was probably contributory money purchase (I forget).

I chose #1. for my first 10 years. I could easily have chosen either of the other two.

I agree that final salary pensions probably became much more expensive than was envisaged when they were in vogue, but it depends on the imaginations of those who designed them in times of very high inflation.

In the government's case, if they had not envisaged what the cost would be for public sector pensions, then they should have. I think it is true that public sector salaries have become too high and that therefore there should ideally have been a rebalancing reduction in the pension benefits. But there wasn't. There is scope for negotiating with public sector unions to reduce the liabilities for active members (those still employed as public servants), but I think it is morally repugnant to suggest it is ever okay to renege on promises already made to leavers, or to reduce pension entitlements already earned by active members for that matter.

In the private sector, if sponsoring employers had not envisaged the future cost of the schemes, then that was their look out and their shareholders' look out. But unfortunately, in the main, the private sector just decided to renege. Those private sector schemes which remain, remain because on balance they are commercially viable "perks" to continue, although it is quite obvious that after every merger and takeover, the new boys are constantly looking to dump the liabilities inherited from hoards of deferred members if they can (deferred member = "not one of us"). That is morally repugnant behaviour.

For whatever reason, you chose a different path. Whilst I think that there are now a much greater number of "job for life" employees in the public sector than in the private sector, I think you should consider that there are probably many more in both sectors who have had more mixed careers and who have more DC pension entitlements than DB entitlements.

Whilst a job for life, with a DB pension too, is indeed a journey leading to a magic money tree, if it plays out according to the Film of My Life director's story board, there are I think fewer than you imagine who achieve it in the private sector unless they become high fliers who can dictate pension terms as well as salary terms for their own particular happy endings.

Far more, representing the typical case, have suffered through age and sex discrimination, through abuse of TUPE arrangements (both public and private sector) and general lack of effective trades unionism in the UK since unions were smashed by Thatcher.

And currently we are at a low point in the last 15 years of fear of speaking out against wrongs being the overriding working environment, because government has seen to it that the door to employment practices justice has been slammed shut over the past 5 years.

Wage levels for those not sitting pretty with heads down in longer term jobs are a sick joke in the UK, so one wonders what it is about the pension cost for them that is so expensive for employers? Their salaries are a pittance, so even if the true cost of a decent pension was +50% on salary, the total reward for labour would still be desultory.

So let's please be careful who we are disinheriting when we simplistically dismiss old DB schemes as "magic money trees" we cannot afford.

We are indeed all in it together, but if you are doing alright Jack, then the way a proper country truly works as one we can be proud of, is that you Jack, should probably be paying twice as much tax as you do, the lowest paid should be paid twice as much as they are, and they should thereby be "enabled" to pay perhaps 30% tax on a chunk of it too - so they learn what it is to belong to a country instead of what it is to be a mere wage slave to corporate interests.

gadgetmind

agarnett wrote: »

Unfunded relates to public sector schemes, I grant you, but it is surely not good enough to say promises should not have been made and use that as some justification for reneging on the promise or even part of it, especially when no negotiation has occurred!

Lots of private sector pensions are also under funded, with no real hope of them recovering. I guess we could pretend that mistakes haven't been made, and to try and carry on regardless, but that wouldn't really get us anywhere.

I agree that final salary pensions probably became much more expensive than was envisaged when they were in vogue, but it depends on the imaginations of those who designed them in times of very high inflation.

Their fundamental flaws have been apparent for many many decades, but a combination of weak management and strong unions allowed them to continue.

There is scope for negotiating with public sector unions to reduce the liabilities for active members (those still employed as public servants), but I think it is morally repugnant to suggest it is ever okay to renege on promises already made to leavers, or to reduce pension entitlements already earned by active members for that matter.

I leave such matters to others to juggle as the issues are too varied and complex for armchair punditry. I merely observe that those who don't address their pensions problems (be they companies or countries such as Greece) will crash and burn, and people could easily end up with nothing.

So let's please be careful who we are disinheriting when we simplistically dismiss old DB schemes as "magic money trees" we cannot afford.

Being careful is all well and good, but the facts are as they are, like it or not.

the way a proper country truly works as one we can be proud of, is that you Jack, should probably be paying twice as much tax as you do, the lowest paid should be paid twice as much as they are

End result: vast numbers of those with valuable skills fly overseas, those remaining find in many cases that not being able to compete in a global market means their jobs have gone, leaving a country with lots of mouths to feed but no geese laying those golden eggs.

agarnett

gadgetmind wrote: »

Lots of private sector pensions are also under funded, with no real hope of them recovering. I guess we could pretend that mistakes haven't been made, and to try and carry on regardless, but that wouldn't really get us anywhere.

Most private sector pension schemes are run in a constant shortfall situation as a partial Ponzi by unwritten agreement with UK plc - that doesn't mean they have no real hope of paying, now does it? Those firms who need to will have taken action to wind up their schemes or make them more contributory or alter them to career average or similar. Pension schemes are not constantly dragging firms under water. That's a myth.

Their fundamental flaws have been apparent for many many decades, but a combination of weak management and strong unions allowed them to continue.

Er ... pardon? Fundamental flaws apparent for decades? Are you calling previous generations of blue chip boards and others blind and/or weak? I think you will find that as a breed they were generally finer ladies and gentlemen, wiser, more beneficent and benevolent to the societies they employed and their customers, and all round good eggs. Can't say that now about those who get called before Parliamentary Select Committees, now can we? And can you name a UK trade union that has been strong since the 1980s? (Bob Crowe's RMT excepted). And has it escaped your notice that for 15 years private sector pension promises have in fact been reneged upon right royally left right and centre by boards of directors who reward themselves massively ?

I leave such matters to others to juggle as the issues are too varied and complex for armchair punditry.

Do you mean the likes of the posh boys in Westminster or the troika in Europe ? I'd say that makes very good material for armchair punditry!

I merely observe that those who don't address their pensions problems (be they companies or countries such as Greece) will crash and burn, and people could easily end up with nothing.

Who in Greece has ended up with nothing, so far ? Even the Russians who got their private bank accounts in Cyprus "taxed" suddenly, haven't left. Greece is a very nice country to be part of if you are Greek, or if you aren't. Pensioners are still surviving. It helps if you have somewhere else like Switzerland to put your money when things look a bit risky, and maybe you flew somewhere once and opened the necessary accounts for a rainy day, but since when has that been just a Greek tendency?

Being careful is all well and good, but the facts are as they are, like it or not.

Surely you realise the "facts" are entirely debatable? What is needed is a steady hand on the tiller, not Dive! Dive! Dive! when all we have is the vaporware to tempt our heads below the surface of with the flow of the prevailing politics, but no viable submarine to navigate in once we are under, or to safely bring us back to the surface and common reality.

the way a proper country truly works as one we can be proud of, is that you Jack, should probably be paying twice as much tax as you do, the lowest paid should be paid twice as much as they are

End result: vast numbers of those with valuable skills fly overseas, those remaining find in many cases that not being able to compete in a global market means their jobs have gone, leaving a country with lots of mouths to feed but no geese laying those golden eggs.

Who says they can't compete? Are you saying they aren't smart enough to compete because smart people are only driven by greed, and not driven by any sense of pride in country and a desire to belong to it? I say good riddance to that sort, because they ain't the only smart people around and we don't just need selfish minds to succeed - we need beneficent and benevolent minds too.

gadgetmind

agarnett wrote: »

Most private sector pension schemes are run in a constant shortfall situation as a partial Ponzi by unwritten agreement with UK plc - that doesn't mean they have no real hope of paying, now does it?

The PPF exists for a reason, and without drastic changes (some of which are happening, some not) it's going to be stretched to the limit.

Pension schemes are not constantly dragging firms under water. That's a myth.

Agile new companies will run rings around companies that lumper along dragging the ball and chain of massive pension commitments. If we're *very* lucky, these new companies will be UK-based, but that's beyond optimistic TBH.

Er ... pardon? Fundamental flaws apparent for decades? Are you calling previous generations of blue chip boards and others blind and/or weak?

Perhaps they just didn't get the memo?

http://fortune.com/2013/08/15/the-1975-buffett-memo-that-saved-wapos-pension/

And can you name a UK trade union that has been strong since the 1980s?

A lot of progress was certainly made in the 80s, but there's still long way to go.

Who in Greece has ended up with nothing, so far ?

How much longer do you think they can keep paying their pensioners? Being anti-austerity is all well and good, but it doesn't pay the bills.

Who says they can't compete?

If they are demanding 2x the going rate, but their employer (or another one) can get someone at 1x in another country, then the writing is on the wall.

Are you saying they aren't smart enough to compete because smart people are only driven by greed

It's easy to know what I'm saying because I type it. So, as for the rest of your paragraph ...

https://en.wikipedia.org/wiki/Straw_man

agarnett

I wrote:

Are you saying they aren't smart enough to compete because smart people are only driven by greed

and you wrote:

It's easy to know what I am saying because I type it. So as for the rest of your paragraph ...

The rest of my paragraph was:

I say good riddance to that sort, because they ain't the only smart people around and we don't just need selfish minds to succeed - we need beneficent and benevolent minds too.

Was that particularly polemic, or does it betray your own view?

gadgetmind

agarnett wrote: »

Was that particularly polemic, or does it betray your own view?

It's easy to know what my views are because I type them clearly in black and white. I therefore don't need people to attempt to stuff words into my mouth as part of concocting straw man arguments.

If you want to say things, just come out and say them, and don't try and ascribe them to me. This will avoid a lot of confusion and misunderstanding.

agarnett

gadgetmind wrote: »

It's easy to know what my views are because I type them clearly in black and white. I therefore don't need people to attempt to stuff words into my mouth as part of concocting straw man arguments.

If you want to say things, just come out and say them, and don't try and ascribe them to me. This will avoid a lot of confusion and misunderstanding.

Well the bit of the conversation you seem not to want to add to went like this:

gadgetmind wrote:

me wrote:

the way a proper country truly works as one we can be proud of, is that you Jack, should probably be paying twice as much tax as you do, the lowest paid should be paid twice as much as they are

End result: vast numbers of those with valuable skills fly overseas, those remaining find in many cases that not being able to compete in a global market means their jobs have gone, leaving a country with lots of mouths to feed but no geese laying those golden eggs.

OK so you then objected to me trying to understand why you responded that way when I enquired in the style: did you mean this or did you mean that?

OK, what did you mean, dear gadgetmind? Most readers would assume you meant that if my suggested substantially higher taxes were implemented, the majority of those with valuable skills would leave, and those who remained would fail as a country. What is your rationale for stating that the majority with valuable skills would leave? And what is your rationale for stating that the country left behind would be unable to feed itself, and what sort of people are you alluding to as geese who lay golden eggs? Are those geese the ones who you say will leave in vast numbers ? Would not a significant number of geese who lay golden eggs choose to remain ? And would they not contribute sufficiently to their country that it will succeed and be a happy country despite high taxation (or even because of it)? What is it that motivates the typical geese that lay golden eggs you envisage as you type, please ?